The commercial real estate financing landscape is shifting in Montreal as we move through 2026. After a challenging 2024 and cautious 2025, lenders are becoming more selective about which projects get funded—and the conditions are narrowing for those that don’t meet their criteria. If you’re planning construction or refinancing debt in the months ahead, here’s what the market is actually telling us.
Lender Appetite Is Rising, But Standards Are Tightening
The good news: over 25% of lenders plan to increase origination volumes by 20% or more in 2026, according to recent CBRE data. Debt liquidity is expanding across most asset classes. But there’s a catch. Capital is flowing toward quality assets with solid fundamentals, while lower-quality buildings are struggling to attract investment. This shift from "crisis mode" into "selective recovery" means your project’s fundamentals matter more than ever.
In Montreal specifically, industrial assets are seeing the most lender enthusiasm. With cap rates compressed to 4.75%—the lowest in years—and vacancy rates sitting at just 1.6%, institutional investors are actively bidding for loans. However, that tight cap rate leaves little margin for error. If interest rates rise, properties could face valuation pressure. For office sector debt, lenders remain concerned about aging stock requiring significant tenant improvements and modernization. New construction debt for office is particularly difficult to secure; zero new office completions are anticipated, and existing inventory is being repositioned rather than newly built.
Construction Costs Are Stabilizing—But Not Declining
Here’s what matters for your project timeline and budget: construction costs stabilized in 2025 and are expected to align with general inflation in 2026. That’s better than the volatility of recent years, but it’s not a price rollback.
The challenge is municipal zoning restrictions and rising construction costs are slowing the addition of new industrial supply. Even so, 800,000 square feet of new construction starts were recorded in Q1 2026, with 60%+ pre-leased. The market is rewarding projects with pre-committed tenants. If you’re developing industrial space on the South Shore or East End, demand from mid-sized distributors exceeds supply by a factor of three—a compelling case for lenders.
For residential-focused development, the federal government announced a new $1.7 billion housing package in April 2026, and Ontario removed HST on newly built homes for one year. These measures are designed to kickstart development and protect jobs in the homebuilding sector. However, developers still face elevated costs and softer demand, meaning financing conditions remain selective.
The Window of Opportunity for Existing Asset Refinancing
If you own performing industrial or multi-family assets, now is the time to act. Montreal’s transaction volume closed 2025 at $10.6 billion (up 5% year-over-year), with multi-family assets up 31% and office experiencing its first meaningful rebound in six years. Debt financing is available for properties that can demonstrate strong tenant rosters, stable cash flow, and reasonable cap rates.
The industrial sector in particular offers a "window of opportunity" for property owners to renegotiate existing leases or refinance at favorable rates. Rents have climbed to $12.50 per square foot net—an 8% year-over-year increase—which strengthens your debt service coverage ratio and improves your refinancing position.
Bottom Line
Financing and construction in 2026 require a disciplined approach. Lenders are actively deploying capital, but they’re being selective. Industrial assets with pre-leased tenants and strong fundamentals have the easiest path to debt. Office and residential projects need to demonstrate clear value-add stories and solid underwriting. Construction costs aren’t spiraling, but they’re not falling either—so lock in your budget and timeline early.
If you’re evaluating a development project or considering refinancing, the market conditions are favorable for quality assets. The risk lies in overestimating cap rates or underestimating construction timelines.
Ready to explore financing options for your Montreal CRE project? At Immodev Montréal, we work with lenders across the region and understand the nuances of today’s selective market. Let’s discuss your project’s financing strategy. Contact us today to connect with our team.