Report highlights where the wins could be in the year ahead
For investors seeking returns from commercial real estate, 2025 could be a good year with emerging opportunities and changing conditions expected to benefit the sector.
With tighter lending restrictions creating some financing challenges for developers, the participation of high-net-worth individuals, family offices, and other private investors will be welcomed and rewarded.
A recent report from PwC Canada and the Urban Land Institute looks at the trends for Canadian real estate in the year ahead and highlights the less favourable conditions seen recently, including heightened risks from geopolitics and costs. However, there are signs of better things to come.
"Canadian real estate companies are closely monitoring catalysts like declining interest rates, government policy changes and business model reinvention to reinvigorate investment and development. At the same time, they are exploring new technologies such as GenAI to enable productivity improvements," said Fred Cassano, Partner, National Real Estate Leader, PwC Canada. "The use of generative AI in the real estate sector though still evolving, offers significant competitive advantages."
While the use of technology is a clear benefit for making real estate more efficient and for monitoring market trends, for investors the asset classes that they consider are informed by fundamental basics – what’s selling and what isn’t.
The report shows that investors are looking beyond traditional favourites that are slowing down in markets such as Toronto and Vancouver, and instead eying opportunities in emerging asset classes such as data centres, cold storage facilities and student housing.
These investments and others that blend real estate and infrastructure are appealing to investors and can bring significant value, along with other niches including those in digital connectivity (i.e. GenAI) and sustainable energy.
Whatever assets are added to real estate portfolios though, there is a strong focus on sustainability and values will be scrutinized by investors for inclusion of climate resilience, insurance, and factors such as energy efficiency.
Canadian investors are likely to face competition from international peers who plan to take advantage of emerging distress in real estate with less domestic competition for these assets, including investments in multifamily and industrial properties.
"2025 will be about taking a fresh approach to investment and development," said Richard Joy, Executive Director, Urban Land Institute, Toronto. "Capitalizing on newer opportunities like GenAI and data centres requires real estate players to act with creativity and conviction, which may involve developing new capabilities, forging strategic partnerships, and entering new markets."
