2025: A Promising Year for Canadian CRE
2 min read
As we enter 2025, demographic shifts, interest rates, and economic conditions are creating new opportunities and a promising year for Canadian CRE.
With interest rates and inflation stabilizing, CRE can expect a boost in consumer demand and transaction activity. As the Bank of Canada continues with its rate reductions, bank rates are expected to remain around 2.5%, with the possibility of further cuts throughout the year.
Population growth is a key driver of change in Canada’s real estate industry in 2025. It will increase to approximately 1.2 million people annually—three times the pre-pandemic numbers. This demographic shift significantly impacts the housing and labour markets, particularly in Ontario and Quebec. As a result, demand is shifting away from starter homes and toward condos and properties targeting older demographic groups. While employment remains strong, rising unemployment is mainly due to the growing population.
The retail sector continues to experience steady growth, with improved sales activity and higher rents. Still, there are concerns over consumer spending and political uncertainty despite inflation stabilizing. While transaction activity increases, buyers and sellers remain cautious, waiting for stronger market stability. Activity in the office sector continues to rise, driven by return-to-work mandates; however, expansion efforts have slowed due to downsizing and vacancies. Alternate property types, such as data centres and student/senior housing, are promising investment opportunities expected to see increased activity in 2025.
Despite the uncertainty experienced in 2024, the improved market conditions, reduced interest rates, and stabilized inflation provide an optimistic outlook for Canadian CRE in 2025. Investors must leverage emerging trends and markets to maximize opportunities as the market evolves.
References
Peter Norman, R. W. (2024, December 5). A more promising year ahead for Canadian CRE, but patience is still required. AltusGroup Insights. https://www.altusgroup.com/insights/a-more-promising-year-ahead-for-canadian-cre-but-with-patience/
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