Five commercial real estate trends to watch in 2025
Avison Young, a Toronto-based commercial real estate (CRE) services firm, has released a report detailing five CRE trends that are taking hold this year as investors reshuffle their preferences.
Retail is back
Investors are becoming more bullish on retail real estate after years of decline culminating in a pandemic-era reckoning. Avison Young says that consumers have returned to stores and interested investors are finding it hard to snag prime retail assets. This is because construction of new retail buildings has been muted for over a decade, leading to a shortage of assets available for sale – and a run-up in prices.
Grocery-anchored neighborhood shopping centers are the most in-demand assets to own and lease in Canada, the report says.
Booming industrial is starting to settle
The addition of 87 million square feet of new industrial inventory raised the vacancy rate to 3.6% in Q4 2024, up from 2.4%. Avison Young says the sector is becoming more neutral and balanced after “exceptional” levels between 2020 and 2023.
The Canadian manufacturing sector is facing significant headwinds because of the present US trade war, however.
“The market is still very strong and poised to generate attractive returns – as long as there is not an upheaval in global trade,” said Marie-Claire Laflamme-Sanders, principal, SVP, and practice lead for capital markets, Quebec.
Investors are “office curious”
Investors are changing their attitudes on office assets after years of pandemic- and remote-work-driven malaise. With office development muted in recent years, the vacancy rate is under control and on the decline, Avison Young says.
Meanwhile, redevelopment and conversion projects are reducing stock. In downtown Montreal, 500,000 square feet of office space has been converted to residential, with another 1.7 million square feet being analyzed for potential redevelopment or conversion.
Hotels attracting non-traditional investors
More non-traditional investors and lenders are looking at hotel assets, attracted by high-yield potential and more transparent and predictable performance (in the absence of pandemics, a breakdown in trade and tourist relations, or war).
Quebec’s multifamily market remains strong
Though the multifamily market has softened across the country, Quebec has bucked the trend with investment volumes holding steady at $3.8 billion in 2024.
The province is home to the largest rental inventory in the country and is characterized by a culture that supports renting.
With institutional buyers staying on the sidelines in Quebec, private investors accounted for over 70% of multifamily transactions over $5 million in 2024.
“As debt becomes more affordable, institutional investors are expected to return to the table, which should enhance competitive pressure for multifamily assets,” Laflamme-Sanders added.
