The MSCI/Real Property Association of Canada (REALPAC) Canadian Property Index fell last year from 2024 and remained well below historical norms.

The index had a total return on standing assets, excluding developments, of 1.3 per cent in 2025. The income return was 4.93 per cent while capital growth was -2.7 per cent.

That compares to a total return of 3.21 per cent in 2024, when the income return was 4.91 per cent and capital growth was -1.63 per cent.

The total return has averaged 1.7 per cent annually over four years, 3.6 per cent over 10 years and eight per cent over the index’s full history since 1985.

The index’s total return in Q4 2025 was 0.03 per cent. The income return was 1.2 per cent while capital growth was -1.0 per cent.

Canada ranked second-last among all the countries reporting through three quarters, finishing higher than only Luxembourg. The overall average total return among those reporting countries was about five per cent, led by the Netherlands at close to 10 per cent.

Industrial was the top asset class

The total return on standing assets was highest in Canada for the industrial asset class, reaching 2.9 per cent last year. That was followed by office at 2.1 per cent, retail (which had the highest return the two previous years and hit 6.5 per cent in 2024) at 1.9 per cent and residential at 1.4 per cent.

The total major metro downtown office return was 2.2 per cent while it was 0.8 per cent for suburban office properties. The national office vacancy rate was 14.8 per cent.

Community/neighbourhood retail centres had an eight per cent total return while the return for super regional centres was -0.2 per cent. The vacancy rate for community/neighbourhood retail centres was 3.9 per cent, well below those for regional centres (10.7 per cent) and super regional centres (11.5 per cent).

Halifax was the top market

The Canadian city with the highest total return on standing assets was Halifax at 7.16 per cent, repeating its title from the last  two years. Halifax was also the only market to have positive capital growth at two per cent.
 
Halifax’s total return was followed by Winnipeg (5.37 per cent), Calgary (3.43 per cent), Victoria (3.40 per cent), Vancouver (2.89 per cent), Edmonton (2.64 per cent), Toronto (1.87 per cent), Regina (0.43 per cent), Ottawa (-0.19 per cent) and Montreal (-0.27 per cent).

Transaction activity increased

Total transaction volume rose four per cent to $44.2 billion in 2025 relative to 2024. Individual asset sales increased by six per cent to $35.8 billion.

Industrial and apartments are still the most liquid sectors in Canada, with $11.2 billion in transaction activity for each, even though volume fell by five and nine per cent respectively in the two sectors in 2025 from a year earlier. 

Retail property sales were up 10 per cent to $6.8 billion while office sales also increased by 10 per cent to $5.2 billion.

There was $4.3 billion in development site transaction volume, down 12 per cent from 2024. Hotel sales were also down 12 per cent to $1.7 billion.

Data centres are popular, but it’s a thin and volatile market. There was $1.7 billion in deal activity last year, up 7,060 per cent year-over-year.

Volume in seniors housing and care facilities was also up significantly, rising by 207 per cent from 2024 to $2.1 billion.

Composition of the property index

The MSCI/REALPAC Canadian Property Index measures unlevered total returns of directly held property investments.

The index includes buying, selling, development and redevelopment activity data provided by major pension funds, insurance companies and large real estate owners in Canada.

The 2025 index encompassed 50 portfolios with 2,171 assets totalling 476.8 million square feet and a gross capital value of $159.6 billion. 

MSCI provides decision support tools and services for the global investment community. It has more than 50 years of expertise in research, data and technology to assist in investment decisions. 

REALPAC was founded in 1970 and is the national leadership association for Canada's real property sector.

Its 130-plus members include publicly traded real estate companies, real estate investment trusts (REITs), pension funds, private companies, fund managers, asset managers, developers, government real estate agencies, lenders, banks, life insurance companies, investment dealers, brokerages, consultants/data providers, large general contractors and international members.  

REALPAC members have $1 trillion in assets under management and represent office, retail, industrial, apartment, hotel and seniors residential properties across Canada.