In Canada, the economic landscape is shifting as the Bank of Canada (BoC) continues to cut interest rates, with inflation falling below its target and unemployment on the rise. BGO’s Research Team sees signs of a commercial real estate (CRE) market recovery, as lower debt costs and increased capital availability may boost real estate sentiment and ease transaction flows. Property values seem to have stabilized across sectors, except for the office market, which still faces challenges. Multifamily and industrial sectors show balanced conditions as supply has recently outpaced demand, but tighter market conditions are expected by the decade’s end due to limited new starts.
The industrial sector is showing signs of recovery with improved leasing, while the office market remains stable, bolstered by “return-to-office” mandates and a shift toward high-quality buildings. Retail demand remains strong, particularly in needs-based and food-anchored retail, with limited new supply meeting growing population needs. Despite downside risks like weaker consumer spending and global geopolitical tensions, BGO remains cautiously optimistic about the CRE market, emphasizing the importance of active asset management as rate cuts could spur moderate cap rate compression and drive investment returns.