Tariffs and tight tenant budgets have added pressure to Canada’s commercial real estate (CRE) market. Owners and operators now grapple with higher operating costs, higher vacancy rates, and lower rental prices.

CRE organizations must use all tools available to future-proof their assets in a tough market. A new tool? AI.

We’ll break down the latest trends in Canadian commercial real estate, and three ways AI is helping owners and operators outperform in the market.

The state of commercial real estate in Canada today

We surveyed 100 CRE owners and 100 CRE tenants to learn how today’s market is affecting their businesses.¹ Cross-border tariffs have caused the following challenges for owners:  

Notably, smaller real estate owners have experienced more significant impact to their supply chains than larger owners, who have experienced more fluctuations in their asset valuations and cap rates.

The CRE tenants we surveyed have responded to tariff pressures with tighter budgets, scaled-back expansion, and a renewed priority for flexibility and customization in lease terms and spaces.

Owners must respond to tenants’ increased demand for:

• Rental concessions (74%)
• Flexible lease terms (65%)
• Subscription based services and amenities (61%)
• Waste management upgrades (73%)
• Accessibility renovations (72%)
• Energy efficiency upgrades (69%)

Technology and AI are critical components to CRE owners’ response to tenant needs. Specifically, owners increasingly plan to leverage GenAI for:  

Three ways to future-proof asset performance with AI

1. Treat AI as a value driver, not just a cost

Commercial real estate owners and operators are dealing with rising costs, while feeling pressure from lower tenant budgets and expensive demands. In this environment, every efficiency gain can influence revenue, savings, and valuation.

One prominent example of this is one larger retailer that deployed autonomous HVAC optimization platform across 600+ stores, covering 6.6 million square feet. The rollout delivered:

• About $1.38 million (US $1 million) in electricity cost savings
• About 7.98 million kWh of annual electricity savings
• Valuation impact of approximately $24.46 million (US $17 million, at 6% cap rate) driven by the cost savings and NOI uplift

These savings were made possible by an autonomous HVAC optimization solution. The solution transformed energy usage patterns across the stores by combining the data extracted from the retailer's building management system (BMS) with external data sets, such as weather forecasts.

AI is also helping owners drive topline revenue. QuadReal Property Group leveraged Funnel’s AI-driven renter CRM and Virtual Leasing Agent for automated lead handling, tour booking, and pre-qualification across its approximately 10,000-unit portfolio.² QuadReal experienced an improvement in tour-to-lease conversions of 33%, which eventually shortened vacancy days and increased effective rent capture.  

2. Deploy GenAI and agentic AI to automate key real estate processes

We’re seeing commercial real estate owners use GenAI and agentic AI to automate once laborious tasks, like:

• Optimizing HVAC systems
• Researching and analyzing vast and complex CRE data
• Automating lease management tasks

Agentic AI and GenAI capabilities are making building operations more efficient. Owners, operators, and managers can now automate tasks like adjusting HVAC setpoints. Additionally, they can query buildings with natural language to identify performance variances, which allows them to take corrective action in real time.

AI can also play a pivotal role in streamlining time-consuming lease management processes, which often require touchpoints across multiple stakeholders.

Deloitte’s AI specialists have helped commercial real estate leaders leverage our proprietary and customizable AI tool to find operational efficiencies and streamline lease management tasks including lease data abstraction, querying, reviewing, and reporting.

3. Modernize ERP and integrate with GenAI capabilities

Enterprise Resource Planning (ERP) software is the digital spine that can either accelerate or slow down decision-making. The difference lies in ERP modernization and integration with GenAI.

More commercial owners plan to leverage their ERP this year to address current market challenges, along with other technologies. Here's a quick list of the technologies, accompanied by the percentage of owners who plan to use them this year: 

• ERP (74%)
• Customer relationship management (CRM) (68%)
• Cloud-based lease management platforms (64%)
• Independent property management software (63%)
• Project management information system (PMIS) (59%)

In a market fraught with costly delays in permit processing, supply chains, and lease renewals, it’s more important now than ever for commercial real estate owners to improve operational efficiency and enhance productivity. They can do that by integrating GenAI and agentic AI capabilities with ERP to:

• Automate data entry and processing
• Enhance intelligent reporting and forecasting
• Automate work orders and compliance
• Personalize tenant and investor communications

Real Estate ERP solutions are also embedding GenAI capabilities into client workflows to enable tasks such as resident/tenant follow-ups, recommend whether to approve or review invoices, and query data through virtual assistant.

Transform your real estate data into dollars

Real estate leaders can rely on GenAI and agentic AI as key value drivers amidst a tough commercial landscape. Indeed, 53% of surveyed CRE owners consider the role of agentic AI as critical for long-term innovation.

Deloitte’s real estate and technology specialists help large- and medium-scale real estate owners to audit their systems and integrate AI solutions. We help them:

• Improve operational efficiency;
• Enhance tenant experiences; and
• Create new revenue opportunities.

Ready to transform your real estate data into dollars? Book a call with a leader today.