Richard Crenian highlights how Canada’s commercial real estate (CRE) and multi-tenant sectors are evolving in response to economic shifts, regulatory changes, and cross-border trade policies. As interest rates stabilize and new market conditions emerge, investors must adopt a strategic, flexible approach to maximize opportunities while mitigating risks.
Navigating Interest Rate Adjustments and Economic Shifts
The Bank of Canada’s successive rate cuts in 2024 have eased financing conditions, bringing the overnight rate from 5% to 3.25%. With additional modest reductions expected in 2025, potentially reaching 2.5% by mid-year, borrowing conditions continue to improve. This environment bodes well for commercial property acquisitions, multifamily developments, and value-driven investments. However, with fixed-rate lending costs remaining stable due to bond market trends, investors must weigh variable-rate benefits against long-term stability.
Despite economic uncertainty, sectors like logistics, energy, and technology continue to support CRE demand. Secondary markets, where affordability and population growth intersect, remain attractive for developers and institutional investors looking for alternative investment hubs outside of major metropolitan centers.
Impact of Canada-U.S. Tariffs on Commercial Real Estate
The recent tariff announcements between Canada and the U.S. add a layer of complexity to the commercial real estate landscape. Trade tensions could influence material costs, supply chain logistics, and tenant demand, particularly for industrial and retail spaces tied to cross-border commerce. While the specifics of these tariffs will determine their full impact, developers and investors should monitor construction material pricing and assess potential delays in sourcing steel, aluminum, and other critical building supplies.
The industrial sector, which has thrived due to e-commerce expansion, could experience increased costs if tariffs raise expenses for distribution centers and logistics hubs. Additionally, any disruption to trade routes might shift demand patterns for industrial properties near major transportation corridors, creating new investment risks and opportunities.
Multifamily Housing: Resilient Amid Changing Conditions
Multifamily real estate remains a core growth area, driven by shifting homeownership trends and continued urbanization. The federal government’s commitment to increasing housing supply—including GST exemptions for new rental developments and CMHC financing incentives—supports the expansion of purpose-built rentals, student housing, and senior living facilities. That said, tax reforms, including higher capital gains inclusion rates introduced in the 2024 federal budget, have prompted investors to rethink exit strategies and consider tax-efficient structures such as REITs and joint ventures. While the demand for rental units is expected to remain strong, developers must balance rising construction costs and policy shifts when planning future projects.
Adapting Office Spaces and Retail Developments
The office market continues its transformation as businesses adapt to hybrid work models. Traditional office demand remains weaker, particularly for smaller units under 2,500 square feet, but opportunities exist in repositioning vacant office spaces. Office-to-residential conversions and mixed-use redevelopments are gaining traction, especially in urban areas with housing shortages.
Retail real estate is also evolving, with a growing focus on experience-driven spaces. Shopping centers and mixed-use developments incorporating dining, entertainment, and community amenities are expected to perform better than traditional retail outlets. Meanwhile, last-mile distribution hubs remain a high-demand asset class as retailers optimize logistics networks to meet e-commerce-driven consumer expectations.
Sustainability and Smart Real Estate Investments
Sustainability and technology-driven efficiency remain central to the long-term viability of commercial properties. Green-certified buildings, energy-efficient retrofits, and smart building technologies are increasingly valuable, offering operational cost savings and aligning with government policies promoting environmental responsibility. Investors prioritizing sustainability will likely benefit from stronger tenant demand and potential tax incentives supporting eco-friendly developments.
As we move through 2025, Canada’s commercial real estate market presents both challenges and opportunities. While lower interest rates, strong rental demand, and infrastructure investments support long-term growth, factors such as shifting tax policies, global economic trends, and Canada-U.S. trade relations require careful navigation.