Calgary commercial real estate market update - Q3 2025

In the third quarter of 2025, commercial investment in Calgary was relatively flat, with a marginal 2% increase year-over-year

By the end of the third quarter of 2025, Calgary’s commercial real estate market demonstrated a 2% increase year-over-year, recording a total investment volume of $3.8 billion (Figure 1). While this growth trajectory appeared modest, it was statistically obscured by an atypical “pull forward” of investment activity during the second quarter of 2024. During that period, investors accelerated deal closures to precede a proposed capital gains tax hike. Although the policy change was subsequently cancelled, the surge established an artificially elevated benchmark for year-over-year comparisons.

Figure 1: Calgary property transactions - All sectors by year

The broader macroeconomic landscape was defined by heightened investor caution, which peaked during the second quarter of 2025 due to rising geopolitical tensions and a perceived deterioration of domestic economic conditions. In response, the Bank of Canada (BoC) sought to stimulate the economy by lowering its key interest rate by 25 basis points (bps) to 2.5% on September 17, 2025. This move marked a significant pivot in monetary policy. While the rest of Canada largely adopted a “wait-and-see” approach regarding capital deployment, Calgary’s robust fundamentals, including its lower cost of living and a financially favourable operating environment, positioned the market for a rebound after its momentary strategic pause.

Investors maintained a pronounced preference for modern, high-quality industrial assets, though activity remained well-rounded across other core sectors. The region garnered substantial attention as a strategic hub for affordable logistical operations. Furthermore, Calgary distinguished itself through its aggressive office-to-residential conversion programs, backed by municipal funding initiatives and provincial government incentives. This directly contributed to the upward trajectory of investment volumes in both the industrial and office sectors during the third quarter.

Despite these strengths, the latest Canadian Investment Trends Survey (ITS) indicated a slight shift in sentiment. Calgary fell to sixth place for overall investor preference, narrowly edged out by Edmonton, which saw a surge in investor interest for its higher affordability in sectors like multi-family and industrial. Nevertheless, the quarter concluded with clear evidence that investor confidence in Calgary’s core assets remained structurally intact.

Retail

According to an analysis of transactions based on Altus Data Studio data. The retail sector recorded $574 million in dollar volume transacted by the end of the third quarter, marking a 21% decrease year-over-year. This decline was primarily driven by a lack of available inventory rather than a cooling of investor demand.

According to ITS, food-anchored retail strips remained the most coveted asset class, as investors prioritized defensive, recession-resistant cash flows. However, the high performance and perceived stability of these properties led to a significant supply-side shortage. Owners largely retained their holdings, while financing constraints and economic uncertainty restricted new deliveries, intensifying competition for existing high-quality assets.

Strategic focus shifted toward the recapitalization and diversification of aging retail footprints. As Calgary’s population surged, particularly within the deep south and northern corridors, developers moved away from standalone retail models in favour of intensification projects. Key examples of this trend include the Midtown Station project by Chinook Centre, Glenmore Landing, and Northland Village Mall. By integrating multi-residential towers directly into existing shopping centre sites, owners successfully bolstered their asset valuations while securing a captive consumer base. This trend of converting traditional parking surface area into high-density residential units became a cornerstone of investment strategy, as firms sought to mitigate risks associated with a constrained supply of new commercial space.

Industrial

The industrial sector maintained robust momentum with total transaction volume surpassing $1.1 billion, representing a substantial 124% increase year-over-year. This growth underscored Calgary’s enduring appeal as a primary inland port and strategic Western Canadian distribution hub.

Calgary’s availability rate decreased by a marginal 20 bps year-over-year to 6.3%. Leasing activity remained resilient across all bay sizes. Small-to-medium bay occupiers prioritized financial flexibility amid fluctuating overhead costs, while large-bay tenants sought to modernize supply chains. These institutional occupiers favoured high-ceiling logistics facilities specifically engineered to support heavy automation and sophisticated racking systems.

On the development front, the market saw the delivery of three new industrial buildings, totalling approximately 417,000 square feet, of which 28% remained available at completion. Currently, the pipeline includes 11 industrial buildings under construction, totalling nearly 2.7 million square feet, of which 57% remained available for lease. This reflected a deliberate shift toward supply-side discipline. Following a period of rapid expansion that previously elevated vacancy levels, developers focused on rebalancing the market’s equilibrium. This risk-averse posture toward speculative capital deployment was further reinforced by a softening domestic economy and a strategic pivot toward pre-leased build-to-suit projects.

Multi-family

The multi-family sector experienced a notable contraction in investment volume, with total transactions reaching nearly $526 million, representing a 33% decrease year-over-year. This decline was heavily influenced by the high base effect created in 2024. However, when assessed against historical benchmarks, activity remained consistent with long-term trends, sustained by Calgary’s robust market fundamentals and comparatively lower entry costs.

Positive sentiment persisted among developers, driven by favourable zoning reforms and federal financing programs such as the CMHC MLI Select initiative. According to Statistics Canada, Alberta led the country in net interprovincial migration for three consecutive years, placing immense pressure on the existing housing stock. This necessitated the accelerated construction of high-density residential buildings, particularly within and surrounding the downtown core, where vacancy rates remained critically low. Developers increasingly prioritized smaller, more affordable, and higher-density products as a direct response to nationwide affordability challenges.

Office

Calgary’s office sector recorded a substantial year-over-year increase in investment volume, with $582 million in dollar volume transacted, an astonishing 172% surge compared to the same period in 2024. This trajectory reflected a persistent “flight-to-quality” phenomenon, as institutional investors and REITs capitalized on the increasing tenant preference for prime, high-tier assets situated within well-amenitized urban corridors.

A defining narrative was the portfolio realignment by Oxford Properties, which acquired full ownership of several key assets by buying out stakes previously held by CPP Investments. This included two of the largest year-to-date office transactions: Centennial Place and Eau Claire Tower, valued at approximately $164 million and $91 million, respectively. These high-value acquisitions underscored a renewed investor conviction in the long-term viability of Calgary’s Class A office stock and the continued revitalization of the downtown core.

The market’s health was further bolstered by the City of Calgary’s proactive approach to inventory management. Through the Downtown Development Incentive program and the Housing Accelerator Fund, the city approved an additional 10 office-to-residential conversion projects. By strategically removing obsolete, underutilized Class B and C inventory, these initiatives addressed structural vacancy while revitalizing the inner city.

Consequently, Calgary’s overall office availability rate experienced a sharp correction, recording a significant decrease of 260 basis points year-over-year to settle at 20.7%. This reduction signalled a healthier equilibrium between supply and demand, stabilizing a market that historically contended with elevated vacancy levels.

On the development front, the third quarter saw no new office completions, reflecting supply-side discipline. The development pipeline remained exceptionally lean, with only the Westwind Business Campus III, totalling approximately 72,000 square feet, under construction. Notably, 100% of this future space was available for lease at quarter-end, suggesting a cautious approach toward new commitments from tenants and a strategic preference for proven, existing assets or those with high adaptive-reuse potential.

Land

Investment activity in the land sector, encompassing both the residential land and ICI land sub-sectors, experienced a notable contraction by the third quarter. Total transaction volume reached approximately $881 million, representing a substantial 31% decrease year-over-year. This decline was not merely the result of a single factor, but rather a confluence of elevated interest rates, geopolitical uncertainty, and a strategic pivot in developer sentiment.

While the bid-ask gap created significant friction, several emerging headwinds further stifled demand for residential land. Most notably, international migration decelerated following federal policy changes, cooling the intense demand that characterized the previous two years. Concurrently, a surge in housing completions resulted in a rise in unabsorbed inventory and increased vacancy. These factors, combined with a softening labour market prompted developers to adopt a “wait-and-see” approach.

The residential land sub-sector saw the most pronounced decline, with transaction volume falling 54% year-over-year to $319 million. This cooling was also driven by a temporary saturation in higher-priced multi-family product, where increased vacancy and marginalized rental growth deterred new high-density acquisitions. Simultaneously, the ICI land sub-sector demonstrated greater resilience, recording $563 million in volume, reflecting a marginal 4% decrease year-over-year. Despite the slight annual decline, the third quarter saw a notable acceleration in activity as investors prioritized the relative stability of industrial and commercial assets.

Figure 2: Calgary property transactions by asset class (Q3 2024 vs. Q3 2025)

Notable Calgary property transactions for Q3 2025

The following are the notable transactions for the Q3 2025 Calgary commercial real estate market update:

500 5th Avenue SW (500 Fifth) – Office

The acquisition of 500 Fifth (formerly Chevron Plaza) by Strategic Group was one of Calgary’s defining real estate transactions in the third quarter of 2025. Purchased for $17 million, the Calgary-based firm announced plans to convert the vacant 25-storey, 380,000 square foot Class A tower into a residential development featuring 332 rental units. This project further expanded Strategic Group’s growing portfolio of office-to-residential conversions across the city.

While most office-to-residential conversions in Calgary typically targeted obsolete Class C or Class B buildings, the 500 Fifth deal stood out as a rare repositioning of a Class A asset. At $17 million, the purchase price equated to roughly $45 per square foot. In a quarter when some distressed office assets were trading at near land value, this represented a strategic opportunistic buy of a building in exceptional condition.

1516 & 1518 7th Street SW (JB Court & Mona Lisa Building) – Retail

The iconic Mona Lisa retail property at 1518 7th Street SW in Calgary’s Beltline sold for $5.55 million following a competitive bidding process. Marketed by JLL on behalf of the Beeger family, the offering included the 9,337 square foot former Mona Lisa Art Supplies building and the adjacent JB Court. The final sale price significantly exceeded the initial $4.495 million list price, reflecting a land valuation of approximately $470 per square foot.

The buyers, three private investors, planned to occupy the second floor as office space while modernizing and enhancing the property to attract new retail or food and beverage tenants. This transaction was considered one of the most exceptional deals in the 17th Avenue Entertainment District in recent years due to the property's prime location across from Tomkins Park.

The sale marked the end of an era for the art supply store, which had been a staple in the community since the 1980s, while signaling a fresh chapter for this vibrant urban corner.

110 Bow Meadows Crescent (Self Storage) – Industrial

The facility located at 110 Bow Meadows Crescent in Canmore represented a flagship asset within the Alberta Five-Property Self Storage Portfolio acquired by SmartStop Self Storage. According to industry reports from JLL and Harrison Street, this location was part of the $97.4 million CAD portfolio that closed on August 26, 2025, involving joint venture partners Bluebird Self Storage and Harrison Street.

As reported by Modern Storage Media and Connect CRE, the Canmore site contributed significantly to the portfolio’s 330,000 square feet of net rentable area and 3,095 total units. This institutional-grade facility offered a high-value mix of climate-controlled and drive-up units, serving as a critical operational node in the high-barrier Bow Valley market. This location near the mountain resort environment complemented the strategy of meeting recreational demand from the local population amid limited competition.

22 Griffin Industrial Point & 160 Griffin Ranch Road (Self Storage) – Industrial

The Cochrane self-storage facility was also part of the Alberta Five-Property Portfolio acquired by SmartStop Self Storage. This transaction served as a high-volume operational anchor within the $97.4 million Alberta portfolio acquisition. Strategically located in the Griffin industrial area, this self-storage site was underwritten with a standout year one Net Operating Income (NOI) of $1.5 million, reflecting its strong capture of the Rocky View County market.

Unlike other assets in the trade, the Cochrane location was positioned as a primary hub for both local residential needs and regional small business storage. The transaction, which finalized on August 26, 2025, transitioned this institutional-grade facility from the Bluebird and Harrison Street joint venture to SmartStop’s national operating platform. Its inclusion provided the portfolio with a stabilized, cash-flowing asset in one of Canada’s fastest growing municipal corridors.

Figure 3: Overall Capitalization Rate trends - 4 benchmark asset classes, Calgary

Looking ahead

As of the close of the third quarter of 2025, Calgary’s commercial real estate market reached a critical inflection point, transitioning from a period of strategic pause toward a sustainable, long-term equilibrium. While the broader Canadian landscape maintained a “wait-and-see” approach, Calgary’s robust fundamentals, specifically its favourable demographic and economic trends, acted as a primary catalyst for renewed optimism. This underlying strength mitigated the friction that constrained investment activity earlier in the year, providing the necessary momentum for increased capital deployment throughout the final quarter of 2025.

Investor sentiment for the remainder of the year is expected to remain disciplined, fueled by a conviction in the market’s unique structural advantages. The bifurcation narrative is intensifying, particularly within the office and industrial sectors, as investors prioritize high-tier, well-located assets and logistics facilities. While the cooling of international migration presented near-term headwinds for residential land and multi-family assets, Calgary’s significant affordability gap compared to other major Canadian markets continues to provide a resilient floor for valuations and sustained tenant demand.

Looking toward to year-end, the market is projected to see the tangible results of current supply-side discipline. The lean development pipelines in the office and industrial sectors, coupled with the city’s successful office conversion initiatives, positioned the market for further vacancy compression. Investors are expected to maintain a focused posture, favouring recession-resistant assets such as food-anchored retail and purpose-built rentals. Ultimately, Calgary’s proactive municipal incentives and its status as an affordable hub ensure that the market remains a top-tier destination for capital seeking stability and growth potential within the 2025 economic landscape.

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