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doesn’t protect real estate practitioners from the fallout of a downturn, but it does perhaps insulate them from paralytic astonishment when shocks occur. This time last year, many were tentative as they digested tariff threats and a sudden blast of economic uncertainty. There was talk of sidelined investment and waiting cautiously, along with hopes for a relatively quick resolution of trade tensions.
Today, there is arguably even more geopolitical uncertainty, yet trepidation seems less apparent. In public industry forums, real estate investors, managers and operators are highlighting opportunities and sharing strategies for adapting, surviving and thriving.
In this issue, we look at renewed optimism in the office market, ambitious plans in the tourism sector and the continuing push to integrate sustainability with investment performance. Industry insiders also express confidence in industrial and retail assets and suggest a current dip in multifamily rental prospects won’t be long-lasting. Meanwhile, data centres are drawing steady interest that’s in sync with Canada’s ambitions for economic growth rooted in clean and smart technologies.
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An associated agenda to broaden the base of Canada’s trade partners reminds us, too, that sustainability, climate risk resilience and disclosure are competitive strengths that will influence business with and investment from Europe and Asia Pacific. And that comes with the bonus of operational efficiencies, reduced reliance on non-renewable resources and mechanical intervention for heating and cooling, and enhanced capacity to keep functioning through power outages and other disruptive events.
“Quality assets attract more investor interest. They’re viewed as lower risk by most insurers and they simply are resilient — physically and, increasingly now, financially,” Brent Gilmour, Chief Commercial Officer with the Canada Green Building Council, asserted during a seminar earlier this winter probing the symbiosis of sustainability, finance and business. “This is not a niche. It’s a material economic lane. It’s directly connected to productivity, competitiveness and how capital will flow in the built environment over the decades ahead.”
We report on some of the insights from that seminar in this issue. The issue also features the 31st edition of the Who’s Who in Canadian Real Estate survey. Thank you to Jason Krulicki and Gerald Ngan for collecting and coordinating this year’s results.
This spring finds us adjusting to the sad absence of our long-time Art Director, Annette Carlucci, who died in January 2026. Annette devised the signature look of Canadian Property Management and a wide array of other MediaEdge print publications, and produced each issue with discerning flair, professional commitment and good humour toward her coworkers. She was a talented and respected colleague, and a true friend. We miss her very much.
Barbara Carss barbc@mediaedge.ca
6 Office Ascendant: Resurgent market lures back lenders and investors.
14 Inviting Properties: Tourism promoters pitch Canada as a destination for investment returns.
18 Capacity for Improvement: Class B assets hold future promise.
23 Who’s Who in Canadian Real Estate: The 31st annual survey of the industry’s players and portfolios in the office, industrial, retail and multifamily sectors.
30 Vague Value: Green premiums are still more intuitive than tangible in Canada.
38 Budget Blow: British Columbia’s real estate sector gets a provincial sales tax surprise.
Articles
34 Enlisting Emitters: Compulsory carbon market participation could expand.
37 Converging Agendas: Canadian content rules contemplated for clean technology tax credits.
Departments
3 Editor’s note
By Barbara Carss
THE FINANCIAL SERVICES sector provides dual momentum for Canada’s resurgent office market. As a tenant, it’s ramping up demand for space. As a lender, it’s loosening access to capital and easing uncertainty that has kept investors on the sidelines. Recently released findings from CBRE Canada’s annual survey of lenders’ intentions for commercial real estate show a marked turnaround in attitudes from earlier in the decade. Respondents — representing 47 financial entities that collectively hold more than $200 billion worth of Canadian commercial real estate loans — ranked downtown Class A office as one of their
most favoured asset sub-classes among 22 possible choices, while downtown Class A and B and suburban Class A office recorded the most positive gains in perception relative to their 2025 rankings.
That’s seen in the 45% of survey respondents who plan to increase their loan books for office in 2026 — an intention that just 7% of participating lenders indicated in 2025 and none committed to in 2024. While 93% of respondents decreed that office posed an elevated credit risk on refinancing in 2024 and 71% offered that opinion in 2025, just 32% voiced such reservations this year.
“From zero to hero. Lenders are ready to support the asset class again,” Joshua Sonshine, a Senior Vice President with CBRE Capital, observed in late February, as he presented an overview of the survey results in conjunction with the Real Capital conference in Toronto. “It’s tied directly to improving market and cashflow fundamentals, most notably renewed leasing momentum and a steady reduction in vacancy.”
Lenders, investors and real estate operators link their optimism to a leasing uptick. That’s coming through in both hard data for vacancy rates and anecdotal evidence.
“Looking across our portfolio, tour activ-
ity is absolutely up. The number of RFPs in the market are absolutely up. We’re signing more deals,” Scott Gordon, Head of Asset Management with Manulife Investment Management, told attendees on hand earlier this winter to learn how institutionally held assets in the MSCI REALPAC Canada Property Index performed in 2025.
Those results confirmed a positive average total return (2.1%) across the office assets in the index for the first time since 2021. Office was the second best performer of the four core asset sub-classes measured, ahead of retail and multifamily residential, after consistently bottoming out the field from 2021 to 2024. Peter Koitsopoulos, Vice President, Real Estate Client Coverage with the index producer, MSCI, also attributed Toronto’s regional outperformance of Montreal to its “office-heavy” profile.
“One thing I want to stress here is that the capital values are still negative, but the income return story has improved for office,” he said.
Across the broad index, the average value of office holdings has been in decline for six consecutive years, with drops in the 10% range in both 2022 and 2023 and a further 5.5% reduction in 2024. Average value nudged down an additional 3.4% last year.
Industry insiders participating in a panel discussion alongside the release of the lenders’ survey results suggest the conditions are right for a reversal of that trend, although, for now, that’s most noticeable for Class A assets in select markets like downtown Toronto and Vancouver. Kevin Leon, founder and President of Crestpoint Real Estate Investments, cited a combination of factors including the leasing uptick in the third and
Institutional investors garnered anemic returns from their Canadian commercial real estate holdings in 2025. Results from the MSCI REALPAC Canada Property Index peg the all-asset average total return at 1.3% across 50 portfolios collectively valued at roughly CAD $160 billion. The average total return on 2,171 standing investments came in at 2.1%, based on 4.9% income return against a 2.7% decline in capital value.
Canadian returns in 2024 were middling in the pack of countries represented in MSCI’s global property index, but were near the bottom for 2025. That’s also in a year when equities and bonds made significantly better gains.
“Canadian real estate is one of the worst performing markets globally, sorry to say,” Peter Koitsopoulos, MSCI’s Vice President, Real Estate Client Coverage, told a gathering on hand in Toronto earlier this winter for the release of the index results.
Underperformance relative to the global benchmark is attributed to geopolitical and interest rate uncertainty, and the slower readjustment of values compared to countries where write-downs occurred earlier in the decade and recovery is now underway. This was the fourth consecutive year of shrinking capital value for the index’s standing assets, following declines of 2.9% in 2022, 4.6% in 2023 and 1.6% in 2024. (Prior to that, the index had registered negative capital growth just three times in the 21st century, in 2008, 2009 and 2020.)
“In many cases, what we did see when properties would sell, they sold below book value in our index,” Koitsopoulos reported. “Canada has been in a market where we’ve been taking slower write-downs over a prolonged period of time.”
“We were expecting a year, maybe two, but we weren’t expecting another year of repricing so that was kind of surprising,” acknowledged Tamara Lawson, Chief Financial Officer with QuadReal Property Group, who participated on an industry executive panel tasked with providing on-thespot feedback on the results. “Canada has lagged in terms of repricing because our market is typically a more stable market globally. The thinking had generally been that repricing wouldn’t continue into this last year and we’d see better returns overall.”
Nevertheless, MSCI analysts and industry insiders found some upbeat elements in the results. Notably, office rebounded into positive territory, largely on the strength of income return. A 2.1% average total return positioned it as the second best performer among the four main property types — trailing industrial’s 2.9% total return, but ahead of retail at 1.9% and multifamily residential at 1.4%.
Among regional markets, Koitsopoulos identified Toronto’s “office-heavy” profile as a differentiator in surpassing Montreal’s performance, while his colleague, Jim Costello, MSCI’s Chief Economist, Real Assets, noted the office sector’s contribution to the overall 4% year-over-year increase in transaction volume.
“That’s not the most fantastic growth, but growth is growth. There has been a little bit every year since the collapse following the low interest rate environment of 2022,” Costello said. “The office sector and retail had better growth than industrial and the apartment sector. Those sectors were quite negative for a time, so I view that as a bit of a positive.”
Koitsopoulos connected that trend to a steady nudging up in income return.
“The yields that someone can get in terms of buying commercial real estate have improved. That does bring back activity to the market and that’s a very important story,” he submitted.
The Canadian government’s hybrid work model is tipping decisively back to the formal office. Instructions from the Treasury Board of Canada Secretariat outline expectations that executive level public servants will spend five days per week on-site in their departments as of May 4, while the remainder of direct federal employees return for a minimum of four days per week, beginning July 6.
“Separate agencies are strongly encouraged to take a similar approach,” states a com munique from senior Treasury Board staff. “The Government has put forward ambitious plans to deliver on priorities for Canadians and to strengthen our country. Working together on-site is an essential foundation of the strong teams, collaboration and culture needed during this pivotal moment and beyond.”
The Building Owners and Managers Association (BOMA) of Ottawa called for this kind of action last fall after both the Ontario government and the City of Ottawa announced returnto-office mandates for their public servants.
“A thriving downtown supports local businesses, strengthens transit systems, attracts private investment and reinforces Ottawa’s role as a hub for tourism, culture and commerce,” BOMA Ottawa President, Jen Arbuckle, maintained in a letter to Ottawa Mayor Mark Sutcliffe. “We can all agree that a convergence of municipal, provincial and federal in-person work standards would enhance mentorship, inter-agency coordination and the shared civic identity that resonates most effectively when public servants can engage face-to-face with each other and with the business community.”
Unions representing federal government workers have not been receptive to that assertion. They contend the new policy will undermine productivity and hinder prospects to realize cost savings from reducing federal office space inventory. They also accuse the government of acting in bad faith at a time when it is simultaneously negotiating collective agreements that address the issue of remote work.
“It is insulting for any employer, let alone the government, to change the conditions of work while its workers are in bargaining,” maintains a statement from the Public Service Alliance of Canada. “PSAC will be fighting this irresponsible decision every step of the way. We are prepared to take any legal action against changes to the in-office mandate.”
fourth quarters of 2025, unsettledness in equities markets that had previously been “on fire” and business leaders shaking off a prolonged period of decision-making inertia following the COVID 19 pandemic.
“I think the capital markets turned for office four to six months ago. We see the fundamentals getting better and now, with a little bit of volatility in the equities market, people are saying hard assets are where it’s at,” Leon mused. “There are more positive assumptions going into underwriting in the office market today than there have been in the last four years, and that’s where you see buyers step up and say: I’m on the cusp of something that’s really going to take off.”
In Toronto, where the downtown Class A vacancy rate eased from 16.7% in December 2024 to 12.1% at year-end 2025, more buildings now qualify for better financing. That’s because lenders typically rely on the most conservative baseline — either the ac-
tual vacancy or the broader market vacancy — when they calculate a building’s potential net operating income (NOI).
“Vacancy is not just a market statistic; it is a central input in every lender’s underwriting model. During the height of uncertainty, even a fully leased building could not escape the drag of high market vacancy. For an office building that is 100% occupied, a 460-basis-point decline in [market] vacancy can swing the underwritten NOI meaningfully,” Sonshine explained. “As vacancy continues to fall and leasing activity continues to strengthen, lenders’ underwriting assumptions are significantly improved. With stronger NOI comes better debt service coverage, more deals pencil, more capital flows and more confidence returns to the office sector.”
Few expect the renewed influx of capital will be channelled to new development, but corporate egos and a scarcity of Class AAA
space could spur some action if investors have pre-leasing assurances.
“I do think there will be a value proposition for a larger tenant that wants its name on a new building. We’ll see something like that in Toronto or Vancouver,” Leon hypothesized. “I don’t think you’ll see buildings built on spec for four or five years or perhaps longer.”
In the interim, existing office stock could harbour some outsized returns on investment. Institutional investors theorize that the timing is right to “find alpha” in competitively priced assets with the potential to command higher rents, but it will likely take savvy management and strategic capital expenditures to extract them.
Gordon acknowledged Manulife is “still kind of fighting in the trenches” to lease Class B buildings, but he sees a definable
pocket of demand that can grow in step with other segments of the market. (See story, page 18) Meanwhile, older Class A buildings are already reaping positive spillover from tighter availability within trophy assets, and early bird shoppers aren’t likely to encounter a lot of competition for product.
“There are some great deals to be had, but those landlords who are still over-allocated to office, they’re probably going to stay on the sidelines for awhile until they rebound,” Gordon said. “For asset managers, it’s a question of how are you going to get the economics?”
Leon advised targeting the needs of prospective tenants.
“You want tenants to come into the building and feel good about where they are, but you have to read the value proposition because that could mean different things,” he said. “Some of it could be services and amenities. Some of it could be purely on costs.”
For investors with a deep retrofit in their value proposition, the news isn’t necessarily upbeat on the financing front. For 2026, 37% of surveyed lenders said they would offer tighter credit spreads for loans with strong sustainability metrics, representing a 4% decrease in willing lenders from the previous year. In 2025, 19% of respondents indicated that they planned to begin offering spread discounts for sustainability “in the near future”, but only 5% made that pledge this year.
This year, about 20% of lenders are prepared to offer spread discounts of 5 to 9 basis points (bps) for sustainability and 17% would tighten credit spreads by less than 5 bps. Last year, roughly 27% indicated they would offer sustainability-related spread discounts of up to 9 bps; 12% promised 10 to 14 bps; and about 3% said they would convey discounts of 15 to 19 bps.
Just 8% of surveyed investors perceive
“There are more positive assumptions going into underwriting in the office market today than there have been in the last four years."
that a building’s carbon footprint currently affects the availability and terms of financing, even though 17% expressed that opinion in 2025. Correspondingly, 20% of respondents do not foresee that a building’s carbon footprint will ever be a factor in loan availability or terms — up from the 11% of respondents who held that view in 2025. 26_000609_Canadian_Property_Management_Spring_CN Mod:
Nevertheless, lenders specializing in sustainable finance flag office building retrofits as a potential growth area. Speaking at a recent seminar sponsored by the Canada Green Building Council (CAGBC), Melissa Menzies, Director of Sustainable Finance with Scotiabank, reported continuing high demand for green bonds from Canadian in-
stitutional investors. As well, her bank and others of Canada’s big six now offer blended loan rates with Canada Infrastructure Bank, which extend more preferential rates based on delivery of greenhouse gas (GHG) emissions reductions.
“There isn’t as much net new green buildings being built across a variety of asset classes. Obviously, office has been a bit of a challenging asset subclass where we’re seeing a slower development pipeline, but still see opportunities to enable emissions mitigation and reduce energy use within existing buildings,” Menzies observed. “Once we have some tangible case studies, and we can show a lot of these financial metrics across different geographies and make the business case by example, I think that’s going to be a really big topic for the next five years.”
The 2026 Canadian Real Estate Lenders’ Report can be found at www.cbre.ca/insights/reports/ canadian-real-estate-lenders-report-2026.
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In Alberta’s long-term care sector, Black & McDonald (B&M) is recognized for delivering more than well-run buildings. The Facilities Management division partners with multiple care operators, combining technical expertise with empathy to create environments where residents live with dignity, comfort, and peace of mind.
As Shane Warrick, Sales Leader for Alberta, explained: “These aren’t just
facilities where people go to work, and then leave at the end of the day. They’re homes, communities, and lifelines for hundreds of seniors and their families. That’s why we’re always mindful of the residents, especially elderly and dementia patients. Every job is approached as if we’re working in our own home, because that’s the level of care people deserve.”
The division supports a diverse mix of clients across Alberta, each with distinct
missions and operational models. From Qualicare, a for-profit provider with three facilities under B&M’s care, to not-forprofit organizations like Shepherd’s Care and The Good Samaritan Society, with more partnerships on the horizon.
“We’re big believers in true partnership,” said Scott Giesinger, Division Manager, Northern Alberta. “We don’t just work with these organizations — we support them. Whether it’s by sponsoring events
or donating to help fund new beds, we’re in it for the long haul. It’s never about making a quick buck and walking away. It’s about building lasting relationships and showing up for the people who rely on these facilities every day.”
B&M’s integrated services for longterm care and senior living facilities include everything from air quality management with advanced filtration tailored to vulnerable populations, to energy audits and green retrofits that lower costs and environmental impact. Most importantly, the team strives to ensure that essential systems such as HVAC systems, plumbing, and electrical services remain uninterrupted, safeguarding comfort and continuity for residents who depend on these facilities every hour of every day.
When the weather presents extreme temperatures or risky conditions for residents, mandatory walk-throughs, HVAC resilience and contingency plans help
“It’s never about making a quick buck and walking away. It’s about building lasting relationships and showing up for the people who rely on these facilities every day.”
—
Scott Giesinger, Division Manager, Northern Alberta
ensure that every facility is prepared to respond swiftly.
“Across Alberta, wildfires have become a growing concern, and some of our care homes are located in remote areas or near impacted communities,” said Warrick. “Operators have had to plan for worst-case scenarios — asking, ‘If a fire approaches your long-term care centre, what is your plan to safely relocate residents? How do you safely move them to the next fire-safe city? Does the receiving care centre need additional site services to help accommodate the relocated residents? Should we implement plans to increase the air filtration media to include carbon air filters to minimize the amount of smoke and fire particulates entering the care facility? Part of what we offer includes covering those critical decisions from end to end.”
That same level of foresight applies to day-to-day operations. Beyond emergency planning, Black & McDonald works closely with care providers to optimize building performance and financial sustainability.
“We’re always asking: How can we help reduce operating costs, extend the life of mechanical systems, and help our clients generate revenue?” Warrick said.
“In long-term care, full occupancy is what drives funding and growth, so our role is to support that goal with reliable, efficient infrastructure that keeps every bed occupied and every resident comfortable.” With a deep commitment to quality of life, the Alberta team continues to set the standard for safe, responsive, and resident focused facility management. Every system upgrade, every maintenance check, and every energy retrofit is part of a larger promise: to uphold the dignity of seniors and support the operators who care for them. As the sector evolves to meet growing demand and rising expectations, B&M remains a steadfast partner — innovating with purpose, listening with empathy, and investing in solutions that make long-term care not just sustainable, but humane.
Visit www.blackandmcdonald.com for more information.
TOURISM PROMOTERS are pitching Canada as a destination for investment returns. Several organizations recently joined forces to highlight potential opportunities in recreational, leisure and entertainment assets at MIPIM, the international gathering of property professionals held annually in Cannes, France.
“The level of interest in Canada from investors and media across the real estate, hospitality and mixed-use sectors at MIPIM exceeded our expectations,” reports Gracen Chungath, Senior Vice President, with Destination Canada, a federal Crown corporation that provides marketing, research and facilitation services for the tourism industry.
Last year, Canada’s tourism sector generated an estimated $134 billion in revenue — flowing through to roughly 265,000 businesses in 5,000 regions and communities nationwide — and those annual earnings are projected to reach $178 billion by the end of this decade. International visitors constitute a Canadian export market, with the added bonus that the goods and services they consume while in the country are tariff-free.
Foreign travellers are tapped as a lucrative customer base toward the target of doubling Canadian exports outside the United States over the next 10 years. It’s envisioned that visitors from countries other than the U.S.
could pump an extra $24 to $30 billion annually into the Canadian economy by 2035, but tourism promoters identify a corresponding need for attractions and related services to complement and augment existing lures.
The 30-member Team Canada delegation to MIPIM included representatives from Vancouver, Kamloops, Winnipeg, Toronto, Ottawa, the Tahltan Nation in northwest British Columbia and the Cape Breton region of Nova Scotia — all seeking to forge connections with prospective investors in a range of projects that could serve the sector.
That includes experiential retail, accommodations, venues for culture, entertainment and recreation, and sustainable and regenerative approaches to tourism.
“The collective approach we took at MIPIM across jurisdictions, levels of government and the public and private sectors will continue to guide this work,” Chungath says.
The timing could be right to capitalize on Canada’s growing share of global tourism spending and perceived bargains in its institutional grade assets. Canada was one of the worst performers in MSCI’s global property index for 2025, posting an average all-asset total return of 1.3% and the fourth consecutive year of declining capital value, averaged
across 2,171 assets held in 50 institutional portfolios in MSCI’s Canada property index. (See story, page 7)
However, industry insiders suggest that could deliver an upside here that won’t be found so readily in markets closer to the peak of their cycles.
“If you’re an investor, do you want to go hunting now in Europe?” Ugo Bizzarri, Chief Executive Officer of Hazelview Investments, observed earlier this winter when called upon to assess the 2025 investment results. “I’m selling Europe and buying Canada.”
Meanwhile, CBRE Canada’s 2026 survey of 47 financial institutions that collectively hold more than $200 billion worth of Canadian commercial real estate loans reveals 38% are planning to increase their loan books for hotels this year and 55% have expanded budgets for retail. Lenders ranked hotels (9th) and entertainment-focused retail (11th) relatively favourably among 22 asset subclasses.
Digging deeper into the survey findings in a presentation during last month’s Real Capital conference in Toronto, Joshua Sonshine, a Senior Vice President with CBRE Capital, noted that lenders have generally had more success fulfilling their budget intentions for hotels than other property types within the
sought-after alternative assets class that are still at a more nascent scale in the market.
“Hotels have seen fundamentals improve. Financing is available, accretive and competitive, and the deal flow is much more tangible than data centres and life sciences,” he said.
Colliers Canada’s recently released 2026 Canadian hotel investment report concurs that there is “robust” availability of capital, supplied by schedule 1 banks, cooperatives and credit unions. Hotel investment companies, real estate owners/investment managers seeking portfolio diversification and non-traditional hotel developers that see promise in current hotel room shortages in some markets could all potentially be players. Nevertheless, Colliers analysts caution that foreign investors have historically preferred “large portfolio acquisitions” over one-offs, while the economics of new construction may not yet be workable.
Last year saw $2.3 billion worth of transactions, a 16% jump from 2024, while the average per room price of $219,000 was up 36% year-over-year. In contrast to the years of pandemic fallout earlier in the decade, just 1% of last year’s sales volume was due to distressed sales and just 2% of transactions removed hotel stock to be converted to other uses. Both domestic and international travel are identified as drivers of demand.
“A weaker Canadian dollar and the rebound of long-haul markets, including China, continue to enhance Canada’s global value proposition,” the Colliers report states. “Resort and gateway markets — from Vancouver Island, Whistler and Alberta’s mountain regions to Toronto, Vancouver and Montreal — remain highly sought after, supported by strong air connectivity.”
The upheaval that the Hudson’s Bay Company’s (HBC) bankruptcy caused for owners of super-regional malls is apparent in the Canada Property Index. In 2024, the asset subclass delivered a 6.1% average total return; in 2025, that plummeted to negative 0.2%.
In 2024, retail was the top performer among the four asset classes monitored in the index, with an average total return of 6.5% — breaking down to 0.8% capital growth and 5.6% income return. In 2025, retail fell to third place, behind industrial and office, while recording a 1.9% average total return and suffering an average 3.6% decline in capital value. A spate of regional mall
Institutional investment in Canadian commercial real estate began to rebound last year and is projected to keep ticking up in 2026. JLL reports institutional investors — including fund managers, pension funds, REITs and foreign investors — deployed nearly $15 billion toward Canadian assets in 2025, representing about one third of investment deal volume for the year and their largest share of acquisitions since 2021.
“Since these groups generally encompass the largest and most experienced investment funds in the market, this resurgence underscores a consensus that Canada is entering a new capital cycle characterized by stronger market fundamentals and improving returns,” observes the real estate advisory firm’s overview of 2025 performance and expected 2026 trends.
CBRE Canada likewise identifies institutional investors as a driving component of acquisitional momentum this year. The firm is forecasting an 8% year-over-year increase in deal volume, pushing it up to about $56 billion worth of activity over the course of 2026.
“Global capital is also increasingly looking to Canada as a market of relative stability amid rising geopolitical tensions. Meanwhile, a significant rebound in real estate debt markets has supported greater liquidity across all asset classes, including the office sector,” CBRE analysts state in the firm’s 2026 outlook report.
On the flipside, Canadian institutional investors pulled back from the United States last year. Although Canadian investors as a whole continue to hold more assets in the U.S. than any other foreign market, activity decreased to a record low share of outbound capital.
“Canadians were net sellers of U.S. real estate in 2025. They sold a whole lot more than they bought,” reported Jim Costello, MSCI’s Chief Economist, Real Assets, while speaking in Toronto in conjunction with the release of the 2025 results of the MSCI REALPAC Canada Property Index.
Nevertheless, a surge in data centre investment, to the tune of about CAD $2 billion, somewhat masked that imbalance. Costello identified the emergent alternative sector as one alluring element of an otherwise less-than-compelling investment landscape.
“The returns have turned positive, but still not so fantastic. You can earn more investing in debt in the United States today than you can investing in the equity stack,” he said. “That’s a good reason for Canadian investors to not be thinking about the United States at the moment, and when you pile all the uncertainty coming from the geopolitics on top of it, it’s not surprising to me that you see a pullback.”
Two retirement home operators have been compelled to divest properties as a condition of regulatory approval to acquire Canadian portfolios. The Competition Bureau of Canada recently negotiated agreements with Chartwell and U.S.-based Welltower Inc. that will allow two deals, worth roughly $5 billion, to proceed.
Welltower will sell four of its existing retirement homes located in Vancouver, Victoria, Brampton and Ottawa so that it can move forward with the $4.6-billion acquisition of the Amica Senior Lifestyles portfolio from the Ontario Teachers’ Pension Plan. That deal, which was first announced in March 2025, included 31 luxury retirement homes, seven projects under construction, nine development sites with secured municipal approvals and a minority interest in Amica’s management company.
Chartwell will sell off its Clair Hills retirement residence in Waterloo, Ontario, in order to complete the transaction for the six-building Sifton Properties portfolio. The $432-million deal, first announced in July 2025, was for a total of 1,024 suites and 29 townhomes under construction.
In both cases, the Competition Bureau cited concerns about concentrating ownership of retirement residences in particular markets where the prospective purchasers already had a presence. The agreed upon divestitures were deemed a satisfactory solution.
“As the Canadian population ages, the retirement home industry becomes even more important, with demand expected to accelerate rapidly over the next decade. Competition in the retirement home sector plays a crucial role in keeping prices in check and pushing providers to maintain high standards of care and modern, well-maintained facilities,” a statement from the Competition Bureau maintains.
sell-offs also underpins the net divestment of nearly $1.8 billion worth of retail property from the index over the course of the year.
Yet, looking to the future, those dynamics could gel with tourism promoters’ aims. Participating in the panel discussion in conjunction with the 2025 investment results release, Tamara Lawson, Chief Financial Officer with QuadReal Property Group, cited her company’s success in fully leasing the ambitious, high-end redevelopment of the Oakridge Park retail centre in Vancouver.
That was to have included a space for the incumbent tenant, Hudson’s Bay Company, which has now been freed up for other retailers and uses. She speculated that other mall operators have likewise moved beyond the initial shock of the sudden vacancy to adopt an upbeat outlook on the prospect for more dynamic tenants with the potential to pull in more customers.
“Our focus is really on transformative retail,” Lawson said. “It’s no secret that Hudson’s Bay wasn’t paying a lot of rent. When it has all worked through the system, people
A NEW STREAM of incentives to extract energy saving potential in Class B and C buildings dovetails with projections about their future competitiveness in a recovering office market. For now, elevated vacancy rates continue to plague this subset of the inventory, but some investors are eyeing it as a good bet for future returns given anticipated scarcity of Class A and AAA supply.
“Our development cycles are, generally speaking, at a standstill. Save for a few potential projects, we’re in a position of limited new inventory over the next three to five or potentially seven years. Tenants will be forced to seek alternative opportunities to a very tight AAA and A class market,” says Brendan Sullivan, Senior Vice President, Office Leasing, with CBRE Canada. “We’re at a moment in time where it’s very important for landlords of B class office buildings to understand the opportunity that exists today, and, more importantly, will exist in the future.”
By Barbara Carss
Still, there’s no prediction for a quick, universal or effortless improvement in those landlords’ fortunes. CBRE Canada’s recently released data for the first quarter of 2026 reports a 24.3% national vacancy rate for downtown Class B and C office stock — a drop of 100 basis points (bps) from 12 months earlier, but just 10 bps lower than at the end of Q1 2024 and 160 bps higher than the B/C vacancy rate for the first quarter of 2023. Consistent with Sullivan’s hypothesis, a steeper year-over-year dip in downtown Class A (210 bps) and trophy status (160 pbs) office vacancy illustrates where leasing momentum is currently occurring.
Toronto, which is leading the trend, posted a third consecutive quarter with more than 1 million square feet of positive absorption downtown. A record high tally of 2.1 million square feet of absorption in Q1 2026 includes the completion of the fully pre-leased, 1.4-million-square-foot CIBC
Square II tower, leaving just 420,000 square feet of in-progress construction yet to arrive onto the downtown market. The Class A vacancy rate fell 160 bps during the course of the winter to end the quarter at 12.1%, while the total downtown office vacancy rate declined by 110 bps, to 15.9%.
Analysts with Savills interpret the yearover-year 0.4% drop in average net asking rents in Toronto’s central business district as evidence that “lower-tier” inventory now accounts for a larger share of available space. The firm’s newly released stats for Q1 2026 peg those average asking rents at $62.67 per square foot (psf) versus $45.73 psf across the broader Greater Toronto Area. Within the central business district, average asking rents range from $70.10 psf in the financial core to $49.68 psf in midtown and $47 psf in the King/Dufferin node, where more Class B and C office buildings are typically found.
That’s happening as investment property specialists turn back to asset-specific strategies after an extended run of reaping easy gains from tilting their portfolios toward industrial holdings. Last year, the gaps in performance narrowed significantly among the four main asset categories monitored in the MSCI REALPAC Canada Property Index, which tracks institutionally held assets, and office registered the second best average total return after bottoming out the field for the previous four consecutive years.
“It’s becoming more of a stock picker’s market,” Jim Costello, MSCI’s Chief Economist, Real Assets, told a Toronto audience assembled earlier this winter for the release of the 2025 investment results. “It’s a matter of finding the right properties, understanding those properties and making sure you have the right pieces, at the asset level, to generate income.”
Searchers for potential outsized returns on investment — dubbed “alpha” — zero in on properties valued at a discount relative to the market, which could credibly command higher rents and operate more cost-effectively in the future. Class B buildings, whether newly acquired or long held in a portfolio, almost inherently fit that bill, but typically need intervention to deliver on their promise.
“You create the alpha by running the property efficiently, doing something to the property, really increasing your rents,” Ugo Bizzarri, Chief Executive Officer of Hazelview Investments, observed during a panel discussion occurring alongside the release of the Canada Property Index 2025 results.
That’s not necessarily accomplished solely through the addition of deluxe amenities like the conference centres, fitness facilities and lounges that have been sprouting up in Class A and AAA space in recent years. Joining Bizzarri in the panel discussion, Scott Gordon, Head of Asset Management with Manulife Investment Management, suggested non-trophy office assets and markets beyond Toronto, Vancouver and Montreal offer some of the best possibilities.
“If you’re in a primary market, yes, you’re in a stable economy, but it’s hard to outperform. The almost-primary and secondary markets are where, from an investment perspective, you have to spend a lot of time looking to try to outperform the index,” Gordon said. “If you put alt [alternative asset classes] aside, I think office is actually where you’re going to find alpha right now, and amenitzing your building is different if
you’re a C or a B versus an A. I think people who are looking for Class B office are less concerned about amenities and more concerned about economics.”
“There are many things on the margin, from an investment perspective, that can enhance the experience that an occupant will have in an office building,” Sullivan concurs. “Back-of-house things like energy and water efficiency complement front-of-house when we talk about amenitization. It’s not just about what looks good; it’s also about what’s operationally good, and they have to meet together and be symbiotic.”
The Building Owners and Managers Association (BOMA) of Canada has targeted that sphere via its Enspire program. Newly launched Retrofit Ready incentives, drawing on funds from Natural Resources Canada’s deep retrofit accelerator initiative, include rebates of:
• up to 80% of the eligible costs of recommissioning to assess and, where necessary, adjust mechanical, electrical and/or automation systems to ensure they are operating as intended; and
• up to 60% of eligible costs for the professional services required to: set up and configure tracking and monitoring systems; develop the business case for a retrofit involving at least $100,000 worth of upgrades; and/or project manage a retrofit of similar value.
The program reflects the Canadian government’s capacity-building agenda for the deep retrofit accelerator initiative, which is aimed at developing preparedness, delivery models and expertise to conduct deep retrofits on the scale and at the pace necessary to achieve Canada’s targeted reductions in greenhouse gas (GHG) emissions. (Those are a 40 to 45% drop below the 2005 level by 2030 and net-zero emissions by 2050.)
BOMA Canada’s piece of the larger national puzzle focuses on Class B and C buildings. Adjacent programs, such as the Purpose Retrofit Accelerator offered in collaboration with the Canada Green Building Council (CAGBC), cover off other building types and economic sectors, but also channel federal funds to preproject planning and preparedness to help owners/managers reap optimal gains from their retrofit spending. (See story, page 34)
There are just eight months left to make use of Ontario’s regional opportunities investment tax credit, which provides a 10% rebate on up to $450,000 of the costs of acquiring, constructing, expanding or renovating a commercial or industrial building in 34 designated jurisdictions throughout the northern, eastern, central and southwest zones of the province.
The refundable tax credit for Canadian controlled private corporations was introduced in 2020 as an economic stimulus measure in regions where the employment growth rate lagged the provincial average during the years from 2009 to 2019. In practice, that covers most areas of the province outside of Ottawa, the Greater Toronto and Hamilton Area, Barrie, Niagara Region, Kitchener-Waterloo and Guelph.
The 10% rebate applies on qualifying expenditures in excess of $50,000 up to a ceiling of $500,000. For investors interested in secondary and tertiary markets, it is available in several of Ontario’s more prominent mid-sized cities, including London, Windsor, Kingston, Peterborough, Sudbury and Thunder Bay.
The recently released 2026 Ontario budget points to an employment uptick in the subject regions and the introduction of other tax relief measures — including a reduction in the corporate income tax rate for small businesses and accelerated write-offs of capital cost allowance, aligned with new federal tax measures — as the rationale for eliminating the tax credit as of January 1, 2027. It’s projected the rebate’s termination will result in $17 million in additional provincial revenue in the 2026-2027 fiscal year and $70 million in 2027-28.
Last year, two fully subscribed BOMA Enspire initiatives — Quick Start Assessment (QSA) and Building Performance Excellence (BPE) — provided support for 838 projects in 735 properties collectively encompassing about 43 million square feet of space. The new Retrofit Ready initiative has a $4 million budget, of which slightly more than two-thirds is earmarked for recommissioning incentives. Program administrators began processing applications on April 1. Eligibility is restricted to Class B and C commercial and institutional buildings in the range of 10,000 to 250,000 square feet, built prior to 2016. Office, retail, light industrial, restaurants, hotels/lodgings and public sector facilities, excluding those that the federal government owns and operates, can qualify for varying maximum amounts of
funding, depending on their size.
The rebate ceiling is set at $125,000 for buildings in the range of 100,001 to 250,000 square feet; $100,000 for buildings in the range of 51,000 to 100,000 square feet; and $75,000 for buildings from 10,000 to 50,000 square feet. Owners/managers would have to undertake whole-building recommissioning and all three of the other designated activities to obtain those maximum amounts. As well, they can claim only to a threshold of $500,000 across their entire portfolio of buildings, including funds previously allocated for Enspire’s QSA and BPE initiatives.
Approved candidates are expected to work with one of BOMA Canada’s registered service providers, comply with all program rules, complete projects by Jan. 29, 2027 and
submit required documentation by Feb. 12, 2027. Beyond that, project proponents will have to secure and invest the capital to move forward with their retrofit plans.
Meanwhile, some prospective financiers welcome awareness-building exercises that could steer more loan applicants their way. Speaking at a recent CAGBC seminar, Carla Heim, Director of Sustainability with the Business Development Bank of Canada (BDC) acknowledged that the lending institution’s certified green building loan is “not flying off the shelves”.
The preferred-rate loan is available for Canadian entrepreneurs to acquire, build or renovate a building that has or will achieve a sustainability certification, and it comes with what Heim describes as “very simple” conditions. However, many applicants in the small and medium-size enterprise (SME) sector, in particular, are not highly attuned to sustainability as they grapple with other economic and growth-related pressures.
“A lot of times, the building is the last thing on their list [of concerns]. Entrepreneurs are coming to us with fully baked projects and they haven’t made any considerations about sustainability in their buildings,” Heim said. “We really want to get into that conversation a lot earlier. I think they would pursue it because it has a rate reduction for achieving a building certification, and we’ve shied away from complicated reporting requirements that might intimidate them. Once the underlying condition is met, the rate reduction can be done.”
More information about the Building Owners and Managers Association of Canada’s Enspire program can be found at https://bomaenspire.ca. More information about the Business Development Bank of Canada’s certified green building loan can be found at www.bdc.ca/en/financing/certified-greenbuilding-loan.
The Commercial Real Estate landscape is changing. Property managers and stakeholders look to BOMA Toronto for educational support and resources to help navigate critical issues, deliver operational excellence, and inspire success. Build your skills. Build you network. Build your career. JOIN TODAY! For membership and sponsorship inquiries contact:
Nadeyah Kailan Manager, Stakeholder Engagement
416.596.8065 ext. 227
ACCESS FUNDING FROM 60% TO 80% TO IMPROVE BUILDING ENERGY PERFORMANCE AND PLAN UPGRADES
ACCESS FUNDING SUPPORT THROUGH FOUR ACTIVITIES:
Recommissioning and Building Optimization | Business Case Development Energy Monitoring and Tracking Systems | Retrofit Coordinators NEW FUNDING INITIATIVE: APRIL 2026 - MARCH 2027
By Peter Altobelli, Vice President and General Manager
Canadian commercial real estate is entering a more measured phase, one defined by adjustment, selectivity and long-term positioning. Office is stabilizing as hybrid work raises the bar on quality and purpose; tenants are making more deliberate decisions about the spaces they keep. Industrial is finding balance after a period of exceptional growth, with success now hinging on disciplined execution and rapid response. Retail, meanwhile, has proven more durable than many expected, with the strongest performance coming from convenience, service and experience.
Against that backdrop, technology decisions should start with the foundation of the business. Before chasing what is next, organizations need connected systems, consistent data and clear visibility into the functions that shape dayto-day performance.
The fundamentals matter more than ever. Month-end close processes that once took days can be streamlined with a modern ERP system that consolidates tasks, owners, due dates, dependencies, status updates, reporting and more into a single dashboard, giving teams a clean, consistent and auditable close process while leadership gains a real-time view across the portfolio.
Risk oversight and collections are equally critical. When all tenant data lives in one place, teams can see which leases are expiring, which receivables are overdue and where risk is building, so they can get ahead of issues before they become problems. Automated workflows for tenant collections and arrears management mean issues surface earlier and are resolved faster, protecting cash flow across the portfolio.
As we all know, AI need to be part of the business strategy, but for many commercial real estate organizations, the right approach is still a practical one. The biggest opportunity is not using AI for the sake of innovation, it is applying it in focused ways that support workflows, improve access to information and help teams make better decisions.
In practice, this means starting small and being selective. AI-assisted lease abstraction, for example, can reduce the time it takes to extract and validate key data from complex documents. Intelligent search and summarization tools can help teams surface the right information faster, whether that is a historical maintenance record, a rent escalation clause or a portfolio-level trend. Automated anomaly detection in financial data can flag discrepancies before they become reporting problems.
The common thread is focus. AI works best on well-defined problems with clean, connected data underneath it. That means sequencing matters: organizations that build a strong operational foundation first are far better positioned to layer in AI that actually delivers.
The opportunity ahead is not simply to adopt new technology. It is to align the right technology with the goals of the business. That starts with a strong operational core, followed by targeted innovation where it can create measurable value. In a more disciplined market, strategic technology partnership will matter just as much as the technology itself.
To learn more about aligning technology with your commercial real estate goals, visit yardi.com.
Having the technical expertise and insight to conduct retrofit projects in established buildings without affecting the day-to-day business of occupants is our specialty. It’s what sets us apart.
The truth is, existing buildings are far more complex and challenging than new construction, and require a unique game plan every time. It’s why the process for delivering mechanical and electrical engineering solutions requires more than a cookie cutter approach – it demands that you have a deep insight into the building and how new systems can be integrated into existing systems seamlessly.
All of our projects are reviewed by senior engineers, each with over 30 years of experience in their respective fields, ensuring that our clients always receive engineering services of the highest quality.
A RELATIVELY MODEST construction premium could yield significant performance improvements in Canada’s commercial building stock. Early evidence from one effort to motivate deep retrofits suggests a 40% reduction in greenhouse gas (GHG) emissions, in keeping with the Canadian government’s 2030 target, could be achieved for an average incremental cost of about $10 per square foot. Those numbers might crunch even more
By Barbara Carss
favourably if capital budgeters could count on a green premium. Yet, despite general recognition that sustainability influences net operating income (NOI), marketability and the physical condition of assets, there is no consensus on how it flows through to value and credit risk. Appraisers and lenders need credible, standardized metrics to produce valuations and inform underwriting, and those key pieces of the financing puzzle are still emerging.
“It is very case-by-case. We don’t have granularity yet in the Canadian market on what the composition of that premium is,” Colin Guldimann, a Senior Director of Sustainable Finance at RBC, told attendees at a recent seminar sponsored by the Canada Green Building Council (CAGBC).
JLL research, based on the firm’s global real estate advisory practice, concludes that green-certified assets do command a premium over non-certified competitors. That’s
pegged at an average of 8.5% worldwide, but, speaking at the CAGBC seminar, Julian Smith, JLL’s Climate and Decarbonization Practice Leader in North America, acknowledged there is wide variation from market to market. In Toronto, where more than 90% of Class A office buildings carry some form of green certification, the premium is calculated to be less than 5%.
Meanwhile, the financial penalties now attached to exceeding New York City’s allowable threshold for GHG emissions from buildings (known as Local Law 97) appear to be accentuating green premiums there. JLL analysts found low-carbon assets significantly outperforming those with more carbon-intensive profiles, and Smith speculated there is potential for a more pronounced divergence in Toronto based on tenants that have committed to the 2030 target for a 40% reduction in GHG emissions relative to 2005 levels.
“There’s an 80% shortfall in supply of low-carbon stock. Right now there are other issues in the market that are kind of slowing things down, but this marker really shows that there’s going to be a supply and demand gap at some point,” Smith submitted. “Have
decarbonization measures increased asset value? The answer is yes. Increased NOIs and cashflows are happening right now globally. Is it standardized and somebody can apply it in the Canadian market? Not yet, but it is happening.”
Recently released estimates of the square footage costs of hitting the 2030 target are based on identified measures to reduce energy use and carbon emissions within a selec-
tion of portfolios participating in the Purpose Retrofit Accelerator. The initiative — part of a nationwide network of capacity-building exercises that draw on federal funding to promote and ease the implementation of deep retrofits — was launched in April 2024 by the sustainability consulting firm, Purpose Building, in collaboration with the CAGBC. Through the accelerator program, owners/managers of commercial and multifamily buildings are eligible for rebates of up to 50% on various elements of deep retrofit
planning, design and project management. Thus far, enrollment encompasses roughly 1,700 buildings at some stage of mapping out how to achieve a minimum 50% reduction in energy consumption and 70% cut in GHG emissions. That includes 380 assets with completed net-zero transition plans and 26 where design and/or construction are now underway.
The $10/ft² assumption is derived from a smaller cohort of 16 properties with finalized plans that collectively entail 135 retrofit mea-
sures. Accelerator program administrators also focus on these participants, along with some broader industry survey data, to assess the level of emissions reductions that might be deliverable by 2030 and what’s needed to make more aggressive gains. Those observations and related recommendations are highlighted in a new summary report of the accelerator program’s first-year activities.
The Canadian government’s stated goal for the capacity-building initiative is to develop preparedness, delivery models and
Vancouver, Toronto and Montreal are among 75 world cities seen to be exerting some degree of climate action pressure on the commercial real estate sector in JLL’s analysis of the interplay between local regulations, decarbonization and resilience. It finds that local governments in major global markets are evolving from initially setting largely voluntary targets for the reduction of greenhouse gas (GHG) emissions to now implementing reporting and building performance mandates with penalties for non-compliance.
Vancouver is notably grouped with 11 cities deemed to be “global accelerators” with established, enforceable policies and rules related to emissions reduction, transition away from fossil fuels and climate change adaptation. Others in the cohort include New York City, Seattle, Amsterdam, Copenhagen, Helsinki, London, Oslo, Paris, Stockholm and Sydney.
“Regulation is accelerating real estate’s transition toward a low-carbon, climate-resilient future — and city governments are leading the charge,” JLL analysts observe. “For the CRE sector, local policy is often the most significant regulatory force impacting operational costs and investment strategies. As regulation gains enforceability and scope, real estate leaders must anticipate these shifts to safeguard asset value and manage transition risk.”
That’s evident in the findings that 82% of global investment in commercial real estate over the past decade — roughly USD $4.1 trillion worth of expenditures — has occurred in markets where there is a target to achieve net-zero emissions by 2050. More than 40% of the surveyed cities now have some form of building performance standards that set allowable and increasingly tightening thresholds for energy intensity and/or GHG emissions, while “dozens more” are on track to introduce them by 2030.
A significant subset of 17 cities, mostly in Europe, already have requirements in place to effectively prohibit fossil-fuel-fired systems in new construction. As well, Vancouver is flagged as one of three cities, along with London and Amsterdam, with policies to address embodied carbon, while all cities in California are captured by the statewide mandate for large, non-residential buildings.
About 60% of the surveyed cities also have policies related to resilience and climate change adaptation, although mostly still confined to risk disclosure or voluntary planning mechanisms. Meanwhile, building owners/managers in more than two-thirds of the surveyed cities can tap into some form of local financial incentives for retrofits and energy efficiency upgrades, building electrification or on-site renewable energy generation.
“These local tools increasingly sit alongside state, national and supranational programs,” JLL analysts report. “As these instruments mature, they help to de-risk projects and attract private capital, and enable owners to undertake more ambitious upgrades at scale.”
Toronto is slotted into a larger group of 22 “market mobilizers” that lags the global accelerators’ pace, but is seen to have “clear regulatory traction” through programs such as mandatory benchmarking and reporting. The group also includes Boston, Chicago, Denver, Los Angeles, Portland, San Francisco, San Diego and Washington, D.C. in the United States, seven European cities and six in Asia Pacific.
Montreal has more company from the Americas in its group of 22 “policy builders” at earlier stages of policy and regulation implementation and what’s characterized as “still patchy” coverage and enforcement. This group includes Atlanta, Austin, Miami, Minneapolis, Pheonix and Salt Lake City in the U.S., along with Medellin, Mexico City and Rio de Janeiro, six European cities and five cities in Asia Pacific.
Another 20 cities are identified as “emerging implementers” at the early stage of policy development with few mandatory requirements in place. This cohort is largely located in South America, Africa and the Asia Pacific, but also includes Houston and Tampa in the United States.
JLL’s City Climate & Resiliency Policy Tracker can be found at www.jll.com/en-us/insights/citypolicy-is-driving-building-transformation.
— REMI Network
expertise for deep retrofits to occur on the scale and at the pace necessary to achieve targetted reductions and, ultimately, net-zero emissions by 2050. Incentives are meant to facilitate future investment and work — ideally, in a way that cost-effectively maximizes emissions reductions using a straightforward, systematic approach that can be widely replicated — and help recipients sharpen the business case for required capital expenditures.
Authors of the CAGBC report caution that the initial dataset is comprised of assets that have been flagged as retrofit candidates and, thus, “may not represent ‘average’ Canadian buildings”. However, that still aligns with the program objectives.
“High-level observations help demonstrate what’s possible when committed owners and portfolio managers apply a clear and proven methodology to energy and carbon retrofit projects at prioritized assets,” the report states. “This figure [$10/ft²] is preliminary and based on a relatively modest pool of retrofits. We share it here with the hope that it will spark discussion, innovation and collaboration across the sector.”
CAGBC industry surveys that bookend the accelerator program’s first year show some progress on deep retrofit preparedness. When questioned in 2024, 30% of respondents envisioned they would undertake future retrofit projects; that percentage jumped to 55% in 2025. In 2024, respondents collectively envisioned they would finalize net-zero transition plans for about 6% of their holdings before the end of 2026; that climbed to 17% in 2025.
Nevertheless, there are some continuing financial, technological and policy-related drags on execution. Notably, 44% of respondents indicated financing was more onerous in 2025 than 2024. Although 46% saw pricing improvements for technology during that 12-month period, 62% said they struggled to integrate it into their operations. Meanwhile, 67% said a fragmented policy landscape caused them frustration and/ or confusion in 2025, up from 65% who voiced that sentiment in 2024.
The report tallies several costs of inaction that aren’t necessarily acknowledged when decision-makers consider the upfront costs of retrofits — including “costs of utilities, insurance premiums, mitigating risks or repairing disaster damage, retaining tenants or attracting new ones” — and contends building owners/managers are not alone in overlooking this reality.
“Financial institutions, appraisers and other market actors need to account for the tangible advantages of efficient, low-carbon buildings,” it asserts. “Today, market valuations often lag performance, underestimating true gains in efficiency, comfort and resilience that highperforming buildings achieve.”
Recent findings from CBRE Canada’s 2026 survey of lenders’ sentiment do seem to show diminishing endorsement of that upside across a base of 47 financial institutions that collectively hold more than $200 billion worth of Canadian commercial real estate loans. This year, a smaller percentage indicated they would be willing to offer credit spread discounts for loans on projects with strong sustainability metrics (37%) than did so in 2025 (41%) and, when available, that potential discount is generally expected to be more modest. As well, just 8% of surveyed lenders confirmed that a building’s carbon footprint currently influences loan conditions, while 20% expressed the opinion that it never would.
Even so, green building advocates and practitioners within the sustainable finance field are striving to adjust that perception. CAGBC is currently working with the Real Property Association of Canada (REALPAC) and appraisal specialists from Canadian real estate advisory firms to develop standardized approaches for assessing sustainable attributes. Guldimann confirmed lenders are grappling with the same issues.
“We’re engaged in industry groups right now trying to whittle down the information that we could be gathering into what’s financially relevant to the way that we think about lending to buildings so that we can price risk better, price loans better, underwrite these buildings differently,” he advised. “We’re really trying to understand: What does this do to vacancies? What does this do to lease-up? What does it do to all the different parts of NOI? And how does that translate to valuation?”
Guldimann and Smith concurred that the connection to value is rooted in how green attributes sway underlying risk and returns — drive higher rents, shorten lease-up time, reduce utility, maintenance and insurance costs, etc.. That relies on convincing proof, which, for now, tends to be more piecemeal than comprehensive.
“To ask a valuator to put that to a valuation is near impossible because they don’t have the evidence,” Smith said. “That hard data is not there and it makes it challenging, but those are the markers that need to be focused on.”
The first-year insight report on the Purpose Retrofit Accelerator can be found at www.retrofitsnow.ca/ resources.
“Have decarbonization measures increased asset value? The answer is yes. Increased NOIs and cashflows are happening right now globally."
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A PROPOSED LOWER THRESHOLD for mandatory participation in Canada’s industrial carbon market could bring some commercial and institutional campuses into the mix along with a broader range of suppliers to the buildings sector. A Canadian government discussion paper, released in December 2025, explores possible adjustments to the stringency standards that establish key elements of the federal benchmark and provincial/territorial carbon pricing systems. It presents four potential approaches for determining subject participants, three of
which would target facilities that emit a minimum of 10,000 tonnes of carbon dioxide equivalent (CO2e) per year, while one would set the bar at 25,000 tonnes of CO2e per year. Either trigger point for compliance would be a significant drop from the current 50,000-tonne threshold.
The proposals come as part of a regular review process and as a follow-up on the promise to strengthen industrial carbon pricing, which the government made when it cancelled the consumer surcharge on fossil fuels in March 2025. The discussion pa-
per flags “hospitals and other non-industrial buildings” as examples of non-industrial sectors that are expected to be exempt from the proposals, but it also obliquely refers to commercial and institutional real estate in arguing why updated parameters for the regulated carbon pricing system are needed.
“These criteria were designed when the fuel charge was still in place, and facilities not subject to industrial pricing systems were instead subject to the fuel charge,” it states. “The removal of the fuel charge requires rethinking how scope of coverage should work.”
Elsewhere, the list of emission sources that carbon pricing systems would be required to cover includes “stationary fuel combustion” (at the top of the list) and “on-site transportation” with seven other activities that are more commonly exclusive to industrial/manufacturing operations or solid waste management.
“The paper states only that sectors that are ‘generally considered non-industrial’ would be excluded. It’s not saying that all commercial and institutional facilities are automatically excluded,” observes Bala Gnanam, Vice President of Sustainability, Advocacy
“The paper states only that sectors that are ‘generally considered nonindustrial’ would be excluded. It’s not saying that all commercial and institutional facilities are automatically excluded.”
and Stakeholder Relations with the Building Owners and Managers Association (BOMA) of Canada. “I suspect large campuses, around 5 million square feet or more, could come under this.”
“I could definitely see large cogeneration systems being covered,” adds Eric Chisholm, a Principal with the engineering and sustainability consulting firm, Purpose Building Inc.
The discussion paper more explicitly acknowledges the risk of creating a competitive advantage within various industry sectors for CO2e emitters that fall under the threshold for required participation in the carbon market. That concern underpins the proposed option to set the mandated entry level at 25,000 tonnes, which would capture “fewer industrial activities where there is a significant split between emissions above and below the threshold” but also reduce the number of participants, potentially undermining optimal market functioning.
Alternatively, a proposed “activity-based” approach would be scoped to specific subsectors where it’s calculated that facilities outputting upwards of 10,000 tonnes of CO2e annually account for at least 75% of emissions. (Various supporting assets for the oil and gas sector, dubbed “petrinex” facilities, that individually emit less than 10,000 tonnes annually would also be included.)
This option would appear to definitively exempt commercial and institutional buildings, but the discussion paper does specify the producers of many common building materials, including: iron; steel; aluminum; cement; gypsum; polystyrene foam products; brick; and glass.
Finally, there is a combo option that would encompass all facilities within specified industry sectors that emit a minimum of 10,000 tonnes of CO2e annually, and smaller oil and gas petrinex facilities. This approach is projected to address facilities that collectively generate about 284 megatonnes (284 million tonnes) of CO2e per year, or 41% of total Canadian emissions, while the loosest approach of setting the threshold for market participation at 25,000 tonnes would target 264 megatonnes (264 million tonnes) or about 38% of total Canadian emissions.
“All options would cover the majority of Canada’s industrial emissions (75 to 80%) and a large number of facilities,” the discussion paper states. “The options vary by the extent to which they balance GHG reduction potential with competitiveness and carbon leakage risks, the number and diversity of market participants that would be covered (which influences market function and liquidity), and in regulatory complexity.”
The discussion paper also addresses some identified challenges related to the quantity and price of carbon credits and the effectiveness of current price signals for influencing investment in decarbonization. Although the benchmark carbon price — $110/tonne as of April 1, 2026 — is consistent nationwide, there are some considerable discounts within the various output based pricing systems (OBPS) that are in place in every province/territory except Quebec and Northwest Territories.
Each carbon credit represents one tonne of carbon that is reduced, avoided or removed from the atmosphere, but few regulated
market participants are paying full price to counterbalance emissions that exceed their allowable benchmark. In turn, it’s less lucrative for market participants to sell carbon credits earned from coming in below their mandated emissions intensity level, and there is less incentive for potential developers of emissions reduction projects to embark on credit creation.
“It’s a very fragmented system, and provinces have different rules and different supply and demand for credits,” Adi Dunkelman, Director of Policy and Strategy with the carbon market advisory firm, Clear Blue Markets, told attendees at The Buildings Show in Toronto last December. “If you’re in Ontario and you’re generating a credit, you can sell it for $72, but if you’re in Alberta, the value of your credit is $18. This is something that the federal government is trying to change up and harmonize because this is not a system or a market that can support decarbonization.”
The discussion paper attributes the discrepancies to a credit glut, which is particularly pronounced in some provinces, and outlines proposed mechanisms to help rebalance supply and demand. This would require carbon pricing systems to put a buffer in place to ensure that demand for compliance credits exceeds supply, taking into consideration the volume of banked, unused credits in the market.
“The annual net demand test would be adjusted to require that forecast demand for credits exceed forecast supply by a given amount each year, scaled to reflect the size of the system,” the discussion paper proposes. “This could increase certainty for regulators and stakeholders that market prices are likely to stay close to the headline price, and therefore incentivize decarbonization investments up to that price level. However, the additional level of compliance obligations required to create the buffer could increase overall compliance costs for facilities.”
The discussion paper can be found at www.canada. ca/content/dam/eccc/documents/pdf/climatechange/carbon-pricing-benchmark-consultation/ Discussion-Paper-Driving-Effective-CarbonMarkets-Canada.pdf
Proposed amendments to Canada’s Energy Efficiency Act would instigate a five- to 100-fold increase to existing maximum fines, depending on the circumstances, and introduce a new slate of administrative monetary penalties (AMPs) characterized as primarily for instructive rather than retributive purposes. Enabling legislation has now completed the second reading stage in the Canadian Senate with several steps still to go before it might be adopted in the House of Commons.
As proposed, equipment/appliance dealers or other commercial entities that “use an energyusing product for commercial purposes” could be in line for a significant financial hit if they are found to be importing or shipping items between provinces that do not comply with applicable energy-efficiency standards or carry accurate labels. Currently, they would face a maximum fine of $50,000 if convicted of a summary (i.e. less serious) offence or a fine of up $250,000 for a serious indictable offence.
The proposed amendments would lift maximum fines to $250,000 for a first summary offence and $2 million for a first indictable offence. Subsequent convictions could yield fines of up to $500,000 for a summary offence or up to $5 million for an indictable offence.
A range of other transgressions — such as tampering with energy-rating labels, false statements/documentation or inadequate record-keeping — that can currently result in fines of up to $10,000 could become steeply more odious. Maximum fines of $500,000 for a first offence and $1 million for a subsequent offence are proposed.
Elsewhere, the amendments would establish the authority for administrative monetary penalties (AMPs). As proposed, the Minister of Energy and Natural Resources would designate officials with the authority to issue notices of violation to individuals or other entities for contravening provisions of the Energy Efficiency Act or its regulations. In turn, recipients would have the right to request a review of the alleged violation and/or to enter into a compliance agreement for a lesser penalty. The framework for the penalties would be set out in future regulations.
“The purpose of a penalty is to promote compliance with this Act and not to punish,” the amendment states. “The maximum penalty for a violation is $5,000, in the case of an individual, and $25,000, in any other case.”
The proposed legislation also includes the framework for regulatory sandboxes that would allow new products to be tested in the marketplace in tandem with the development of rules to govern them, and other new provisions related to digital procedures and mechanisms that have emerged since the Act was last updated.
THE CANADIAN GOVERNMENT is considering how its agenda to support domestic manufacturers and technology providers could meld with goals to decarbonize the buildings and energy sectors. Early this winter, it called for public input on the viability of introducing Canadian content requirements for federal investment tax credits tied to clean technology and clean electricity.
Under existing rules, commercial building owners are among the proponents eligible to claim credits for up to 30% of qualifying costs associated with the purchase and installation of various designated clean technologies, including air-source heat pumps, wind and solar energy systems and stationary electricity storage systems. Entities in the electricity generation and transmission sectors can claim tax credits for up to 15% of the eligible costs of low-carbon generating systems, stationary electricity storage systems and inter-provincial transmission equipment.
Contemplated Canadian content rules could complement recently introduced protocol to guide federal government procurement in “strategic” economic sectors. For now, that prioritizes Canadian suppliers and products/ materials when contracts with a minimum value of $25 million are awarded, but the rules are slated to apply to contracts with a minimum value of $5 million by springtime this year. Canadian suppliers are promised additional points in the tendering process and all bids are to be assessed for “inclusion of Canadian goods, services and value-added content” in contract delivery.
There are also new rules for procurement for federal buildings, infrastructure and defence spending that mandate the use of domestically produced steel, aluminum
and wood products. Those are in effect for contracts valued at a least $25 million that require at least $250,000 worth of any one type of material/product for which there are Canadian suppliers in the marketplace.
The recent consultation delved into the potential pros and cons of integrating domestic content requirements with clean tech and clean electricity investment tax credits. Respondents were asked:
• whether such rules could support or undermine their business activities and supply chains;
• what products should be covered or exempted;
• what processes and documentation should be used to verify product origin; and
• what the consequences should be for failing to comply with Canadian content requirements.
“Other countries, including the U.S., have incorporated domestic content requirements in their clean electricity tax credits to encourage the use of domestic materials and equipment. In Canada, stakeholders have called for similar measures to strengthen domestic supply chains and support Canadian manufacturers,” the prelude to the consultation questions states.
Energy management and decarbonization specialists caution that Canadian manufacturers still have a long way to go before they’ll be in a position to forge competitive market share for some of the equipment and systems fundamental to switching away from fossil fuel heating sources. However, the consultation did present
an opening for the buildings sector to make a case for broadening the range of technologies that qualify for the investment tax credit.
“Most of the commercial cold climate heat pumps available in Canada are manufactured in the USA, Mexico, Japan, Italy or elsewhere outside the country,” says Eric Chisholm, cofounder and principal with the engineering and sustainability consulting firm, Purpose Building. “Bluntly introducing Canadian content restrictions for investment tax credits will undermine program participation. To meet emissions reduction targets, participation will need to increase, not decrease, and there are already barriers in the existing program.”
“Today, key technologies like heat pumps are not yet manufactured in Canada at the scale needed. Targeted collaboration with manufacturers is essential to avoid increasing construction costs or slowing the green building economy,” concurs Thomas Mueller, President and Chief Executive Officer of the Canada Green Building Council (CAGBC). “Energy efficient and low carbon technologies are increasingly important to investors, and Canadian asset owners and developers need reliable access and competitive pricing to meet project financial goals.”
Chisholm underscores the risk of skewing the market toward monopoly providers and argues content restrictions would be best applied in product categories where there are a number of different Canadian competitors. Enabling more choice for prospective investors could also have flow-through benefits for those feeding the supply chain.
“Heat recovery heat pumps, or heat recovery chillers, are a foundational decarbonization technology that doesn’t qualify for an investment tax credit currently. Including them as eligible technology could quickly accelerate market participation,” he urges.
landlords and strata corporations in British Columbia face a 7% increase on some key operational costs later this fall when provincial sales tax (PST) will be added to the purchase price of property management, security and accounting services and non-residential brokerage fees. These new levies, along with the introduction of 2.1% PST on architectural, engineering and geoscience services, were announced in the 2026 provincial budget earlier this winter, and are projected to generate roughly $534 million in revenue once they’re in place for the full 2027-28 fiscal year.
The new tax is scheduled to kick in Oct. 1, 2026. In justifying the move, the B.C. government notes that most other Canadian provinces already tax professional services, albeit with the obvious exception of Alberta, which does not collect provincial sales tax.
“B.C.’s economy has shifted significantly towards services, which have largely remained untaxed under the PST. B.C. currently has the narrowest sales tax base of all Canadian provinces that have a sales tax,” the budget document states.
The consumers in line for new costs don’t necessarily see it that way. While acknowledging the B.C. government is looking for new sources of revenue in response to daunting constraints elsewhere in the economy, industry advocates suggest targeting the housing and buildings sector will have repercussions for affordability and business competitiveness.
“With office occupancy and vacancy rates still not returned to normal, added costs will not help, but will only hinder our progress,” maintains Zach Segal, Director of Government Relations with the Building Owners and Managers Association (BOMA) of British Columbia. “Adding costs to property management and several other building services, such as architecture, engineering and security, will make it more expensive for small businesses to lease space and run their business.”
“If you want affordable housing, it seems misdirected,” concurs David Hutniak, Chief Executive Officer of the rental housing industry association, LandlordBC. “Licensed property managers deliver an important ser-
vice to our sector. They’re the ones managing the tenant relationships and we really don’t need an extra cost for that.”
The new tax fallout might have been more muted for many business operators, including commercial landlords, if British Columbia had not withdrawn from the harmonized sales tax (HST) arrangement with the federal government in 2013.
“There is no ability for the purchaser (in B.C.) to recover the PST paid on those services,” advises Laura Gheorghiu, a tax lawyer and partner with Gowling WLG. “If this were an HST environment, an input tax credit (ITC) could be available provided the expenses were incurred in the course of commercial activities, the recipient was validly GST/HST registered and the other criteria for claiming the ITC were met.”
However, those other criteria exclude rental housing providers in any case. LandlordBC is now grappling with the implications of a raft of new unexpected costs.
“We saw it for the first time when the budget was tabled. It just came out of the blue, and basically everything that’s on that list [for application of PST], our industry uses,” Hutniak says. “I’m confident the Housing Minister, in particular, is acutely aware of how difficult it is to deliver rental housing so it’s just really odd they targeted us.”
The 2026 budget also includes a tax boost for many holders of undeveloped residential land. As of Jan. 1, 2027, the provincial school tax surcharge on residential property valued in excess of $3 million will increase from 0.2% to 0.3% on the portion of assessed value up to $4 million, and climb from 0.4 to 0.6% on the remainder of assessed value above $4 million. The B.C. government projects it will generate an additional $139 million in revenue through this mechanism in the 2027-28 fiscal year.
The government is additionally revising its formula for calculating school property tax. Increases will now be based on the three-year average annual change in nominal provincial gross domestic product (GDP) — replacing the practice of pegging increases to the inflation rate plus the tax on new construction. That’s projected to yield $31 million in new revenue from non-residential ratepayers and $124 million from residential ratepayers in the 2027-28 fiscal year.
“The share of tax revenue from provincial property taxes has decreased from 14% in 2003/04 to 8% in 2025/26,” the budget document states. “This policy change maintains the property tax base relative to economic growth, in line with other provincial taxes.”
