The Canadian commercial real estate market enters 2026 in a period of cautious optimism. After two years of adjustment, transaction volumes are recovering and cap rates appear to be stabilizing across most sectors. Interest rate policy remains the dominant macro factor. The Bank of Canada's easing cycle has brought borrowing costs down from their peak, improving debt coverage ratios and making previously uneconomic deals viable again. However, rates remain well above the ultra-low levels of 2020-2021. Industrial continues to be the strongest-performing sector, though rent growth has moderated from the extraordinary pace of 2022-2023. Vacancy rates remain historically low in major markets like the GTA, Vancouver, and Montreal, supported by nearshoring trends and e-commerce logistics demand. Office markets are bifurcating sharply. Class A properties in downtown cores with strong amenity packages are seeing improving occupancy, while older suburban stock faces structural challenges. The flight to quality is accelerating, and repositioning or conversion of underperforming office assets will be a major theme. Multifamily remains a safe harbor for institutional capital, driven by immigration-fueled population growth and persistent housing supply shortfalls. Purpose-built rental is attracting both domestic and international investors, though construction cost inflation continues to pressure development returns. For fund managers, the key strategic question is portfolio positioning. Funds with exposure to well-located industrial and multifamily assets are well-positioned. Those holding older office or challenged retail will need active management strategies to protect value.