Intelligent Investment
Canada Real Estate Market Outlook 2025
December 6, 2024 35 Minute Read
The Next Chapter
Canada finds itself at an inflection point on many fronts – politically, economically, and on social issues such as housing affordability and congestion. In spite of these very real challenges, Canada remains a growth play. The country ranks among the top G7 nations in GDP, population and employment growth over the next five years, all of which are highly correlated with demand for all types of commercial real estate.
2025 is poised to be a year of increased activity. The cost of capital crisis will finally begin to ease and, contingent on global bond market conditions, investment and leasing activity will increase in the year ahead. Leasing fundamentals are improving on the whole, though Canada has seen significant amounts of new supply in the office, industrial and residential sectors which will take time to work through.
CBRE Research stands ready to help clients succeed in 2025. Please contact us at any time.
Marc Meehan
Managing Director, Research
Executive Summary
Economy - Despite modestly lower economic growth forecasts as a result of immigration curbs, Canada’s longer term outlook remains solid compared to the G7 and favourable for commercial real estate demand.
Capital Markets - Sentiment has been improving and stronger investment activity is expected in 2025 as more capital is drawn off the sidelines. Cap rates for some asset classes are likely to start modestly compressing, but subject to global bond market conditions.
Debt Markets - Debt availability is expected to improve, however, lenders will remain selective and nuanced. Credit spread dynamics should begin to normalize and loan underwriting will echo broader market trends with respect to rents and vacancy rates.
Office - Occupiers will shift back into a growth mindset, paving the way toward recovery. Further bifurcation of product with a focus on ‘flight-to-experience’ and a slowdown in new supply will lead to an under-supply of modern, amenitized and environmentally sustainable buildings.
Retail - Positive leasing intentions combined with a supply-constrained retail landscape will force retailers to consider expanding into secondary markets and modifying the scale and format of their typical store.
Industrial - The industrial sector is facing headwinds amid softer demand and an influx of new supply. The market will continue to work towards normalization, which could come sooner than some expect.
Multifamily - Immigration curbs and new supply deliveries have heightened near-term uncertainties. Long term growth fundamentals, however, remain solid and present a compelling investment thesis.