Real estate headlines in many major Canadian markets paint a picture of doom and gloom, but what if the actual story is one of reinvention?

PwC Canada and the Urban Land Institute’s Emerging Trends in Real Estate 2026 Canadian report, released this week, reveals a market in transition.

Based on 200 interviews and surveys of Canadian investors, developers, asset managers and other professionals, the report shows how companies are leaning into new sources of growth in areas like purpose-built rentals, student and senior housing and secondary markets.

Family-Sized Rentals as A Beacon of Hope

The real estate sector faces several headwinds, like relatively elevated interest rates, strained affordability, depressed consumer sentiment and tariff uncertainty.

One of the biggest victims this year has been the Canadian condo market, which has historically served as a source of future rental stock.

With investors moving away from the condo market, capital and development activity have “shifted decisively” to purpose-built rentals, reads the report.

There’s a particularly wide gap in the market for rental units that are big enough for families, after rising costs led many developers to reduce unit sizes to make project numbers work, resulting in an oversupply of small units.

Demand for rental units beyond the one-bedroom continues to increase across the country, reads the report, even with federal policies limiting the number of non-permanent residents and international students.

Interest in the purpose-built rental market is particularly high in both Montreal and Quebec City, notes the report, with several companies focusing on existing retail assets to make use of excess land. Similarly, developers in Ottawa are prioritizing transit-oriented developments as the city builds out its light-rail network.

Rising rental starts are already relieving price pressures in cities that saw meteoric growth in recent years. According to the Canada Mortgage and Housing Corporation’s (CMHC’s) 2025 Mid-Year Rental Market Update, in the first quarter of 2025, advertised rents in Toronto, Vancouver, Calgary and Halifax declined between two and eight percent compared to the same period a year earlier.

Calgary Ranked Top Prospect for 2026

Calgary benefited in recent years from strong population growth and diversifying its economy, and real estate investors are keen to latch on to its success.

New home construction in Calgary reached a record high in 2024 for the third year in a row, according to CMHC, and the level of new construction is expected to remain elevated.

Calgary has expanded its program to convert underused office space into housing or hotels, and 21 properties are now part of the program.

The report notes the market may get an additional boost over the next five years from the Prairie Economic Gateway, an inland port and industrial park. This project is currently in the land-use approvals stage, with commercial readiness expected sometime between 2027 and 2030.

New Business Models Emerging for Seniors’ Housing

Demographic shifts have investors viewing seniors’ housing as a “top-tier” asset class.

However, interviewees pointed to the operational complexities of the sector as a hurdle, with one developer noting that a high level of expertise is required to succeed.

The report identifies two paths forward.

The first is a strategy of “scale and modernization,” which would see large, institutional buyers acquiring existing assets and applying professional management and operations platforms.

The second path is focused on innovation and reinvention. To meet the needs of a new generation of seniors, interviewees pointed to emerging models such as mixed-use retirement communities and dedicated “clubs” for active adults within larger developments.

The Dealmaker’s Changing Playbook

Canada’s dealmakers are shifting their mindsets.

As pension funds and public REITs pace new acquisitions more slowly, private capital is filling the void, reads the report, and doing so at a time when emerging asset classes such as student housing and medical offices are scaling and need funding.

But success in this environment relies on deploying it with good timing and creativity.

Fred Cassano, partner and national real estate leader at PwC Canada, said Canadian real estate is at a “pivotal moment” as policy momentum is building and the sector is opening itself to collaboration.

“By embracing new approaches and partnerships, we have a tremendous opportunity to build the spaces our communities need and unlock growth throughout the market,” he said.

Cassano noted that addressing the construction labour shortage will be paramount to capitalizing on opportunities across all asset classes, from housing to retail and industrial.

Real Estate Trends for 2026 : Why Canada’s Future May Be Brighter Than It Looks? by Courtney Zwicker | Real Estate Magazine