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Canadian commercial real estate is under pressure. Is your portfolio going sour?

Lenders can still squeeze value from a dry market with new risk policies and alternative data.

Key takeaways

  • Rising vacancies, falling valuations, and stricter regulations make risk management more critical than ever.
  • Alternative data, AI, and flexible loan products empower lenders to make smarter, more resilient decisions.
  • Deloitte’s tailored solutions help lenders leverage new data sources and thrive in a challenging market.

Financial institutions face a number of hurdles in today’s commercial real estate (CRE) market, like high vacancies, valuation dips, and loan delinquency. The good news? Lenders can refresh their strategy with alternative data and tactics to jump over these hurdles.

High vacancies, plummeting valuations, and refinancing cliffs threaten to sour even the most robust lending portfolios. Market risks have slowed down essential decision-making, as developers and lenders alike struggle to address a changing market with outdated policies, processes, and strategies.1

Lenders have leaned on the same borrower assessments, loan structures, and data sources for years, if not decades. A new approach requires a systematic shift that infuses new data and tactics that might be different from traditionally relied-upon sources.

Deloitte’s real estate finance leaders are helping lenders overcome today’s CRE crunch with risk management transformation and alternative data strategies.

We’ll look closely at Canadian CRE trends, and ways that Deloitte empowers lenders to thrive with new data, policies, and strategies.

The state of CRE today

The Canadian CRE market has a 1.84% CAGR predicted from 2025 to 2029.2 This is slightly behind our US neighbours, but higher than many of our European counterparts.

But growth won’t come easily, as lenders grapple with troublesome trends, like:  

  • High vacancies: Office vacancies remain high at 17%.3 While multifamily homes present more optimistic predictions, skilled labour shortages and subsequent cost increases could hurt asset performance.
  • Declining valuations: Global CRE valuations declined 6.3% and contributed to a 31% drop in investment sales. Canada’s exposure to $40 billion in vulnerable, cross-border debt exacerbates the pressure.
  • Strict regulatory requirements: The Office of the Superintendent of Financial Institutions (OSFI)’s CRE risk management guidelines have evolved to demand more robust risk assessment criteria and stress testing.
  • Bankruptcy and loan delinquency: Vacancies and distressed assets have increased bankruptcy rates amongst developers, and lenders have been left hanging with credit losses.
  • Continued economic uncertainty: Recent geo-political shocks erode confidence in export driven industries, and changes to the Canada-United States-Mexico Agreement (CUSMA) may actualize the feared impacts of tariffs.

Lenders can find relief from these pressures with two overarching actions:

Risk management is vital for lenders to safeguard their institutions financial health. It’s the foundation that allows lenders to make sound decisions while protecting their portfolios and bottom lines.

Deloitte’s Financial Risk Advisory & Transformation (FRA&T) practice has tweaked and tailored an end-to-end, five-step process that delivers recommendations to solidify any lender’s credit risk management strategy.

1. Lending policy and control review: Working with the same lending policy and control frameworks from five years ago? Chances are, you’re not keeping up with organizational risk appetite (which has likely decreased), or industry trends (which have shifted). This review also extends to credit adjudication processes to support sound lending decisions. Of course, a policy is just a document without proper implementation through processes and technology. We also review the end-to-end mortgage origination process to help find opportunities to streamline the process, reduce non-value added steps, and introduce smart controls.

2. Know your customer (KYC): With increasing loan delinquencies, your borrower assessments might not cover all your bases. Our specialists conduct broader scans of borrowers with advanced analytics and market intelligence that cover deeper details like collateral valuations, guarantor assessments, and debt service capacity.

3. Portfolio review and insights: Our loan portfolio services help you find the sweet spot between risk and reward. This covers advanced analytics that goes beyond data to inform actionable insights and diversification strategies.

4. Loan flexibility: Commercial mortgages and terms aren’t one-size-fits-all for all developers or tenants. We help lenders analyze and customize loan structures to find common ground, with common solutions like:

  • Extended amortizations
  • Interest-only periods
  • Payment deferrals
  • Collateral adjustments
  • Loan buy-out plans

5. Asset management and realization: When declining valuations depress assets and all else fails, our M&A specialists turn to asset realization. We help lenders assess a property, identify the most likely buyers, or if necessary, squeeze value from the borrower’s collateral.  

Today’s lenders have decades of experience assessing risk and value. They lean on assessments based on neighbourhood analysis, similar buildings, and analogues. But in a rapidly evolving landscape, lenders must look to new places to manage risk and capitalize on growth opportunities.

We’re going beyond the surface with alternative data, AI, and advanced metrics through innovative solutions like:

  1. Tenant-centric analysis and credit modelling
  2. Intelligent provisioning
  3. Alternative data from municipal applications and building usage patterns

Tenant-centric analysis and credit modelling

Traditional models often rely on property and market factors, but this picture isn’t wide enough to address the changing commercial landscape. We’re seeing successful lenders expand their view toward very detailed, tenant-focused analysis. This means expanding your assessment view to include tenant concentration, lease expiry portfolios, and exposure to specific industries. We’ve helped lenders leverage AI to capitalize on these inputs, and support more informed lending decisions at the asset and portfolio level.

Intelligent provisioning

Leveraging incremental data to round out traditional loan loss forecasting drivers can help to better understand the timing and severity of potential losses. Carefully considering the changing economic climate can help prevent sudden drops in profitability and capital ratios.

CRE stakeholders can:

  • Better align loss forecasting with evolving market dynamics and project milestones;
  • Enhance financial resilience;
  • Enable proactive risk management; and
  • Maintain capital adequacy, even during periods of volatility.

Alternative data to inform decisions

Lenders can also look to alternative data from:

  • Municipal applications: Both developers and lenders can analyze urban planning trends to anticipate demand changes and adapt their lending and pricing strategies.
  • Mobile signals and building usage: Occupancy activities and tenant levels can help assess Return-to-Office (RTO) trends to better inform operating profits.

Lend with confidence in 2025 and beyond

The CRE crunch has placed mounting pressures on financial institutions and their commercial portfolios. But in a market awash with risk, lenders can find new opportunities to balance their portfolios with:

  • Revamped lending policies
  • Targeted tenant analysis
  • Alternative data and AI
  • Flexible loan products
  • Asset management and realization

With a targeted approach that aligns policies with trends and decisions with data, your portfolios can still shine in a tough market.

Connect with a leader today.  

  1. CBRE Group, “Toronto Industrial Figures Q2 2025,” published July 8 2025.
  2. Statista, “Canada Commrecial Real Estate,” published July 2024.
  3. CBRE Group, “Canada Real Estate Market Outlook 2025,” published January 2025.

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