Investors in Greater Vancouver’s commercial real estate market are navigating a more cautious environment in 2025, adjusting holdings and strategies in response to economic concerns, trade disputes, and rising development costs.

The 2025 REMAX Commercial Real Estate Report outlined how these factors are prompting changes in investment strategies and asset management across the region.

Office Leasing Gains, but Class B and C Lag

Commercial property sales in the first quarter totalled $2 billion, up 10% year-over-year, according to Altus Group. Office leasing activity contributed to the increase, especially in the downtown core, where overall vacancy fell to 10.7%. The absorption of Class A space led the trend, with vacancy in this category down to 8.6%.

Tenant preference has shifted toward high-quality buildings, while Class B and C office properties continue to face weak demand. Older and underutilized buildings are drawing limited interest although some, particularly those with heritage value, may see redevelopment if incentives are introduced. Conversions from office to residential are proceeding selectively, with population growth in the Vancouver area creating more demand for housing. However, only a limited number of office buildings are suited to such transitions.

Development Land Faces Declining Values

Rental housing availability remains tight, with purpose-built vacancy at 1.6%, based on the CMHC Fall 2024 report. Developers are contending with higher borrowing costs and construction expenses, factors that have slowed or halted several projects. April saw four strata developments proceed to court-ordered land sales, reflecting pressures in the land market.

Development site values have declined since 2022, largely due to changing assumptions about profitability. Many developers face a decision between selling properties below expected value or holding them at a financial loss while managing debt and operational costs. Interest is now shifting toward income-generating properties that can sustain cash flow in the current cycle.

Landlords are offering incentives, such as free rent, to attract tenants. Some investors are allocating capital to building improvements, focusing on visual appeal and systems upgrades to maintain occupancy.

Institutional and Foreign Capital Reengage

Institutional and foreign investors have returned, with retail strips anchored by grocery stores, suburban multifamily, and industrial properties ranking high on acquisition lists. A weak Canadian dollar and higher capitalization rates have drawn interest from German and US buyers.

Retail vacancy remains low at 3.4% in urban areas and 0.7% in the suburbs. Industrial availability increased to 6% in Q1 2025 after over 2.1 million square feet of new space entered the market. Demand for industrial condominiums is declining, with fewer buyers for smaller storage-oriented units.

According to REMAX’s report, uncertainty continues to affect investment timelines. Leasing remains more active than sales. Market activity may shift again as interest rates fall and trade outcomes with the US become clearer.

Vancouver Commercial Real Estate Market Adjusts to Volatile Economy by Rod Bolivar | CMP