RECan Invest highlights the opportunities currently available on the Canadian real estate market
In 2025, the Canadian commercial real estate landscape continues to present a highly interesting but complex mix of opportunities and challenges. On the one hand, the industry is optimistic due to falling interest rates and an improving labour market. On the other hand, it cannot be overlooked that geopolitical factors are influencing decision-making as never before—not only in the real estate market, but in almost all industries. This also has to do with what we might call the inconsistent actions of the US president—also, or perhaps especially, regarding Canada. Looking at the mood in the market, it is fair to say that we are in a capital recession with a very solid operating environment.
What does this mean?
The operational side of the real estate business is currently quite constructive:
- Portfolios are generally performing well.
- Buildings are generally mostly fully leased.
- Tenants are generally paying their rents.
- Rents are generally rising, which implies an increase in value.
We are seeing different developments in our most important real estate sectors:
- The industrial sector is normalizing after years of extremely low vacancy rates, with rental growth slowing in most markets. Users are taking advantage of the weaker markets to expand their facilities or even buy them outright.
- The office market remains under pressure overall, mainly due to an oversupply of low-quality, below-average-yield properties. However, we are also seeing the highest level of leasing activity in years, and as new construction activity slows, the market will return to equilibrium.
- Retail is proving resilient, as limited new supply is supporting solid rental growth and shopping centre sales are reaching record levels even when adjusted for inflation.
- The multifamily markets are seeing the highest level of new rental units completed in decades, providing much-needed relief to tenants. This is proof that the private sector plays a crucial role in improving housing affordability, and we are seeing this view increasingly reflected in public opinion.
What’s next?
In the 25 years that we have been investing in real estate, there have only been two occasions when it has been possible to focus on so-called “spread investing.”
Spread investing means that you can buy a building with existing income at a capitalization rate that is 100 to 200 basis points above the cost of financing, without increasing income or achieving any real significant value appreciation, sell the building at the same purchase price, and still achieve opportunity fund returns. The first time was in 2004/05/06 during the global financial crisis, and the second time is now.
With the cost of debt, the cost of equity, the sentiment in the real estate market, and capital flows all changing today, we are in a market where you can buy prime assets from Canada’s largest and most experienced institutions at cap rates that you think are reasonable, can be financed appropriately, and if you are confident that you can maintain the income, then this is a tremendous opportunity – for those who have access to capital.
Sven J. Matten, partner at RECan Invest: “The current situation in Canada presents a very interesting value-oriented proposition for investing in commercial real estate – not only for solid investment returns, but also as a defensive and future proof investment strategy. And now with a new prime minister who has a growth-oriented agenda, the Canadian economy will continue to boom, which will encourage both domestic and foreign investment.”
So, is now the time to invest in Canadian Commercial Real Estate? Absolutely, yes. Join us at our upcoming webinar on Thursday June 27th at 4pm CET where industry experts and decision-makers will discuss the latest trends and share their insight on where the opportunities lie. Stay tuned for the list of speakers and attendees.