Industry sentiment remains mixed as Canadian real estate companies navigate issues such as uncertainty around dealmaking, capital constraints, housing affordability, sustainability and ensuring resilience to climate change.
A key issue revolves around the condo market, particularly in cities like Toronto and Vancouver, where challenges persist even as interest rates are coming down.
Those ready to seize opportunities can look to Calgary, a top market to watch this year, as well as niche properties like data centres that are among the best bets in Canadian real estate for 2025.
After more than two years of an industry slowdown, Canadian real estate companies have been paying close attention to whether declining interest rates would reinvigorate the market for investment and development.
But as we saw in our discussions with companies across the real estate spectrum this year, the industry outlook for 2025 remains mixed, with interviewees observing an increasing differentiation in the market as performance varies even more widely by factors such as region, asset class, the specific characteristics of the investment or development opportunity in question and the strength of a real estate company’s balance sheet and management team.
There are signs of this playing out in the condo market, where developments underway in Toronto are coming under significant pressure and some projects—particularly those led by smaller companies with fewer financial resources—are in varying degrees of distress. While some interviewees noted Canada’s rapid population growth will support an eventual recovery for the condo sector in subsequent years, there’s added uncertainty about the outlook for consumer demand in light of the federal government’s recent moves to curtail both temporary and permanent immigration.
Current trends are in many ways emblematic of the broader shift in Canada’s real estate market since interest rates have remained higher for longer than the industry hoped or believed would be the case. Simply put, as higher financing costs compound other industry pressures and investors weigh real estate investment against other opportunities offering attractive returns with less risk, the sector is less compelling than it was during the previous period of strong returns and cheap and plentiful capital.
But there’s also a range of other factors influencing real estate businesses and prospects in the year ahead. Challenges around housing affordability persist, highlighting an important trend that’s shaping the market and deepening the push for further policy change and a focus on innovation and productivity in Canadian homebuilding. Interviewees also cited other broad business trends, such as demographics, evolving supply and demand dynamics and technology shifts like the rise of generative artificial intelligence, as key issues on the agenda in 2025.
Among the emerging trends are issues surrounding sustainability and climate change. Amid the growing frequency and severity of natural disasters, the long-term resilience of real estate holdings is becoming top of mind for stakeholders such as investors and regulators. An increasingly important consideration relates to insurance, with new regulations faced by insurers on climate risk management raising questions about the effect on policies and pricing.
As challenging as the current environment may be, it’s also true that real estate companies with a strong conviction about where the market is going will be in the best position to seize new opportunities. A key emerging trend for some interviewees is the rise of niche property types and real assets.
With relatively few core office, industrial and retail properties on the market—and limited opportunities for a significant uptick in yields—some real estate investors are taking a closer look at real assets, which blur the lines between real estate and infrastructure. These opportunities appeal to investors with a firm belief that changing consumer, technological and business trends will create new real estate requirements.
Among the examples cited by interviewees this year were data centres, cold-storage facilities and student housing. These niche opportunities, along with purpose-built rental housing and industrial real estate, figure prominently among the best bets in the Canadian real estate market in 2025.
"Success in Canadian real estate demands creativity, resilience and market insight. Innovative financing, strategic partnerships and sustainability help navigate uncertainty and drive growth. Operational excellence ensures these strategies are executed effectively, leading to better outcomes and long-term success."
Fred CassanoNational Real Estate Leader, PwC CanadaWhat do these trends mean for Canadian real estate companies as they prepare for the year ahead? Download our full Emerging Trends in Canadian Real Estate report to learn more about the outlook for 2025 and how industry leaders are approaching the key issues that will shape real estate investment and development strategies next year. We explore emerging trends around dealmaking and capital markets, housing affordability, sustainability and climate change and share insights into what’s happening across Canada’s markets to watch and the various commercial and residential property types.
Managing Director, Real Estate Consulting Leader, PwC Canada
Tel: +1 416 687 8143
National Real Estate M&A Leader and ESG Real Estate Deals Leader , PwC Canada
Tel: +1 416 815 5255
