Canada Market Update: Market Momentum Builds as Office Investment and Federal Policy Align
By Elliot Higgins, CFA – Associate
Major Office Tailwinds Heading Into 2026
Pontegadea acquired the fully occupied Vancouver office and retail complex, The Post, for over $1.1billion, which would be the largest office transaction ever in Vancouver. The 1.1 million square foot transaction signals a possible reversal in the downward trend of office properties seen in the past few years. This adds onto a list of major transactions and could signal a turning point for the asset class:
- Earlier in 2025, Brookfield Properties completed the buyout of AIMCo and CPP Investments’ stakes in 2 Queen St. E., Toronto, for $161.3 million, acquiring a 477,000-square-foot office tower.
- Kingsett Capital purchased twin office buildings at 700 and 750 W. Pender St. in Vancouver, totaling 283,530 square feet, for $125 million from Cadillac Fairview.
- A major 20-year lease agreement with the Canadian Tire Corporation at Oxford Properties’ 2180 and 2200 Yonge St. in Toronto includes a $200 million investment in the leased space.
- In markets like Calgary and Ottawa, decreasing office vacancies coincide with significant office-to-residential conversions, with Calgary repurposing over 500,000 square feet in Q3 2025.
Our borrowers have experienced rapid leasing momentum, also reporting with increasing tours, reflecting accelerating demand driven by return-to-office mandates. The following chart confirms what investors are reporting, return-to-office mandates have accelerated office demand.
Occupancy Index – October 15, 2025
Federal Budget Summary – Major CRE Implications
The 2025 Federal Budget introduces key measures impacting Canada’s commercial real estate sector, with a strong emphasis on industrial and multi-unit residential development. A key highlight is the temporary immediate expensing provision, allowing 100% of the capital cost to be deducted in year one for eligible manufacturing buildings acquired after November 2025 and used before 2030. This tax incentive aims to accelerate industrial real estate investment by improving returns and reducing payback periods. Additionally, the Canada Mortgage Bond cap will rise from $60 billion to $80 billion in 2026, expanding affordable financing options for rental housing projects. Programs like the Apartment Construction Loan and CMHC-insured lending continue to support large-scale multi-unit developments, opening new opportunities for lenders and developers alike.
The budget also launches Build Canada Homes, a $13 billion agency targeting a doubling of the national homebuilding rate through federal land use, modular construction, and public-private partnerships. A new Green Building Retrofit Tax Credit further promotes sustainable property upgrades-an increasingly important factor for investors and tenants. Tax changes include a higher capital gains inclusion rate on large gains and tougher enforcement on anti-flipping and assignment sales. Together, these moves underscore a federal commitment to stimulate supply, improve access to financing, and prioritize ESG considerations in commercial real estate.
At Largo Capital, this evolving landscape means fresh financing opportunities coupled with careful risk assessment. Our team is ready to partner with investors to navigate these shifts and capitalize on market momentum.
