The One condominium and hotel is pictured under construction at the intersection of Yonge St. and Bloor St. in Toronto, in 2023. The One was placed into receivership in October of that year.Arlyn McAdorey/The Canadian Press
By whatever metric you want to use, Canada is experiencing its worst real estate cycle in decades.
According to data from the commercial real estate data firm Altus Group, 119 “distressed sale” transactions were recorded in 2023 across the country, totalling properties worth $767-million. In 2024, those numbers rose to 191 transactions worth more than $1.5-billion. Last year, 252 distressed sales were registered, totalling more than $1.42-billion.
The asset class seeing the most distress is development land, primarily because it’s hard for developers to advance projects in this market environment and these properties are often non-income-producing. With Greater Toronto and Metro Vancouver being the two biggest residential markets, they are seeing the vast majority of the distress.
Altus Group VP Raymond Wong said they define “distress sales” as ones that involve a court proceeding – creditor protection, receivership, foreclosure, power of sale – so the data does not include, for example, a property sold by an owner at a heavy discount due to financial distress. The data also only includes completed sales, meaning the true amount of distress permeating the market is probably substantially higher, because many distressed properties are sitting on the market unsold.
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“Right now, the number has been slowly coming down from 2024 to 2025,” said Mr. Wong. “That’s because there’s less of that pressure and distress. But that’s not to say that in the next six months, depending on the velocity of the market, we won’t see more.
“That’s the challenge with this. I don’t think we’ve hit the bottom yet,” he said. “I think we’re going to see more receiverships and distress sales hit the marketplace. I think it’s going to take us a bit longer to get through this.”
Broker Jeremiah Shamess of the Toronto-based commercial real estate firm Colliers has handled numerous court-ordered sales in the past few years. He said, based on the number of requests for proposals he has seen, there will be more this year and this will continue until an “emergence of a bottom” in late-2026 or early-2027. He’s also starting to see more projects that are mid-construction fall into distress.
“The condo pricing at the end has been crystallized, so people know what their end revenue is and what the risk is to closing,” said Mr. Shamess. “That’s causing issues with either a construction project that has gone on too long, or a site that doesn’t have enough revenue to close because they have some buyers who have defaulted on their deposits. That seems to be a pretty common theme today.”
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Mr. Shamess’s colleague at Colliers, Morgan Iannone, completed about 10 court-ordered sales in 2024-2025 across Metro Vancouver and has also observed some common themes among those facing insolvency.
“I would say it’s a lot of new entrant developers, whether they’re new entrants to development itself or just a new entrant to that form of development,” said Mr. Iannone. “So, for instance, you have a developer that perhaps had been building homes for many years, and now they’ve moved into condo development or high-rise.
“When the market was continuously going up and you could presell a project in a very short period of time, you’d have groups that were able to progress forward and execute on a presale program because the buyer was there,” he said. “But when you get into a market where things get a bit more challenging, or delays happen, it just becomes too challenging, and some just don’t have that expertise or experience or frankly just the capital in place or partnership capabilities. I think that has really magnified as this has dragged on.”
When a development project becomes insolvent, the focus is usually on the developer. But some insolvencies have dragged on for so long that, paired with the down market, insolvencies have started to have significant impacts on lenders.
Brokers in both B.C. and Ontario have noticed an increase in credit bids, a situation where a lender buys the property they foreclose on, using the debt they are owed. Lenders are increasingly being forced into this position because the court-ordered sales processes are not turning up satisfactory offers. These lenders often do not have development capabilities themselves, so the hope is to hold on to the properties to sell or find a new development partner when the market recovers.
“It’s not necessarily the first position they want to be in, but the reason they’re doing it is because there is an ongoing understanding that the market will come back,” said Mr. Shamess. “So at the option of taking a writedown on the loan versus waiting for the market to come back, the general feedback of the lender is that they don’t want to take a significant writedown right now. Whereas I think if there was no certainty that the market would get better at some point, you would likely have a lot more lender fatigue and a lot more writeoffs of the loans.”
“I would say a couple of years ago there was still the potential for them to get out [unscathed],” said Brad Newman-Bennett, VP at Cushman & Wakefield Vancouver. “What we’re seeing now is the second and third guys have been wiped out, and now it’s impacting the first mortgage lender. Typically, that is the more senior banks – like the big five or big six or more conventional lenders. I think they’re starting to feel a little bit of this pain.
“Properties that have $40-million, $50-million, $60-million of debt on them maybe are only worth $10-million or $15-million, if that,” he said. “The institutions we all know, like the BMOs, RBCs, TDs of the world, if they have big development deals, they’re absolutely getting hurt at the moment – or if they had to sell, they would hurt. So that’s where I think you’re getting these credit bids. The banks are not prepared to write off a 40-, 50-, 60-per-cent loss. There hasn’t been a lot of commentary on that, but I think it’s real.”
Asked whether lenders are in denial, Mr. Newman-Bennett said he believes there is some of that, but that the denial will fade as insolvencies continue.
“I think there’s a little bit of denialism going on,” he said. “I don’t think they fully appreciate the depths of where things are at the moment, from a land perspective. So maybe they have their head in the sand a little bit. But I think the more of these that come to market, the more of these that are out being marketed by myself and our competitors and the feedback that I think these lenders are getting from us, they’ll start realizing pretty soon the reality of what these loans are actually worth at the moment. Whether they’ll acknowledge that, I don’t know.”