While attention stays fixed on short-term volatility, supply is drying up across every major property sector just as the demand shock from immigration cuts begins to fade
Advisors worried about Canadian real estate are looking at the wrong side of the ledger, according to Andrew Croll Managing Director, Head of Global Real Estate Investment of TD Asset Management.
The headwinds they are focused on, a population decline, a technical recession, soft condo prices, are real but temporary, he argues. What they are missing is that new supply is collapsing across every major property sector at the same time, setting up the asset class for a stretch of long-term outperformance.
“We’re at a point in time where we’ve seen one of the biggest valuation resets since the global financial crisis,” Croll said. “We have seen a recovery in some of the fundamentals that are driving leasing activity, and at the same time, new supply is rapidly declining across all major sectors or almost nonexistent. This creates an environment for long-term performance in real estate.”
The supply numbers back him up. Final office deliveries arrive in 2026, after peak deliveries in 2025. Industrial construction activity is running at about half its 2021 level. “There’s really no new standalone retail being built,” Croll said, and condo construction has declined rapidly.
“A lot of advisors are focusing on some of the short-term headwinds that still exist,” he said, citing economic growth, geopolitics and lingering return-to-office questions. “There needs to be a reset in terms of taking a step back and looking at the asset class and thinking about some of the long-term drivers.”
The demand shock is policy-made and temporary
The case rests on his read of what hit demand in the first place. The weakness in Ontario and British Columbia housing markets, long treated as untouchable, traces to changes in federal immigration policy that removed a couple hundred thousand non-permanent residents from the population. Canada recorded a population decline in 2025, the first in many years.
“My view would be that it is more of a cyclical phenomenon than a structural change,” Croll said. “At the end of the day, real estate is about supply and demand, and when you shock either side of that, you can create disruption.”
The correction was arguably overdue. Over the last 25 years, Canada’s population grew at just over 1 percent annually. In the three to four years before the policy change, growth ran closer to 3 to 4 percent per year, a cumulative 10 percent increase over four years. “It was almost unsustainable,” he said. “As that shock stabilizes, we are going to go back to more of a normalized population growth environment. It might take a year or two to get there.”
There is also pent-up demand sitting on the sidelines. The proportion of millennials living with their parents is about double the rate of baby boomers, concentrated in Toronto and Vancouver. Affordability has forced people to live more efficiently, with parents or roommates, and that demand returns as conditions ease.
Why a housing shortage coexists with a condo glut
The apparent contradiction between a national housing shortage and a weak condo market dissolves once condos are separated from purpose-built rental, Croll said. The condo market has absorbed most of the damage, hit by a heavy wave of completions from projects launched into a far stronger market. Condo and rental projects take a minimum of four to five years to build, excluding zoning, so much of what is delivering now was started before the pandemic.
The product itself is part of the problem. Condos have gotten smaller each decade for the last 40 years. “People would rather live in their parents’ basement than bunk up in a 600 square foot or less type of condo,” Croll said.
Purpose-built rental typically offers larger units, and rents in TDAM’s portfolio sit at a discount to what a new condo project would command. Affordability requirements attached to purpose-built rental also work in its favour. “We actually have a pretty high degree of confidence on the portion of the building that is deemed to be affordable, that we can lease those up very efficiently,” he said.
Where the recovery shows up first
In office, the recovery is visible and strictly quality-driven. Class A and above buildings downtown are seeing strong absorption, with vacancy falling over the past year. Class B has not yet benefited, and leasing incentives have not materially declined. Retail has quietly tightened too: the population grew roughly 10 percent with little new space delivered, leaving “less retail available for every individual,” Croll said.
AI is reshaping both tenant demand and underwriting. TDAM has assessed recent office investments on a megawatt per square foot basis because AI-oriented users need more power. “It’s not quite a data center, but it creates a different way to underwrite real estate,” Croll said. “How energy productive is your building?”
Geographically, he points to Alberta, citing GDP growth, commodity prices and interprovincial migration, though the province runs more cyclical. Toronto and Vancouver remain attractive given diversified economies.
On exposure, Croll frames REITs as tactical and private real estate as stable income, warning that public liquidity in stress “comes at a very material discount to what your actual underlying values are.” Public markets do offer subsectors harder to reach privately, such as self storage, which makes up a large portion of the US REIT universe. He sees the two as complementary.
TD Global Investment Solutions represents TD Asset Management Inc. ("TDAM") and Epoch Investment Partners, Inc. ("TD Epoch"). TDAM operates in Canada and TD Epoch operates in the U.S. Both entities are affiliates and wholly-owned subsidiaries of The Toronto-Dominion Bank. TDAM and TD Epoch products are also available through a network of affiliated and unaffiliated distributors. Please contact our distribution partners to find out more.
