Executive Summary
Budget 2025 introduced the Productivity Super-Deduction (PSD), a package of enhanced tax incentives designed to accelerate capital investment and lift Canada’s lagging productivity. The PSD applies to most new capital investment and allows businesses to write off a larger share of the cost of these investments right away, including immediate expensing (i.e., a 100% first-year write-off) for select asset classes.
For the commercial real estate sector, the most significant measure is the proposed immediate expensing of manufacturing and processing buildings. This would allow eligible property owners to deduct up to 100% of a qualifying building's capital cost in the first year it meets the manufacturing use requirements, including where the building is leased to a manufacturing tenant. The deduction could support investment in new industrial facilities, manufacturing-focused developments and qualifying improvements to existing properties.
The federal government has now established detailed eligibility criteria through Bill C-31, introduced on May 6, 2026. These include a requirement that at least 90% of the building's floor space be used for manufacturing or processing, qualifying acquisition dates and restrictions on previously owned property. The manufacturing-building measure remains proposed legislation, with Bill C-31 currently before the House of Commons Standing Committee on Finance.
On September 15, 2026, the government also announced the Productivity Mega Deduction, proposing to permanently extend immediate expensing to a much wider range of capital assets.
Manufacturing and processing buildings remain subject to the separate, temporary Budget 2025 measure.
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