Markets can change on a dime and even more so over the course of six or 12 months. Around this time last year, there was worldwide concerns about the economy but the real estate market has remained solid and even turned for the positive in some cases.

"The office story, it’s amazing how quickly it’s turned around,” Colliers’ Head of Research Adam Jacobs told RENX.

"Even one year ago, I didn’t feel as optimistic. The job market has something to do with all that return to office momentum and we’re a long way away from four years ago when there was a million vacant jobs and you can’t get anybody to work and people don’t wanna go to the office. That whole story has flipped the other way.”

The rise of artificial intelligence (AI) has been unavoidable and has been another potential factor that could impact commercial real estate, as companies could lay off employees and then cut back on leasing if jobs can be replaced by AI. So far, however, there’s not much evidence of that.

“If you look at all the big leases that are signed and all the spaces that are taken, it’s major banks, it’s consulting companies, it’s Big Tech, it’s law firms, it’s the usual suspects,” Jacobs said.

When we look at job market data, when we look at leasing data, it’s pretty hard to see the evidence that AI is decimating (these professions).”

Office rent growth turns around

According to a Q2 2026 National Market Snapshot published by Colliers this week, national office vacancy is now 14.7 per cent for downtown markets, 12.1 per cent for suburban markets, and 13.4 per cent overall, all three of which are down from the previous quarter.

“For so long, downtown has suffered more than the suburbs,” Jacobs said. “If you look at the last five years, sure vacancy has gone up a bit in the suburbs, but it’s really gone up a ton downtown and it put the markets upside down. That’s not normally how the market works — usually downtown is more in demand — but we’re kind of coming back to that world.”

At 9.5 per cent, Vancouver retains the lowest office vacancy outside of Halifax, while Toronto now sits at 10.6 per cent. Vancouver has the highest percentage of vacancy as sublets, however, at 17.2 per cent compared to 9.1 per cent in Toronto.

“After several consecutive quarters of declining net rental rates, office asking rate growth turned positive in Q2,” Colliers noted in their report. “Gains were observed across both the Downtown and Suburban sectors nationwide, as net absorption was positive in either segment, while the office vacancy rate decreased by another 20-basis points quarter-over-quarter.”

Jacobs notes that most return-to-office mandates are around four days now and that the weaker job market gives leverage back to the employers.

“The question we’re watching is: Okay, the first wave of return to office happened, all the best stuff has filled up, how much is this gonna trickle down? There is going to be some trickling down.”

Tariff impact on industrial remains small

When “Liberation Day” came last April and U.S. President Donald Trump unleashed his wave of tariffs, there was concern the impact on manufacturing and other sectors could have a strong downstream effect on industrial real estate. That has not really happened.

“It certainly hasn’t been a good thing, but I wouldn’t say it has had the really catastrophic impact that we thought,” Jacobs said. “For six months it kind of froze things and people didn’t know what to do and there was a lot of uncertainty, but the leasing market has come back to some degree.”

Jacobs notes that in most markets, vacancies are going down, people have adjusted, and things are tightening up again.

“It’s been a soft couple of years,” Jacobs added. “We had the all-time unprecedented run of about 10 straight years. I used to joke that I didn’t have to ever update the (industrial) market update because it was always the same thing: Rents are a record-high, pricing is a record-high, occupancy is a record-high, development is a record-high. But of course it has to end eventually.”

Jacobs also said that, as institutional investors with a global perpsective have said, the metrics in Canada still compare well on a global level, with the national vacancy rate and vacancy rate in top markets around three per cent.

Institutional activity

Over the last few years, many have talked about the absence of large multi-asset portfolio deals. It remains to be seen when that will come back.

There’s been several big REIT transactions over the past 12 months, such as with InterRent REIT, Minto Apartment REIT, and First Capital REIT, which Jacobs attributes to REITs not being properly valued in a market where there are few positive headlines about real estate.

“My view is the negative condo headline stories sort of infects everything about real estate and real estate investing,” he said, adding that REITs tend to be more appealing when the stock market is down, whereas the stock market has generally been good.

For large multi-asset deals, the number of parties that can be involved is relatively shallow and they don’t make much sense for institutional investors at this time, hence why large portfolio transactions remain rare.

“The institutions have been very quiet,” Jacobs said. “For a while they used to wheel and deal and buy all kinds of stuff. Once we’re getting into the nine-figure deals, that is outside the realm of private investors.”

Institutional investors are wondering how they can get outsized returns on real estate, Jacobs said, and many have also found themselves to be overweighed in real estate as a result of splurging when the market was hot.

“We’ve been waiting and waiting for institutions to come back and there’s been a few of these deals, but they’re between each other.”