Vancouver Commercial Real Estate Market Update - Q4 2025

Commercial investment in Vancouver experienced a contraction, down 14% year-over-year

In 2025, the Vancouver commercial real estate market recorded a total investment volume of $9 billion, representing a 14% decrease year-over-year (Figure 1). This contraction was largely influenced by an atypical “pull-forward” of activity in the second quarter of 2024, when investors accelerated deal closures to pre-empt a proposed capital gains tax hike. Although the policy was ultimately rescinded, the 2024 surge established an artificially elevated benchmark, making 2025 growth appear more subdued.

Figure 1: Vancouver property transactions - All sectors by year

The macroeconomic landscape was characterized by heightened volatility, which peaked in mid-2025 due to geopolitical tension and shifting domestic economic sentiment. However, the Canada-United States-Mexico Agreement (CUSMA) provided a critical legal framework that mitigated concerns regarding US trade protectionism, stabilizing cross-border confidence. A pivotal moment for market stability occurred on December 10, 2025, when the Bank of Canada (BoC) maintained the overnight rate at 2.25% following two consecutive reductions. Rather than representing a drastic shift in direction, this move established a holding pattern that signalled a transition toward greater predictability for the investment community. This pause was supported by a 2.6% annualized GDP rebound in the third quarter, largely driven by increased defence spending, and a stabilizing labour market, where unemployment settled at 6.8% by December.

By signaling a pause in further rate adjustments, the BoC provided a more transparent outlook for the cost of capital, which allowed investors to underwrite projects with increased confidence. This newfound macro-stability helped mitigate the “wait-and-see” approach that characterized 2025, enabling a more measured deployment of capital across Vancouver’s core asset classes in the near future.

According to the latest Canadian Investment Trends Survey (ITS), Vancouver was ranked as the second most preferred Canadian market, narrowly trailing Halifax. Despite this high ranking, the market registered a negative momentum ratio, indicating that a greater proportion of investors intended to divest than to acquire. Consequently, the investment community prioritized defensive asset classes, emphasizing capital preservation and high-quality income streams over speculative growth.

Office

The office sector recorded a transaction volume of nearly $2.5 billion, a staggering 92% increase year-over-year. This surge was primarily driven by the landmark acquisition of The Post by Spanish billionaire Amancio Ortega’s investment firm, Pontegadea, for $1.2 billion in the fourth quarter. As the largest single-asset office transaction in Canadian history, this deal underscored global confidence in Vancouver’s core. Excluding this outlier, year-over-year percentage change in office investment volume would have been flat.

According to Altus Group’s latest Canadian office market update, Vancouver’s office availability rate plateaued at 13.0% year-over-year. This figure remained stubbornly elevated, having stabilized within the 12% to 13% range for three consecutive years due to persistent hybrid work trends and cautious corporate downsizing.

A defining characteristic of the 2025 market was the enduring bifurcation of leasing activity. Investors and occupiers exhibited a distinct “flight-to-quality,” favouring premium, amenitized Class-A spaces in transit-oriented hubs. While these top-tier assets maintained relatively tight vacancies and elevated rents, older Class-B and C properties faced increasing downward pressure as tenants prioritized modern workplace environments to meet return-to-office mandates. Based on Altus Data Studio data, leasing activity in 2025 corroborated this preference for premium assets.

• Class A transactions constituted the majority of the activity, accounting for 96 deals, encompassing nearly 2.4 million square feet.

• Conversely, Class B office space saw considerably less demand, comprising only 22 transactions, which totalled approximately 313,000 square feet

On the development front, the fourth quarter saw the completion of four office buildings, collectively adding approximately 644,000 square feet to the market’s total inventory. Of this newly completed supply, 6.5% remained available for lease, reflecting the intense demand for modern office space. Regarding the future pipeline, Vancouver has eight office buildings under construction, totalling nearly 910,000 square feet, with 34.4% of the space available for lease. The limited development pipeline moving forward will be a critical factor in the anticipated near-term tightening of availability rates, as less new supply will come online to compete with existing inventory.

Retail

In 2025, the retail sector demonstrated remarkable resilience, as total transaction volume surpassed $1.3 billion, representing a significant 31% increase year-over-year. This robust performance was primarily driven by sustained investor appetite for prime retail locations, with a particular emphasis on food-anchored retail and assets possessing long-term redevelopment potential.

Simultaneously, a restrictive lending environment and elevated capital costs significantly hampered the feasibility of new construction. Consequently, near-term investment activity was largely dictated by a scarcity of available inventory and the persistence of high financing hurdles. In response, developers shifted their focus toward the intensification of existing assets. Owners increasingly integrated residential components into suburban shopping centres to optimize land value and establish mixed-use hubs supported by built-in consumer traffic.

This strategic pivot was evidenced by the latest ITS, which ranked Tier I regional malls as the second most attractive property type in Vancouver. This preference persisted despite the high-profile closure of anchor tenants such as Hudson’s Bay and Saks Fifth Avenue. The potential revitalization of these large-format spaces, if proven successful, will repurpose the space to accommodate diverse, expanding tenants seeking established commercial footprints. This proactive management of anchor vacancies will fortify the sector’s stability in the coming years.

Industrial

The industrial sector recorded nearly $1.5 billion in volume transacted, marking a 24% decrease year-over-year. This contraction stemmed from a fundamental shift in investor sentiment as stakeholders navigated heightened geopolitical tensions and fluctuating macroeconomic conditions. These factors disrupted demand-supply dynamics as a notable volume of existing pipeline projects reached completion, increasing available inventory during a period of softened demand.

According to the latest ITS, Vancouver’s availability rate climbed to 6.6% by year-end, a year-over-year increase of 120 basis points. This fostered a market bifurcation where leasing activity favoured modern, large-bay assets, which commanded premium rents. Conversely, older, small-to-mid-sized bay properties experienced downward rental pressure. While tenant inducements remained selective compared to Central Canada, a sustained bifurcation could necessitate broader concessions to maintain occupancy in secondary assets.

Data from the latest ITS indicated that, despite prevailing uncertainty, investors maintained cautious optimism. Multi-tenant industrial assets ranked as the top property type for investment preference, while single-tenant assets ranked fourth. This sentiment was bolstered by the region’s geographical land constraints and long-term scarcity of larger, modern inventory, which provided a structural hedge against short-term volatility.

On the development front, the market saw the delivery of 12 new industrial buildings, totalling nearly 1.3 million square feet. Notably, only 22.7% of this inventory remained available at completion, highlighting the success of build-to-suit projects in supporting net absorption. The fourth quarter recorded a net absorption exceeding 348,000 square feet and saw two consecutive quarters of positive absorption. The development pipeline currently has 29 industrial buildings under construction, totalling over 1.7 million square feet, of which 60.4% remained available for lease.

Multi-family

Vancouver’s multi-family sector recorded a contraction in investment activity, with total transaction volume falling to $1.1 billion, a 20% decrease year-over-year. This deceleration was driven by a confluence of macroeconomic pressures, most notably elevated borrowing costs that undermined project feasibility and shifted capitalization rate expectations. Furthermore, a surplus of unabsorbed condominium inventory and a marked decline in overall sales contributed to a stabilization in rent growth and rising vacancy rates, particularly within recently completed premium developments.

Consequently, the investment landscape was dominated by private capital, as institutional players largely remained sidelined. These private investors targeted competitively priced assets within prime, transit-oriented hubs to capitalize on long-term urbanization trends. This influx of rental supply, coupled with a reduction in the volume of non-permanent residents, effectively eased the pace of rent appreciation, providing marginal relief to market affordability.

Historically, Vancouver’s supply-constrained environment maintained consistently high asking rents. However, recent data from Statistics Canada indicated a shift in this trajectory. The average asking rent for a two-bedroom apartment decreased by 5.9% year-over-year. This downturn reflected a broader cooling of the housing market, where sales volumes plummeted below the 10-year historical average, forcing a recalibration of rental pricing across the metropolitan area.

Land

The land sector, encompassing both residential land and ICI land segments, continued a notable downward trajectory. Total transaction volume reached approximately $2.5 billion, representing a substantial 49% decrease year-over-year. This persistent downturn reflected a cautious investment climate and a broad reduction in regional development activity, as stakeholders grappled with macroeconomic volatility and restrictive financing.

The residential land sub-sector experienced the most pronounced contraction, with investment volume falling to $875 million, a significant 65% year-over-year decline. This deceleration fell well below historical benchmarks, as developers deferred new project initiations in response to softening demand within the multi-family sector. Elevated construction costs and prolonged municipal approval timelines further disincentivized large-scale residential assemblies.

Similarly, the ICI land sub-sector recorded a decline, reporting $1.6 billion in transaction volume, a 32% decrease year-over-year. While industrial land remained more resilient than commercial parcels due to systemic scarcity, the overall lack of liquidity signalled a strategic pause among developers. Investors increasingly prioritized the build-out of existing holdings over the acquisition of new sites, awaiting more favourable interest rate conditions to restore project feasibility.

Figure 2: Vancouver property transactions by asset class year-to-date

Notable transactions for Q4 2025

The following are the notable transactions for the Q4 2025 Vancouver commercial real estate market update:

658 Homer Street & 349 West Georgia Street, Vancouver (The Post) – Office

In the fourth quarter of 2025, Pontegadea Canada Inc. acquired The Post from QuadReal Property Group via share sale for $1.2 billion in a landmark transaction. The property comprised approximately 1.3 million square feet of gross leasable area, marking one of the largest single-asset office transactions in Canadian history.

Redeveloped from the former Canada Post distribution facility, The Post featured two modern office towers rising above a restored heritage podium, delivering large-format, tech-oriented floorplates in downtown Vancouver’s core.

At the time of sale, the property was predominantly leased to Amazon Canada, which occupied roughly 1.1 million square feet under a long-term agreement. Additional office tenants included Sony Pictures Imageworks and Telus Health. The retail podium tenancies were anchored by Loblaws City Market and included Oakberry, Evolve Strength, and Starbucks.

Strategically located between Homer and West Georgia Streets, the property benefited from immediate access to major transit connections and downtown’s primary retail corridors. The transaction reflected continued institutional demand for prime, transit-oriented office assets with covenant-backed income streams.

1128 West Georgia Street & 1121 Alberni Street, Vancouver (Hyatt Vancouver Downtown Alberni) – Hotel

The 15-storey hotel component and adjoining commercial podium of the Hyatt Vancouver Downtown Alberni (formerly Shangri-La Vancouver) were acquired by Brookfield Asset Management from Westbank Corp. and Peterson Group via share sale for a combined $160 million. The transaction included the 119-room luxury hotel at $119 million and the retail podium at $41 million, equating to approximately $1.0 million per key.

The rebranded hotel formed a large portion of the landmark mixed‑use development in downtown Vancouver’s Alberni Luxury Zone and operated as an upper‑upscale boutique property under the Hyatt banner. The retail podium included prominent tenants such as Burberry, Rolex, The Keg, and Urban Fare.

Located at the intersection of West Georgia and Alberni Streets, the asset benefited from prime proximity to the CBD, Robson Street retail, Coal Harbour, and major transit connections. The sale underscored continued investor demand for trophy hospitality assets in Vancouver’s core.

1175 Haro Street, Vancouver (Villa Esto Apartments) – Apartment

In December 2025, Starlight Investments acquired Villa Esto Apartments in the West End of Vancouver from Esto Holdings Ltd. for $33,100,000, or approximately $398,795 per unit across 83 rental units.

Built in 1967, the property consisted of a 10-storey concrete apartment building with roughly 49,520 square feet of livable space and had undergone significant renovations. The suite mix included 34 bachelor units, 29 one-bedroom units, 18 two-bedroom units, and 2 two-bedroom penthouse units. The building offered 51 parking stalls, including 35 underground and 16 surface spaces.

As a well-located, mid-century concrete asset, Villa Esto provided a diversified unit mix with relatively generous suite sizes compared to the newer purpose-built rental supply. The acquisition aligned with Starlight’s strategy of targeting well-located multi-family assets with stable in-place income and potential for capital upgrades and rental optimization within Metro Vancouver’s established residential neighbourhoods.

13251 Smallwood Place, Richmond – Retail

In December 2025, Harris Auto Group acquired 13251 Smallwood Place from OpenRoad Auto Group for $27.5 million, reflecting approximately $833 per square foot across 33,000 square feet of building area.

The property was occupied by Richmond Hyundai, the largest Hyundai dealership facility in British Columbia, which had opened in 2020. The building included a full showroom, service bays, and associated administrative and retail spaces, purpose-built to support high-volume automotive sales and service operations.

Situated within the Richmond Auto Mall, the property benefited from strong regional exposure, convenient access to major arterial routes, and proximity to complementary automotive and retail destinations throughout Metro Vancouver.

The transaction highlighted ongoing investor interest in purpose-built automotive and specialty retail assets, particularly those with strong tenant covenants, modern improvements, and strategic suburban locations.

1658 Industrial Avenue, Coquitlam – Industrial

In December 2025, 1658 Industrial Holdings Ltd. purchased 1658 Industrial Avenue from 0984390 B.C. Ltd. for $20.6 million, equating to approximately $487 per square foot based on 42,297 sq. ft.

Built in 2009, the freestanding industrial building, improved for food production, included 35,641 sq. ft. of warehouse space and 6,656 sq. ft. of office space over two floors. It featured 26-foot clear ceilings and seven loading doors, including three dock-level doors with levellers and four 12' x 14' drive-in doors. The layout could accommodate up to two tenancies.

Located in Coquitlam’s Mary Hill Industrial District, the property offered convenient access to Lougheed Highway and Highway 1. The facility included food-production improvements such as coolers, freezers, and bulk storage, and was occupied by Shabin Seafood & Restaurant Supply and Manna International Trading Ltd.

Figure 3: OCR trends across 4 benchmark asset classes, Vancouver

Market outlook

Looking toward 2026, the Vancouver commercial real estate market appeared to be transitioning from a period of volatility toward one of measured stabilization. The BoC’s commitment to a holding pattern has begun to instill the necessary predictability for investors to re-engage with long-term underwriting. This macroeconomic clarity was expected to begin to unlock pent-up capital that remained sidelined throughout 2025, shifting the narrative from capital preservation to strategic acquisition.

Investor sentiment remained cautiously optimistic, bolstered by Vancouver’s structural land constraints and the trade safeguards provided by CUSMA. While the fourth quarter negative momentum ratio indicated an initial inclination toward divestment, this trend was projected to facilitate a healthy recycling of capital into higher-yielding, modern defensive assets.

As the construction pipeline across the industrial and office sectors begins to thin, the market is anticipating a gradual tightening of availability through the absorption of existing inventory. Consequently, 2026 is positioned to be a year of recalibration, where the focus shifts toward intensifying existing land holdings and capitalizing on the enduring flight to quality. As borrowing costs remain steady, the market is expected to see a slow but consistent return to historical transaction norms.

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