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1、1CBRE RESEARCH 2025 CBRE LIMITEDIntelligent InvestmentCanada Real Estate Market Outlook 2025REPORTIntelligent InvestmentCBRERESEARCH JANUARY 20252025 Canada Real Estate Market Outlook2CBRE RESEARCH 2025 CBRE LIMITEDIntelligent InvestmentCanada Real Estate Market Outlook 2025The Next ChapterCanada fi
2、nds itself at an inflection point on many fronts politically,economically,and on social issues such as housing affordability and congestion.In spite of these very real challenges,Canada remains a growth play.The country ranks among the top G7 nations in GDP,population and employment growth over the
3、next five years,all of which are highly correlated with demand for all types of commercial real estate.2025 is poised to be a year of increased activity.The cost of capital crisis will finally begin to ease and,contingent on global bond market conditions,investment and leasing activity will increase
4、 in the year ahead.Leasing fundamentals are improving on the whole,though Canada has seen significant amounts of new supply in the office,industrial and residential sectors which will take time to work through.CBRE Research stands ready to help clients succeed in 2025.Please contact us at any time.M
5、arc MeehanManaging Director,ResearchExecutive Summary Economy-Despite modestly lower economic growth forecasts as a result of immigration curbs,Canadas longer term outlook remains solid compared to the G7 and favourable for commercial real estate demand.Capital Markets-Sentiment has been improving a
6、nd stronger investment activity is expected in 2025 as more capital is drawn off the sidelines.Cap rates for some asset classes are likely to start modestly compressing,but subject to global bond market conditions.Debt Markets-Debt availability is expected to improve,however,lenders will remain sele
7、ctive and nuanced.Credit spread dynamics should begin to normalize and loan underwriting will echo broader market trends with respect to rents and vacancy rates.Office-Occupiers will shift back into a growth mindset,paving the way toward recovery.Further bifurcation of product with a focus on flight
8、-to-experience and a slowdown in new supply will lead to an under-supply of modern,amenitized and environmentally sustainable buildings.Retail-Positive leasing intentions combined with a supply-constrained retail landscape will force retailers to consider expanding into secondary markets and modifyi
9、ng the scale and format of their typical store.Industrial-The industrial sector is facing headwinds amid softer demand and an influx of new supply.The market will continue to work towards normalization,which could come sooner than some expect.Multifamily-Immigration curbs and new supply deliveries h
10、ave heightened near-term uncertainties.Long term growth fundamentals,however,remain solid and present a compelling investment thesis.3CBRE RESEARCH 2025 CBRE LIMITEDIntelligent InvestmentCanada Real Estate Market Outlook 2025ContentsEconomy 04Capital Markets 09Debt Markets 14Office/Occupier 19Retail
11、 24Industrial 29Multifamily 34Canada Statistics 3907060501020304PAGESECTION08Regional Outlook 4109PAGESECTIONVictoriaVancouverCalgaryEdmontonSaskatoonWinnipegLondonWaterloo RegionTorontoOttawaMontrealQuebec CityHalifax434445464748495051 52535455Despite modestly lower economic growth forecasts as a r
12、esult of immigration curbs,the longer term outlook remains solid compared to the G7 and favourable for Canadian commercial real estate demand over the long term.Economy015CBRE RESEARCH 2025 CBRE LIMITEDIntelligent InvestmentCanada Real Estate Market Outlook 2025Trends to Watch010203Economic growth i
13、n Canada is expected to be lower,albeit only modestly,for the next few years as a result of the recently announced immigration curbs.Interest rates are set to continue falling in 2025 as the Bank of Canada looks to bring its policy rate back into the neutral range.For the next five-year period,Canad
14、as growth metrics are forecast to remain strong relative to the G7 which will be favourable for long term commercial real estate demand.6CBRE RESEARCH 2025 CBRE LIMITEDIntelligent InvestmentCanada Real Estate Market Outlook 2025Immigration curbs to modestly cut Canadas economic outlookFollowing two
15、years in a row of record high levels of population growth,the Canadian government has announced new measures aimed at slowing the number of new entrants over the next couple of years.The changes planned are mainly two-fold involving material reductions to the temporary and permanent resident program
16、s.Temporary residents have been a significant driver of Canadas outsized population growth over the last two years,surging by nearly 1.5 million people over 2023 and 2024.In response,the federal government has established targets for the first time to lower the share of temporary residents to 5.0%of
17、 the population from its current level of 7.3%within a couple of years.For permanent residents,the government has reduced its acceptance targets from 500,000 annually down by over 20%across all its intake streams for the next two years.The net effect of these policy changes,if fully realized,is expe
18、cted to lead to modest declines in the population in 2025 and 2026.This would have wide-reaching implications for the economy and growth outlooks have been downgraded accordingly.However,many economist groups are not confident that the federal government will be able to quickly and successfully impl
19、ement all of their announced changes.As a result,the revisions to economic growth have mostly been modest with Oxford Economics cutting Canadas average annual gross domestic product(GDP)growth for 2024 to 2028 by 30 basis points(bps).While GDP for 2024 is on track to grow by 1.0%,falling well below
20、the historical trend,it is expected to gradually strengthen thereafter.However,declining productivity levels are also a concern for durable long term growth in Canada that will need to be addressed.Source:CBRE Research,Statistics Canada,Government of Canada,November 2024.FIGURE 1:Components of Popul
21、ation GrowthMillions-0.6-0.4-0.20.00.20.40.60.81.01.21.419901995200020052010201520202025FNatural IncreaseNet EmigrantsImmigrantsNet Temporary ResidentsResidual Deviation7CBRE RESEARCH 2025 CBRE LIMITEDIntelligent InvestmentCanada Real Estate Market Outlook 2025Interest rates are on track to continue
22、 falling in 2025 The Bank of Canada has been consistently cutting its policy interest rate since June 2024,cumulatively lowering the interest rate by 125 bps to 3.75%to date.This shift towards loosening monetary policy comes as the central bank tries to navigate a soft landing for the Canadian econo
23、my now that inflation has fallen back to target.In fact,the Bank of Canada has been explicit with its forward guidance that interest rates will continue to decline further as long as the inflation outlook progresses as expected.The goal is to bring the policy interest rate to the neutral range of be
24、tween 2.25%and 3.25%,the hypothetical range where interest rates are supposed to be neither restrictive nor stimulative for the economy.Speculation has been rising that the Bank of Canada may need to accelerate its pace of interest rate cuts in order to quickly get to the neutral range.With inflatio
25、n already at its target level,there is little reason for the central bank to keep interest rates at its current,still-restrictive levels.As well,the Bank of Canada has started to express concerns that inflation could be at risk of falling below target if the economy ends up slowing more than expecte
26、d.As a result,the current median projection of the major Canadian bank economist groups forecast the policy interest rate will drop to the lower end of the neutral range of 2.25%as early as Q2 2025.This would mean about 100 125 bps of interest rate cuts is expected over the first half of 2025.Howeve
27、r,if economic growth does not recover and ends up weaker than expected,this could necessitate lower and more stimulative interest rates from the Bank of Canada.Overall,as the policy interest rate continues to fall to the neutral range,this should further ease macroeconomic constraints and promote st
28、ronger,more durable growth for the Canadian economy.FIGURE 2:Bank of Canada Policy Interest Rate ForecastProjections are the median quarterly forecasts of the major Canadian bank economist groups.Source:CBRE Research,Factset,major Canadian bank economist groups,November 2024.0.0%1.0%2.0%3.0%4.0%5.0%
29、6.0%20182019202020212022202320242025Stimulative PolicyRestrictive PolicyNeutral RangeF8CBRE RESEARCH 2025 CBRE LIMITEDIntelligent InvestmentCanada Real Estate Market Outlook 2025In the longer term context,population growth remains strong and positive for real estate demand Despite the recently annou
30、nced immigration curbs,Canadas population growth over the next five-year period is still expected to be strong relative to the G7.The current outlook from Oxford Economics forecasts population growth to 2029 in Canada to average 0.5%annually,second among the G7 only to the United Kingdom which has a
31、 marginally faster growth rate.While curbs have been placed on temporary residents and immigration targets have been lowered,they are still positive on a gross basis and expected to remain a net positive over the long term given Canadas aging demographic.In the context of longer term population grow
32、th,the modest potential declines in population over 2025 and 2026 can be viewed as more of a short term correction and not a fundamental change to Canadas long term outlook.When combining the outsized population growth of the last two years with the slower forecasts for the next three years,the aver
33、age annual growth rate for this five-year period is 1.3%,effectively in line with the 50-year historical average of 1.2%.Over the long term,a growing population ultimately means more workers and office space requirements,higher levels of consumer spending that drives retail and logistics demand as w
34、ell as the need for more housing including rental.Real estate demand is highly correlated with population growth and a continued strong outlook is positive for the long term prospects of the Canadian commercial real estate market.FIGURE 3:Five-Year Economic Growth Forecast for G7 CountriesSource:CBR
35、E Research,Oxford Economics,November 2024.-0.4%-0.1%0.0%0.3%0.4%0.4%1.0%1.0%-1.0%0.0%1.0%JapanGermanyItalyG7 AverageFranceUnited StatesUnited KingdomCanada-0.6%-0.2%-0.1%0.1%0.2%0.5%0.5%0.6%-0.8%0.0%0.8%JapanGermanyItalyG7 AverageFranceUnited StatesCanadaUnited Kingdom0.6%0.8%1.3%1.4%1.5%1.6%1.7%2.4
36、%0.0%1.0%2.0%3.0%JapanItalyGermanyG7 AverageFranceUnited KingdomCanadaUnited StatesPopulation GrowthPopulation GrowthCAGR,Next 5 YearsEmployment GrowthEmployment GrowthCAGR,Next 5 YearsReal GDP GrowthReal GDP GrowthCAGR,Next 5 YearsSentiment has been improving and momentum is building towards a reco
37、very in the Canadian commercial real estate investment market in 2025.Stronger investment activity is expected as more capital is drawn off the sidelines.Cap rates for some asset classes are likely to start modestly compressing in 2025,but subject to global bond market conditions.Capital Markets0210
38、CBRE RESEARCH 2025 CBRE LIMITEDIntelligent InvestmentCanada Real Estate Market Outlook 2025Trends to Watch010203Investment market sentiment is improving and activity is expected to recover in 2025 with volumes steadily returning to levels closer to the average pace of recent years.Some price discove
39、ry is likely to continue to play out in early 2025 as the market looks to establish its new pricing levels and narrow buyer and seller expectations.Real estate spreads are roughly in line with their long-term historical average and cap rates are on track to start modestly compressing in 2025,but glo
40、bal bond market volatility poses some risk.11CBRE RESEARCH 2025 CBRE LIMITEDIntelligent InvestmentCanada Real Estate Market Outlook 2025Investment market to recover in 2025 as sentiment continues to improveMomentum in the commercial real estate investment market has been steadily building in the lat
41、ter half of 2024,with transaction volumes and activity notably trending higher since the recent low recorded in Q1 2024.The stronger levels of capital formation and market optimism was driven in part by the Bank of Canada interest rate cuts.With each decrease to the policy interest rate,investors gr
42、ew more confident that the market was shifting back into a stable and more accommodating financing environment.As a result,Canadian commercial real estate investment volumes for 2024 are on track to total$45 billion.This would be the third consecutive annual decrease in investment volumes since the
43、record high in 2021,but also represents what is expected to be the trough before a recovery in 2025.While some real estate asset classes are contending with sector headwinds,market fundamentals are mostly still relatively healthy and supportive of the long term appeal of Canadian real estate as an i
44、nvestment.In particular,alternative assets will see robust investor demand in 2025 given their comparatively stronger fundamentals.Combined with a more accommodative financing environment,investment capital will continue to be drawn off the sidelines in 2025.Institutional capital is also expected to
45、 make a material return and inject significantly more liquidity into the market.Overall activity is expected to be stronger in 2025 as the quarterly pace of investments steadily rise to levels closer in line with the average seen in recent years.If the investment market recovery progresses as expect
46、ed,volumes could total nearly$48 billion in 2025.As well,the possibility for significant merger&acquisition activity presents further additional upside potential to the forecast.FIGURE 4:Canadian Commercial Real Estate Investment Volume Forecast$45$48$0$10$20$30$40$50$60$7020012002200320042005200620
47、0720082009201020112012201320142015201620172018201920202021202220232024F2025FCA$BillionsSource:CBRE Research,Q3 2024.12CBRE RESEARCH 2025 CBRE LIMITEDIntelligent InvestmentCanada Real Estate Market Outlook 2025Some price discovery likely to persist in early 2025 but will then largely stabilizeWith th
48、e investment market recovery in its nascent stages,price discovery for some asset classes is expected to continue over the early months of 2025.Asset classes that saw limited transactions over the past two years and that may not have undergone enough of an adjustment yet will be monitored closely as
49、 the market looks to establish its new pricing levels.As momentum in the market continues to build,each new completed transaction will provide fresh pricing datapoints that should help narrow buyer and seller expectations.Once new price floors and ceilings have been solidified,likely over the first
50、half of 2025,this will give investors greater confidence in pursuing their real estate strategies and become a catalyst for even more transaction activity.One notable exception is with Class B office assets,where pricing is expected to take a much longer time to stabilize.The office sector as a whol
51、e is beginning to see cash flows come under pressure as a result of increased spending on tenant inducements,amenities,insurance,base building build-outs and decarbonization.For Class B offices in particular,these assets are also facing additional headwinds from weaker leasing and investor demand.Al
52、together,it could take a couple years for Class B office pricing to fully stabilize.13CBRE RESEARCH 2025 CBRE LIMITEDIntelligent InvestmentCanada Real Estate Market Outlook 2025Cap rates expected to start modestly compressing,but subject to global bond market conditionsFollowing more than two years
53、of continual increases,Canadian cap rates generally appear to be peaking and are on track to start modestly compressing over 2025.Yields in some markets and select asset classes have already marginally decreased and this trend is expected to grow over the coming quarters.The compression in cap rates
54、 is supported in part by a projected easing in the Canada 10-year bond yield in 2025,which is forecast to drop about 15 bps according to the median forecast of the major Canadian bank economist groups.However,volatility in the global bond markets will pose some risk.Real estate cap rate spreads have
55、 also widened and are roughly in line with the 20-year historical average of 384 bps over the Canada 10-year bond yield,which should relieve some of the upwards pressure on cap rates.Cap rate movements will vary between asset classes as some segments like office still contend with softer valuations
56、and others,such as multifamily,face pressure for wider spreads which may buoy yields in those cases.Meanwhile,cap rates for some assets,such as anchored retail,have risen to rather attractive levels and drawn increased investor interest.The stronger demand and competition for these highly sought-aft
57、er properties will provide further support for modest cap rate decreases in 2025.0.0%2.0%4.0%6.0%8.0%10.0%12.0%199419961998200020022004200620082010201220142016201820202022202410-Year Canada Bond YieldNational Average All-Properties Cap Rate20-Year Average Spread384 bps465 bps231 bps426 bps211 bpsFIG
58、URE 5:Canadian National Average All-Properties Cap Rate and Spreads500 bps355 bpsSource:CBRE Research,Q3 2024.Debt availability is generally expected to improve in 2025,however,lenders will remain selective and nuanced between asset classes,locations and borrowers.Credit spread dynamics will begin t
59、o normalize and loan underwriting will echo broader market trends with respect to rents and vacancy rates.Debt Markets0315CBRE RESEARCH 2025 CBRE LIMITEDIntelligent InvestmentCanada Real Estate Market Outlook 2025Trends to Watch010203Overall debt availability is expected to be greater in 2025,but le
60、nders will continue to be selective with nuanced approaches between asset classes,locations and borrowers.Credit spreads for top real estate assets are likely to remain at tightened levels while some modest compression is expected at the wider end.Lenders are incorporating more conservative market t
61、rends with higher minimum hurdles into their underwriting,specifically with respect to vacancy and rents,that will impact loan economics accordingly.16CBRE RESEARCH 2025 CBRE LIMITEDIntelligent InvestmentCanada Real Estate Market Outlook 2025Greater debt availability expected in 2025,but lenders wil
62、l remain selectiveFor most of 2024,lenders were very selective in their dealmaking which led to many groups ending up well behind on their capital allocation budgets for the year.Lenders focused on financing for assets considered defensive,such as multifamily,industrial and grocery-anchored retail,w
63、hich continued to see strong levels of competition among lenders.Meanwhile,assets facing headwinds or uncertain outlooks were more difficult and costly to finance.In order to meet 2025 capital deployment allocations,lenders have already begun adjusting,exploring a wider range of assets and markets.F
64、inancing activity is beginning to increase and improve,including in such asset classes as enclosed retail and office.While this trend is expected to take hold in 2025 resulting in greater overall debt liquidity,lenders will still remain selective with specific and conservative underwriting approache
65、s as well as cautious,but certainly increasing,appetite for quality risk-adjusted returns.With real estate investment volumes also expected to rise next year,this will be another catalyst for increased debt activity and competition in 2025.Real estate debt markets traditionally follow the equity sid
66、e and so will accordingly see a reciprocal increase in activity as buyer capital re-emerges and transaction momentum starts to build in Canada.17CBRE RESEARCH 2025 CBRE LIMITEDIntelligent InvestmentCanada Real Estate Market Outlook 2025Credit spread dynamics to begin normalizing next yearDue to the
67、highly selective nature of lenders this year,the delta of real estate credit spreads between the tightest and widest ranges for mainstream term lenders had surged to its greatest point in recent years.However,amid increasing debt capital availability and lending competition,these dynamics have begun
68、 to change,with the wide end of the range expected to start contracting towards more historic norms in 2025.Credit spreads for top assets steadily tightened throughout the year,amid strong lending competition and a constant compression in corporate bond spreads.In the year-to-date,the spread of Cana
69、dian investment grade corporate bond yields to the Government of Canada 10-year yield has steadily fallen to the 100 bps range and now matches levels last consistently seen in late-2018.Credit spreads for top real estate assets converged and,in some best-in-class cases,financing was achieved very ne
70、ar this effective“risk free”level.As a result,credit spreads for this tranche of real estate will likely remain at current levels into 2025,as further tightening is unlikely without a parallel movement in corporate spreads.Meanwhile,for real estate loans that have encountered widened credit spreads,
71、these are expected to begin modestly compressing in 2025 as lenders generally become more active and open,following a similar trend in real estate equity markets.However,there will remain some exceptions as lenders more clearly define the specific range of asset classes they are willing to compete i
72、n.In terms of gross financing costs,real estate base rates for fixed mortgage loans are most closely tied to the Government of Canada bond or Canada Mortgage Bond yields instead of the policy interest rate.So despite 100-125 bps of cuts expected from the Bank of Canada over 2025,declines in bond yie
73、lds are largely already priced in and are projected to fall more modestly.FIGURE 6:Canada Investment Grade Corporate Bond SpreadsSpreads calculated as the difference between the S&P Canada Investment Grade Corporate Bond Index yield vs.the Canada 10-year bond yield.Source:CBRE Research,S&P Dow Jones
74、 Indices,Factset,November 2024.0501001502002503002015201620172018201920202021202220232024Basis Points18CBRE RESEARCH 2025 CBRE LIMITEDIntelligent InvestmentCanada Real Estate Market Outlook 2025Lenders incorporating more conservative market trends into their underwritingWith rising vacancy rates acr
75、oss most of the major asset classes,lenders have adapted and made some adjustments to their underwriting process.Most notably,lenders are now factoring larger vacancy provisions in line with current market rates.As underwriting incorporates expectations for the market over the length of the term,thi
76、s shift is reflective of lenders more conservative outlooks for the next few years.Until there is a more pronounced shift in market fundamentals,lenders are likely to continue applying these growing market vacancy rates and softening rents in their underwriting.This will generally lead to more cauti
77、ous net operating income projections and property valuations that will impact loan economics such as the total loan amount available or debt service coverage covenants.FIGURE 7:Canada Historical Vacancy RatesNote:industrial shows availability rates,retail vacancy based on select retail REIT/REOC por
78、tfolios.Source:CBRE Research,Q3 2024,CMHC as of October 2023.Retail,3.5%Industrial,4.4%Downtown Office Trophy Class,10.1%Downtown Office Class A,16.7%Downtown Office Class B/C,25.1%Multifamily,1.5%0.0%5.0%10.0%15.0%20.0%25.0%30.0%2015201620172018201920202021202220232024The office market is exhibitin
79、g more confidence than a year ago with occupiers shifting back into a growth mindset,paving the way toward recovery.Further bifurcation of product with a focus on flight-to-experience and a slowdown in construction activity is expected to lead to an under-supply of modern,amenitized buildings that a
80、re needed to keep pace with the newest era of occupier requirements.Office/Occupier0420CBRE RESEARCH 2025 CBRE LIMITEDIntelligent InvestmentCanada Real Estate Market Outlook 2025Trends to Watch010203Tenants have become more refined in whats driving their real estate decisions,evolving existing fligh
81、t-to-quality trends into one that is being characterized as a flight-to-experience.A muted development pipeline is expected in the coming years.This will be a turning point for the market,helping to reduce volatility in the near-term,while also leading to an under-supply of modern buildings in the l
82、ong-term.Market fundamentals,past and current,are suggesting that vacancy should peak in early 2025.General sentiment is trending positively,providing green shoots of optimism in the year ahead.21CBRE RESEARCH 2025 CBRE LIMITEDIntelligent InvestmentCanada Real Estate Market Outlook 2025Trading up in
83、 a flight-to-experienceOffice space needs continue to impact the market.Increased bifurcation between trophy downtown buildings and the rest of the market is expected to persist as occupiers carry out flight-to-quality moves that focus on upgrading from their existing space.In fact,59%of respondents
84、 to CRBEs 2024 Americas Office Occupier Sentiment Survey noted that they were considering or executing a relocation to higher-quality space.Further,occupiers that already operate in Class A space are now upgrading to AA or AAA buildings or to improved,more central locations.This is just one facet of
85、 the story however,as this trend is evolving into what is now being characterized as a flight-to-experience.Tenants have become more refined in whats driving their real estate decisions.A shift to hospitality-inspired amenities and experiences have led occupiers to seek amenitized buildings that eit
86、her offer or augment what they can provide within their own footprint.Again from CBREs 2024 Americas Office Occupier Sentiment Survey,it was noted that 57%of occupiers relocating desire improved amenities and services for their employees.Both the building and surrounding neighborhood play a crucial
87、role in creating an exceptional employee experience that remote work cannot replicate.High-quality offices in vibrant locations will continue to attract tenant interest and lead to tighter vacancy in the best locations.As the divide is set to widen further between these and lower-quality assets,unde
88、rgoing capital improvements that add a differentiated amenity offering,along with other building upgrades,will be necessary for some product to meet the market and remain competitive.57%CBREs 2024 Americas Office Occupier Sentiment Surveyof occupiers relocating desire improved amenities and services
89、 for their employees.Trophy series includes top-tier properties in Vancouver,Calgary,Toronto and Montreal.Source:CBRE Research,Q3 2024.FIGURE 8:Canada Downtown Office Vacancy Rate by SegmentVacancy Rate(%)19.7%10.1%16.7%25.1%0.0%5.0%10.0%15.0%20.0%25.0%30.0%2015201620172018201920202021202220232024Al
90、l BuildingsTrophyClass AClass B/C22CBRE RESEARCH 2025 CBRE LIMITEDIntelligent InvestmentCanada Real Estate Market Outlook 2025End of construction cycle:good for now but not for longNew supply has been a contributing factor behind record high vacancy rates in cities like Toronto and Vancouver.The mar
91、ket has had to contend with not only backfilling associated tenant moves,but also vacant new supply as we have seen pre-leasing levels drop amongst late-wave deliveries.Properties completed in 2020 were over 75%pre-leased upon delivery versus just under 50%for projects completing next year.When all
92、is said and done,the current development cycle will have added 27.2 million sq.ft.or 5.8%to national office inventory since 2020.The pipeline has continued to dwindle with increasingly few projects moving forward,a trend that started to take hold in 2022 as developers grappled with elevated vacancy,
93、interest rates and construction costs.As such,construction levels are currently at a 20-year low and are anticipated to remain muted following the last tranche of deliveries over 2025.This will be a turning point for market recovery,mitigating supply-side risks as occupiers gradually absorb new and
94、improved existing product.While a lack of new projects breaking ground may be a welcome reprieve and aid in reducing volatility in the short-term,a sustained period of limited construction could lead to an under-supply of buildings that meet modern needs.This might soon be the case in select markets
95、 where there has been limited construction for a number of years already.The cost of construction will pose a further challenge in this equation when considering the high rents needed to pencil out future developments.A limited pipeline of new supply could be good news for existing buildings,however
96、.As prime spaces become scarce,demand is expected to spill over to the next tier of buildings.Forecast only includes projects currently under construction.Source:CBRE Research,Q3 2024.FIGURE 9:Canada Office New Supply0.02.04.06.08.010.012.014.016.018.0198019821984198619881990199219941996199820002002
97、20042006200820102012201420162018202020222024F2026F2028FMillion Sq.Ft.23CBRE RESEARCH 2025 CBRE LIMITEDIntelligent InvestmentCanada Real Estate Market Outlook 2025Overall,the office market is exhibiting more confidence than a year ago,paving the way for recovery.Absorption is trending positive for th
98、e first time since 2019;office utilization,while still lower than pre-pandemic,has by all accounts reached a steady state;and sublease space continues to trend downward,a typical forward-looking indicator.We are also starting to see occupiers shift back into growth mindset.From CBREs 2024 Americas O
99、ffice Occupier Sentiment Survey,38%of respondents are anticipating their portfolio size to expand over the next three years,this is even higher in Canada at 45%,citing expected business growth and evolving workplace design standards that accommodate new work patterns behind that need for more space.
100、This will help support office absorption moving forward.If present indicators arent enough,looking at past market cycles might provide further proof that we are on the cusp of moving into the next stage of this market cycle.Current vacancy levels are on-par with market highs last seen in the 90s rec
101、ession which also came with a large influx of new supply.It took the office market roughly five years to peak,rising from Q4 1988 to Q4 1993,before starting to recover.Applying that to the current cycle which began its ascent from Q1 2020,it is expected that vacancy could peak in early 2025 and move
102、 toward recovery in 2026.Regional differences may still crop up and result in an uneven recovery trajectory in some areas of the country.General sentiment is trending positively,however,providing green shoots of optimism in the year ahead for this challenged sector.Turning tide on office market cycl
103、eSource:CBRE Research,CBRE Econometric Advisors,Q3 2024.Vacancy Rate(%)38%of respondents are anticipating their portfolio size to expand over the next three years,this is even higher in Canada at Q4 1988,10.4%Q4 1993,18.8%Q1 2020,10.4%Q1 2025F,19.0%0.0%6.0%12.0%18.0%24.0%1984198619881990199219941996
104、199820002002200420062008201020122014201620182020202220242026F2028FFIGURE 10:Canada Metro All Classes Office Vacancy Rate45%CBREs 2024 Americas Office Occupier Sentiment Survey Retailer sentiment going into the new year remains positive,however,factors influencing the market will further entrench cur
105、rent trends and push change in the sector.Being forward looking and resilient will always be rewarded,and this has never been more true than in todays competitive landscape.Retail0525CBRE RESEARCH 2025 CBRE LIMITEDIntelligent InvestmentCanada Real Estate Market Outlook 2025Trends to Watch010203A sup
106、ply-constrained retail landscape is expected to persist and reshape the typical store format in Canada.Retailers will ultimately be strategic,expanding into secondary markets or modifying the scale of their typical store.Sentiment going into 2025 remains positive,however,we are starting to see more
107、normal growth levels following the boom pandemic years.Retailers that tap into savings,provide entertainment,or are innovative/experiential will continue to thrive during this time.Expanding where and how retailers access consumers may be what it takes to remain relevant in the year ahead.Diversifyi
108、ng sales methods may play a significant role in revenue generation,even if primarily used for branding.26CBRE RESEARCH 2025 CBRE LIMITEDIntelligent InvestmentCanada Real Estate Market Outlook 2025Spillover effect from supply-constrained marketsAs noted over the last few years,dwindling levels of new
109、 construction have resulted in a supply-constrained retail landscape in Canada with low vacancy and rising rents,especially among fixtured units.Unlike other property types,the main limiting factor has been elevated construction costs and not demand.With a restricted new supply pipeline expected to
110、persist,anticipate these themes to continue in 2025 with robust demand putting pressure on vacancy and rents,although on a healthier growth trajectory.Large-scale developments like the recently opened Royalmount in Montreal are few and far between.In fact,it has been a few decades since an enclosed
111、mall has been built in Canada.Significantly leased on opening,the success of this property further proves levels of demand and that other properties of scale can be supported.Among current active construction,however,the average project or phase is 35,000 sq.ft.which is nearly 50%smaller than three
112、years ago.This smaller-format offering,which is predominantly mixed-use with retail at grade,will reshape what the typical store looks like in the years to come.We have seen activity spill down to lower-quality product amidst lower vacancy,and in the year ahead,will see that continue with retailers
113、expanding over wider geographies,either tapping into secondary markets or going south to the U.S.Retailers will ultimately be strategic during this time selecting spaces that still promote growth while working toward their long-term strategy.Domestically,an increasing number of brands will modify th
114、e scale of their typical store,for example Loblaws is currently rolling out smaller-format No Frills;Sephora meanwhile also opened their smallest location to date at The Well.Being forward looking and resilient will always be rewarded,and this has never been truer than in todays competitive landscap
115、e.*All Other encompasses Convenience,Freestanding or other small retail formats.Source:CBRE Research,Q3 2024.FIGURE 11:Canada Retail New Supply by Format0.01.02.03.04.05.06.07.020142015201620172018201920202021202220232024F2025FRegional Shopping CentresPower CentresMixed-UseCommunity/NeighbourhoodAll
116、 Other*Million Sq.Ft.27CBRE RESEARCH 2025 CBRE LIMITEDIntelligent InvestmentCanada Real Estate Market Outlook 2025Retailers tapping into successesRecord levels of immigration and population growth have been a boon for the sector,which when paired with inflation and elevated interest rates,has result
117、ed in exceptional growth,especially among necessity-based and discount categories.This confluence of factors is changing however,with recent announcements from the Government of Canada indicating they will curtail immigration targets.This could result in a challenging upcoming year for retailers,esp
118、ecially when layering in a potential recession and an associated pullback in consumer spending.Expect growth to continue,however in a more conservative manner.Shoppers will remain cautious and keep household budgets tight against this backdrop in 2025.Correspondingly,value or discount channels,inclu
119、ding second-hand or consignment stores,will continue to be popular.Value Village has even expanded on this success with its boutique-branded locations.According to Trendex,cost savings are the biggest motivator for re-sell apparel shopping,the number one item purchased in second-hand stores,followed
120、 by books and furniture.Entertainment is another category that has been in expansion mode over the last 12 months and is poised for future growth in 2025.These operators are proven to be a destination for consumers and,much like necessity-based retail,can boost centre performance.Beauty is acting si
121、milarly and is now being recategorized as an everyday need.New to market entrants and acquisition of brands will push this category towards continued growth.As has been the case,churn is anticipated among middle of the pack or stagnant retailers without a differentiated offering.Bankruptcies and clo
122、sures in the year ahead wont be viewed as detrimental or as an indicator of poor market health.Instead,weve seen openings outpace closings,with well-located spaces quickly leased,in some cases even before being vacated by the exiting tenant.Note:Openings include announced but not yet opened stores,a
123、nd Closures include bankruptcy filings for retail trade and food establishments.Source:Monday Retail IQ,Office of the Superintendent of Bankruptcy Canada,CBRE Research,September 2024.FIGURE 12:Count of Retail Openings and Closures-1,500-1,000-50005001,0001,5002,0002,5002023YTD-2024Announced Openings
124、Bankrupty Filings28CBRE RESEARCH 2025 CBRE LIMITEDIntelligent InvestmentCanada Real Estate Market Outlook 2025While business sentiment going into the new year has remained positive,recession fears will influence decision making,both on the retailer and consumer front.Future proofing business models
125、will be top of mind,however changing consumer behaviours will challenge retailers with Forrester noting that 74%of retailers believe their organization will struggle to adapt to consumer expectations in 2025.We typically see Canadians stick to known brands and that has never been more true with EY n
126、oting that the percentage of customers willing to pay more for a brand they trust has increased significantly since 2023;this may be tested however in favour of finding a deal.Building off of the recent success of discount retailers,AIR MILES research found that 82%of survey respondents were more li
127、kely to shop at stores with a loyalty program;further,66%will modify where and when they make a purchase to maximize points.Rolling out or expanding loyalty programs may be what it takes to attract and retain existing customers.Additionally,according to Deloittes 2024 Holiday Retail Outlook,a growin
128、g number of consumers are willing to shop directly through social media channels such as Instagram and TikTok,especially those aged 18-34.This was backed by the Retail Council of Canadas Navigating the Future:A Study of Sales Strategies and Challenges for Canadas Retail SMBs where it was noted that
129、other sales methods play a significant role in revenue generation,even though some are still primarily used for branding rather than direct sales.Further from this study,the more sales channels businesses employ,the more optimistic they are about their business prospects,highlighting the importance
130、of diversification.Expanding where and how you access consumers may be what it takes to remain competitive in the year ahead.Channels for capturing market share74%of retailers believe their organization will struggle to adapt to consumer expectations in 2025.Retail Council of Canada noted that other
131、 sales methods like social media channels play a significant role in revenue generation,even though some are still primarily used for branding rather than direct sales.The industrial sector is facing headwinds amid softer demand and an influx of new supply.The market will continue to work towards no
132、rmalization,which could come sooner than some expect.Industrial0630CBRE RESEARCH 2025 CBRE LIMITEDIntelligent InvestmentCanada Real Estate Market Outlook 2025Trends to Watch010203Softer demand will continue to challenge the industrial market.Fundamentals suggest however that the market could see thi
133、ngs start to turn as early as mid-2025.New supply has been the primary headwind,delivering a record amount of supply right as demand wavered.Projects where demisability was planned for will fare better in the year ahead.Rental rates have started to moderate and are anticipated to continue this traje
134、ctory in 2025.Rent growth is not anticipated to resume until the market has time to absorb the recent excess of new supply.31CBRE RESEARCH 2025 CBRE LIMITEDIntelligent InvestmentCanada Real Estate Market Outlook 2025Returning to positive net absorptionThe Canadian industrial market is experiencing h
135、eadwinds following a period of expansion and unprecedented market tightening.Softer demand amid an influx of new supply has resulted in rising availability,the pace of which is on-par with what resulted during the Global Financial Crisis.Current conditions are very different to 2008-2009,however;chi
136、efly macro and structural issues at that time resulted in losses to the manufacturing sector and the retreat of companies from Canada,leading to over 20.0 million sq.ft.of negative net absorption over the course of one year.Present day,we have only had one quarter of meaningful negative net absorpti
137、on.Instead,what weve seen is 3PLs and retailers overstretch,spurred on by the rapid growth of ecommerce,pulling forward future demand over the course of 2020-2023 and then put their pens down.Today,users in these industries are finding that they dont need to take on more net new space because they a
138、lready have that capacity or alternatively,that they took too much during that expansionary period and are now shedding it.Some demand remains,nonetheless,with some regional variances.The food and beverage sector,and data centres are active nationally;auto and electric vehicle production plants are
139、a part of the conversation in Ontario;and in Alberta,economic strength is resulting in heightened demand from local groups.The pickup among these users however is not enough to mask the overall drop-off from retailers and 3PLs.Anecdotally from client conversations,the return of robust demand levels
140、feels like they could be one to two years away.CBREs U.S.-based Econometrics Advisors however are opining that based on historical patterns and Canadas current economic outlook it could be as soon as mid-2025.There are reasons supporting this view-despite federal announcements curbing Canadas immigr
141、ation,Canada will remain among the fastest growing G7 countries across population,GDP,and employment growth.All of which will result in increased demand for logistics space.As well,with central bank policy rates coming down,business growth plans will be supported with more accommodative financing,he
142、lping to inject momentum back into the market.The market has shifted from constrained to healthy market conditions where occupiers now have options to choose from.Deals will continue to happen in the year ahead but will take longer to complete amid this period of greater optionality.FIGURE 13:Canada
143、 Industrial Net AbsorptionMillion Sq.Ft.-9.0-6.0-3.00.03.06.09.012.015.018.0200120022003200420052006200720082009201020112012201320142015201620172018201920202021202220232024Source:CBRE Research,Q3 2024.32CBRE RESEARCH 2025 CBRE LIMITEDIntelligent InvestmentCanada Real Estate Market Outlook 2025FIGURE
144、 15:Canada Industrial New Supply(Million Sq.Ft.)FIGURE 14:Canada Industrial Availability Rate(%)Source:CBRE Research,Q3 2024.Pressure of(spec)construction The situation today may be better characterized as a supply problem that will continue to pose challenges for the market.The precipitous increase
145、 in availability can be linked to record deliveries amid a sharp reduction in demand.This is best showcased in the drop to pre-leasing activity,with just over a third of the total space under construction currently committed.Construction levels have accordingly slowed,with next year anticipated to d
146、eliver even less new supply than in 2024 at an estimated 25 million sq.ft.What remains of the new supply pipeline is heavily composed of projects that kicked off on a speculative basis,accounting for over 70%of active development.These blank big boxes,however,are better suited for 3PLs and in some c
147、ases are not fully aligned with the needs of todays users.Instead,end users are looking to make long term commitments where they can justify investing for greater customization that aligns with their requirements,from clear heights to power capacity and automation.Projects where demisability was pla
148、nned for will fare better in the year ahead,others are likely to drop off or stall at foundation work waiting for a tenant to be secured.While some may consider too much having been built right as demand was wavering,the market could easily see itself in an under-supply issue should activity abruptl
149、y resume.This will be more acutely felt in cities that have a longer than typical pipeline to delivery.Source:CBRE Research,Q3 2024.0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%8.0%9.0%2001200220232004200520062007200820092010201120122013201420152016201720182019202020212022202320240.05.010.015.020.025.030.035.040
150、.045.050.0200120022003200420052006200720082009201020112012201320142015201620172018201920202021202220232024F2025F33CBRE RESEARCH 2025 CBRE LIMITEDIntelligent InvestmentCanada Real Estate Market Outlook 2025Source:CBRE Research,Q3 2024.2025 is expected to be year of finding the floor and increased nor
151、malization of industrial market dynamics.Asking rents are an area to watch in that regard,as they have started to come off of peak pricing;in fact,2024 will be the first year that we are anticipating a national annual decline,albeit a fairly moderate one.A mass correction back to rates seen three ye
152、ars ago isnt likely,however there is room for the market to move down further in response to greater availability.The landlord community is taking different approaches at this time,however,either reducing face rates or offering inducements most typically in the form of free rent.Properties in fringe
153、 areas of the market or with limited touring activity will be the first to see price adjustments.Core industrial areas meanwhile will always remain in demand and hold relative to other areas.It is anticipated that rent growth will not resume until the market has time to absorb the recent excess of n
154、ew supply.If the past is any indicator,an under 4.0%availability rate is the on-ramp to rent growth.Until then,we will see the market continue its current trajectory,gradually moderating back to normalization.Finding the floor on rentsNet Asking Rent($per Sq.Ft.)Annual Growth(%)FIGURE 16:Canada Aver
155、age Asking Net Rental Rate Growth-10.0%-5.0%0.0%5.0%10.0%15.0%20.0%25.0%30.0%35.0%40.0%45.0%-$4.00-$2.00$0.00$2.00$4.00$6.00$8.00$10.00$12.00$14.00$16.00$18.0020042005200620072008200920102011201220132014201520162017201820192020202120222023YTD-2024Net Asking RentAnnual GrowthThe multifamily sector fa
156、ces heightened near-term uncertainty from revised demand outlooks and challenges in the high-end portion of the market.Long term growth fundamentals,however,remain solid.Multifamily0735CBRE RESEARCH 2025 CBRE LIMITEDIntelligent InvestmentCanada Real Estate Market Outlook 2025Trends to Watch010203Whi
157、le immigration curbs may lower aggregate demand for rental housing,vacancy rates among the most accessible segments of the market are expected to remain healthy.The rent growth outlook for the multifamily sector faces greater uncertainty in 2025,especially for the wave of newly completed units with
158、higher rents.Developers are likely to temporarily pause new construction starts while waiting for the market to adjust to the new demand outlook and work through recent new supply.36CBRE RESEARCH 2025 CBRE LIMITEDIntelligent InvestmentCanada Real Estate Market Outlook 2025FIGURE 17:Canadas Home Affo
159、rdability GapSource:CBRE Research,CREA,Oxford Economics,CMHC,rentals.ca,Factset,2024.Demand for the most accessible segments of the rental market expected to remain healthyWhile the recent immigration curbs and potentially slight population declines over 2025 and 2026 may lower aggregate rental hous
160、ing demand,Canada still faces a housing affordability issue and pent-up demand.Despite interest rate cuts and a cooler housing market,housing affordability has remained elevated where the gap between homeownership costs and household income levels are still wide apart.Renting continues to be the mor
161、e affordable housing option for many Canadians.Coupled with the rapid population growth from the last two years,there is still a substantial amount of pent-up demand for rental housing that will need to be fulfilled.However,the recent caps to Canadas immigration policies may provide some limited rel
162、ief to the generally tight rental market conditions.The reductions to temporary residents specifically targeted international students and temporary foreign workers,both demographics which predominately would have been renters.If these announced plans are fully realized,the potential vacancies from
163、temporary resident renters leaving would open up options for other households to take advantage and relocate into more affordable housing.Overall in 2025,only a minimal impact is expected to vacancy rates for the most in-demand rental units such as those with rent controls or more affordable rental
164、rates.Some short term volatility is possible during this transition period,and the impacts may not be uniform across Canada,but long term fundamentals will continue to support low vacancy rates in this segment of the rental market.The greatest potential for vacancy rate expansion in 2025 will be amo
165、ng the influx of newly built units with rents at the higher end of the range.These newer units have required higher rents as a result of the escalation seen in construction costs in recent years.However,the higher rents are also becoming increasingly mismatched with household income capabilities.Wit
166、h still more new supply expected to deliver over the near term,vacancy rates in this segment of the multifamily rental market are likely to rise further in 2025.5.1%CAGR2.8%CAGR3.3%CAGR801001201401601802002202402602006200820102012201420162018202020222024Homeownership CostsMedian Household Income2-Be
167、droom Average Monthly RentIndex Base=200637CBRE RESEARCH 2025 CBRE LIMITEDIntelligent InvestmentCanada Real Estate Market Outlook 2025FIGURE 19:Average 2-Bedroom Asking Rent Growth(Year-To-Date 2024)FIGURE 18:Annual Canadian Average 2-Bedroom Rent GrowthSource:CBRE Research,CMHC,2024.The rent growth
168、 outlook is flat to inflationary,except for high-end recent completionsMultifamily rent growth in 2024 bifurcated and moderated significantly off of the record increases recorded in the two years prior.Newer units,in particular,had seen market rents driven up by high construction costs,but the surge
169、 of completions in 2024 pushed up vacancy rates in this segment and rents had started to fall in the major metropolitan areas.These rent decreases were most apparent in cities with large condominium markets,such as Vancouver and Toronto,that also saw an influx of new supply in 2024.Meanwhile,for the
170、 rest of the multifamily rental market,rents had largely held flat or recorded modest increases amid sustained demand for the more affordable housing units.For 2025,the outlook for multifamily rent growth is more uncertain but the market will face increased downside pressure amid more new supply and
171、 weaker population growth forecasts.Rents for newly built units are at the biggest risk for decreases given higher vacancy rates and still more units expected to deliver over the short term.This segment of the market will likely have to recalibrate pricing in order to fill in vacancy.But for the res
172、t of the market,with generally more affordable price points,rent growth is expected to be flat or inflationary in 2025.For metropolitan areas seeing strong levels of in-migration,such as in the Prairie Region,rent growth is expected to remain solid and supported by growing demand.The net result in 2
173、025 is likely for overall market rents to hold steady or potentially see modest declines.However,when viewed over the longer term,average market rents will remain above levels from three years ago and reflective of strong long term growth fundamentals.Source:CBRE Research,rentals.ca,November 2024.7.
174、8%8.0%0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%8.0%9.0%19941995199619971998199920002001200220032004200520062007200820092010201120122013201420152016201720182019202020212022202311.8%7.6%6.1%4.1%3.9%2.9%-0.3%-1.0%-4.0%-4.9%-5.1%-10.4%-10.5%Canadian Average,-1.0%-15.0%-10.0%-5.0%0.0%5.0%10.0%15.0%SaskatoonHalifa
175、xEdmontonWinnipegQuebec CityVictoriaOttawaMontrealLondonCalgaryKitchenerTorontoVancouver38CBRE RESEARCH 2025 CBRE LIMITEDIntelligent InvestmentCanada Real Estate Market Outlook 2025Construction activity likely to temporarily pause as market recalibrates With population growth potentially heading for
176、 modest decreases over the next two years,this has placed more headwinds on multifamily construction activity that has already been slowing in some major metropolitan areas.Concerns about potentially lower aggregate demand from the new immigration curbs is likely to hold back developers from new con
177、struction starts,at least until there is more certainty for the future growth outlook.At the same time,construction costs are still elevated,albeit slightly off of their peak levels,and continue to make some development projects difficult to rationalize financially.In cities like Vancouver and Toron
178、to with large condominium markets,the situation is further exacerbated by the recent influx of new supply,a steep slowdown in sales activity and a growing number of projects falling into receivership.This combination of market pressures and negative sentiment will likely cause developers to pause ne
179、w construction over in the short term in 2025 as the market adjusts to the revised demand outlook.Over the longer term,this will mean less new supply in a few years time that might reignite supply issues just as population growth resumes again.FIGURE 20:Apartment Construction StartsRentalCondoUnitsS
180、ource:CBRE Research,CMHC,Q3 2024.Canada Statistics0840CBRE RESEARCH 2025 CBRE LIMITEDIntelligent InvestmentCanada Real Estate Market Outlook 2025CanadaDOWNTOWN202320242025FYoYInventory(million sq.ft.)268.45272.28272.81pVacancy Rate(%)19.4%20.0%19.7%qNet Absorption(million sq.ft.)-3.861.902.15pNew Su
181、pply(million sq.ft.)2.185.282.14qClass A Net Asking Rent(per sq.ft.)$28.94$29.41$29.75pSUBURBANInventory(million sq.ft.)220.02220.43221.05pVacancy Rate(%)17.4%17.2%17.2%tuNet Absorption(million sq.ft.)-1.640.680.65qNew Supply(million sq.ft.)0.411.520.84qClass A Net Asking Rent(per sq.ft.)$19.67$20.2
182、5$20.37pOVERALLInventory(million sq.ft.)488.47492.71493.87pVacancy Rate(%)18.5%18.7%18.6%qNet Absorption(million sq.ft.)-5.512.582.81pNew Supply(million sq.ft.)2.596.812.98qClass A Net Asking Rent(per sq.ft.)$25.17$25.74$25.98p202320242025FYoYInventory(million sq.ft.)1,992.25 2,027.15 2,050.11pAvail
183、ability Rate(%)3.2%4.8%5.4%pNet Absorption(million sq.ft.)10.751.4110.14pNew Supply(million sq.ft.)42.9435.5722.96qNet Asking Rent(per sq.ft.)$16.26$15.51$15.41qSale Price(per sq.ft.)$326$314$313qLand Price(per acre,$millions)$1.41$1.38$1.41p202320242025FYoYTotal Retail Sales per Capita$17,226$16,87
184、8$16,862qTotal Retail Sales Growth1.9%0.6%1.1%pNew Supply(million sq.ft.)3.303.802.35q202320242025FYoYVacancy Rate1.6%2.7%3.3%p2-Bedroom Average Rent$1,622$1,729$1,776pNew Rental Supply(units)43,93058,49948,200qOfficeIndustrialMultifamilyRetailAll$values are in CADSources:CBRE Research,Oxford Econom
185、ics,CMHC,2025.Regional Outlook0942CBRE RESEARCH 2025 CBRE LIMITEDIntelligent InvestmentCanada Real Estate Market Outlook 2025Regional Outlook01 Victoria02 Vancouver03 Calgary04 Edmonton05 Saskatoon06 Winnipeg07 London08 Waterloo Region09 Toronto10 Ottawa11 Montreal12 Quebec City13 HalifaxSelect a ma
186、rket to read more43CBRE RESEARCH 2025 CBRE LIMITEDIntelligent InvestmentCanada Real Estate Market Outlook 2025Strong suburban retail pre-leasing marketThe Greater Victoria retail market remains dynamic in the suburban markets,observed through low vacancy rates in shopping centers and strong pre-leas
187、ing demand.New commercial developments such as Arbutus Landing are attracting interest from various retailers seeking expansion opportunities.In contrast,the downtown core continues to experience urban degradation,leading to higher turnover rates among restaurants and merchandise retailers.Ongoing i
188、nitiatives aimed at enhancing local tourism,attracting cruise visitors,and encouraging return to office mandates are expected to play a crucial role in revitalizing the downtown retail landscape.Flight-to-quality trend persists in Downtown VictoriaDowntown Class AA and Class C office inventories con
189、tinue to be inversely correlated.High-quality spaces remain highly sought after in a flight-to-quality,resulting in a growing surplus of vacancy in older properties.This may propel an erosion in Class C market rents or push landlords to upgrade aging assets.The development pipeline remains narrow wi
190、th TELUS Ocean being the only new office building anticipated in the coming years.A lack of new proposed projects will further constrain Class AA/A vacancy and see demand eventually shift to improved existing stock.Interest rate decline will rekindle strata demandIndustrial sales in Greater Victoria
191、 were particularly impacted by high interest rates and the untimely delivery of 430,000 sq.ft.of new strata in the Westshore over 2024.This oversupply of industrial space is anticipated to stabilize over the long term,as the scarcity of freestanding industrial properties will drive active market par
192、ticipants toward the strata market.Additionally,the transition of retiring long-standing local operators is expected to increase vacancy in freestanding industrial inventory in the coming years.Institutional trade sales and non-profit buyers trending in multifamilyMultifamily activity in Greater Vic
193、toria remains robust,driven by demand from institutional trade sales and the Canada Rental Protection Fund.The capital gains tax change sparked a surge in transactions within core plus real estate investments,as investors seized the opportunity to enhance their portfolios with well-occupied properti
194、es requiring minimal improvements.Provincial government housing initiatives,including mandated construction targets and transit-oriented area legislation,aim to fast track new housing supply and will continue to be prevalent in multifamily development land sales.VictoriaSources:CBRE Research,CMHC,Ox
195、ford Economics,2025.OfficeDOWNTOWN202320242025F YoYInventory(million sq.ft.)3.834.144.14tuVacancy Rate(%)10.4%12.1%12.5%pNet Absorption(million sq.ft.)0.08-0.12-0.02pNew Supply(million sq.ft.)0.000.000.00tuClass A Net Asking Rent(per sq.ft.)$22.71$20.40$19.79qSUBURBANInventory(million sq.ft.)5.545.3
196、15.33pVacancy Rate(%)7.6%6.0%5.8%qNet Absorption(million sq.ft.)0.050.050.03qNew Supply(million sq.ft.)0.010.000.02pClass A Net Asking Rent(per sq.ft.)$28.47$29.38$30.26pOVERALLInventory(million sq.ft.)9.379.459.47pVacancy Rate(%)8.7%8.7%8.7%pNet Absorption(million sq.ft.)0.13-0.080.01pNew Supply(mi
197、llion sq.ft.)0.010.000.02pClass A Net Asking Rent(per sq.ft.)$27.46$27.76$27.70qIndustrial202320242025F YoYInventory(million sq.ft.)9.9710.4010.40tuAvailability Rate(%)3.4%5.1%4.8%qNet Absorption(million sq.ft.)-0.030.250.03qNew Supply(million sq.ft.)0.110.430.00qNet Asking Rent(per sq.ft.)$18.69$19
198、.86$20.26pSale Price(per sq.ft.)$500$475$490pRetail202320242025F YoYTotal Retail Sales per Capita$20,119$19,480$19,698pTotal Retail Sales Growth0.5%-0.9%2.4%pMultifamily202320242025F YoYVacancy Rate1.6%2.6%3.4%p2-Bedroom Average Rent$1,839$1,993$2,095pNew Rental Supply(units)2,1392,5722,775pBACK TO
199、MENU44CBRE RESEARCH 2025 CBRE LIMITEDIntelligent InvestmentCanada Real Estate Market Outlook 2025Office sector reverting to long term averages Higher quality assets continue to outperform in the downtown office market with Class AAA and A inventory recording vacancy rates 300 basis points below that
200、 of Class B and C inventory.Vacancy in the downtown core has remained elevated with tenants undertaking rightsizing moves,however a noted resurgence in demand,along with no new supply,could result in a rebound to long term averages within 12 to 18 months for quality product.The inverse is playing ou
201、t in the suburban markets with record levels of new supply and softening tenant demand.It is expected that suburban vacancy will rise above downtown again sometime in 2025,another sign of a return to normal market dynamicsIndustrial demand is normalizingDemand for large format industrial inventory h
202、as been impacted in recent quarters driven by an influx of new supply and a wave of sublease offerings.As a result,asking rates for industrial product have declined and deal incentives are on the rise.Delivery of new supply is expected to decline in 2025 allowing for vacancy to stabilize and tenant
203、demand to catch up.Land&development markets progress through period of adjustmentDevelopment proformas are being impacted by a combination of reduced demand and project revenues,along with elevated costs of construction,financing and government fees.Inflation in end-unit pricing is no longer offsett
204、ing these cost increases,and as a result has significantly reduced residential development site sales from peak years.Distressed sales also make up a notable proportion of total land sales,a trend which should continue into early 2025.Market fundamentals are expected to continue to perform as they c
205、urrently are until project revenues increase and/or costs declineInvestor confidence is on the riseThe resurgence in investment sales activity is expected to carry forward into 2025.Recent deal activity has been broad-based and total transaction volumes are at or above historical averages for almost
206、 every asset type.Pricing has adjusted with cap rates rising from their all-time lows,however,yields are expected to begin compressing again as asset class fundamentals improve and the bond rate stabilizes.VancouverSources:CBRE Research,CMHC,Oxford Economics,2025.OfficeDOWNTOWN202320242025F YoYInven
207、tory(million sq.ft.)26.6427.8027.83pVacancy Rate(%)11.0%11.5%10.6%qNet Absorption(million sq.ft.)0.290.880.28qNew Supply(million sq.ft.)0.751.150.03qClass A Net Asking Rent(per sq.ft.)$47.08$45.51$45.90pSUBURBANInventory(million sq.ft.)25.2125.9826.53pVacancy Rate(%)7.7%10.8%11.9%pNet Absorption(mil
208、lion sq.ft.)-0.39-0.070.20pNew Supply(million sq.ft.)0.130.800.55qClass A Net Asking Rent(per sq.ft.)$29.87$32.47$32.65pOVERALLInventory(million sq.ft.)51.8653.7754.36pVacancy Rate(%)9.4%11.2%11.3%pNet Absorption(million sq.ft.)-0.100.810.48qNew Supply(million sq.ft.)0.881.950.58qClass A Net Asking
209、Rent(per sq.ft.)$39.99$38.46$38.75pIndustrial202320242025F YoYInventory(million sq.ft.)216.14220.60225.16pAvailability Rate(%)3.2%5.3%6.1%pNet Absorption(million sq.ft.)2.68-0.342.52pNew Supply(million sq.ft.)7.194.454.56pNet AskingRent(per sq.ft.)$21.61$20.09$19.75qSale Price(per sq.ft.)$550$515$51
210、5tuLand Price(per acre,$millions)$5.00$5.00$5.00tuRetail202320242025F YoYTotal Retail Sales per Capita$15,758$15,409$15,548pTotal Retail Sales Growth0.0%0.7%2.5%pNew Supply(million sq.ft.)0.270.720.17qBACK TO MENUMultifamily202320242025F YoYVacancy Rate0.9%1.6%2.5%p2-Bedroom Average Rent$2,181$2,314
211、$2,360pNew Rental Supply(units)5,1727,2278,125p45CBRE RESEARCH 2025 CBRE LIMITEDIntelligent InvestmentCanada Real Estate Market Outlook 2025Declining office inventory to drive vacancy reduction Office inventory,both downtown and in the Beltline,is anticipated to decline in 2025 as buildings are remo
212、ved from inventory for conversion and redevelopment opportunities.Rightsizing events and mergers and acquisitions in the energy industry are anticipated to return some excess space downtown,however the reduction of inventory is likely to cause an overall decline in vacancy rates.In the suburbs,posit
213、ive momentum is expected to carry into 2025 as population growth will continue to generate activity from service-based users.Industrial new supply falls significantlyThe latest industrial development cycle is now largely complete after three years of record-breaking new supply deliveries,with 2025 a
214、nticipated to see few new supply deliveries or new construction starts.The recent development surge has substantially increased availability rates however,these are anticipated to decline gradually over the next year as larger vacancies are absorbed,especially when paired alongside limited additiona
215、l new supply entering the market.Retail continues to see strong performanceCalgarys retail market will continue to have low vacancy as robust demand levels are paired alongside record low levels of new supply.The citys record-setting population growth continues to help drive sales for retailers.Dema
216、nd will continue to be strong for health and wellness,food and beverage,personal services,and several other categories.Meanwhile,construction is anticipated to increase slightly as higher rental rates and a lower interest rate environment have changed calculations on some new developments.Multifamil
217、y market remains activeThe market for multifamily assets in Calgary will continue to be robust after reaching record transaction volumes in 2024,with interest from all investor types.New supply levels will remain high as developers continue to turn over much needed inventory.Overall rental rate grow
218、th has slowed slightly from its rapid increase over the last few years;however,high construction costs have continued to place upward pressure on rents in new developments.CalgarySources:CBRE Research,CMHC,Oxford Economics,2025.OfficeDOWNTOWN202320242025F YoYInventory(million sq.ft.)42.1041.5340.90q
219、Vacancy Rate(%)30.2%29.5%28.4%qNet Absorption(million sq.ft.)0.41-0.150.00pNew Supply(million sq.ft.)0.000.000.00tuClass A Net Asking Rent(per sq.ft.)$17.74$19.10$20.00pSUBURBANInventory(million sq.ft.)26.2325.8825.73qVacancy Rate(%)24.2%20.6%18.9%qNet Absorption(million sq.ft.)0.260.640.40qNew Supp
220、ly(million sq.ft.)0.000.130.07qClass A Net Asking Rent(per sq.ft.)$19.60$20.17$21.15pOVERALLInventory(million sq.ft.)68.3367.4166.63qVacancy Rate(%)27.9%26.1%24.7%qNet Absorption(million sq.ft.)0.680.490.40qNew Supply(million sq.ft.)0.000.130.07qClass A Net Asking Rent(per sq.ft.)$18.33$19.42$20.35p
221、Industrial202320242025F YoYInventory(million sq.ft.)156.83162.44163.71pAvailability Rate(%)5.5%5.8%4.0%qNet Absorption(million sq.ft.)2.264.864.00qNew Supply(million sq.ft.)6.035.611.26qNet Asking Rent(per sq.ft.)$11.33$11.36$11.55pSale Price(per sq.ft.)$215$220$230pLand Price(per acre)$720,000$740,
222、000$760,000pRetail202320242025F YoYTotal Retail Sales per Capita$19,350$18,856$18,746qTotal Retail Sales Growth5.5%1.7%2.0%pNew Supply(million sq.ft.)0.600.380.37qBACK TO MENUMultifamily202320242025F YoYVacancy Rate1.4%4.8%6.5%p2-Bedroom Average Rent$1,695$1,882$1,930pNew Rental Supply(units)3,3919,
223、6555,625q46CBRE RESEARCH 2025 CBRE LIMITEDIntelligent InvestmentCanada Real Estate Market Outlook 2025Industrial rates rise as inflation stifles new construction The industrial market will see demand from national and international users seeking lower real estate costs relative to other Canadian mar
224、kets.Northwest Edmonton remains particularly tight for large bay distribution buildings,with very limited availability over 150,000 sq.ft.Growth will continue in the surrounding areas of Leduc,Acheson and Parkland County,which offer substantial property tax savings.As interest rates continue their d
225、ownward trajectory,liquidity and valuations are projected to improve.Tenant activity shows a flight-to-qualityThe office market is expected to maintain positive absorption,favouring the suburban market.Notably,South Henday is forecast to experience tenant demand that will lower vacancy and create po
226、sitive rental growth,allowing landlords to be selective and less aggressive on deal terms.Downtown,the trend of tenants migrating towards higher-quality buildings will continue.Office investment will be dominated by private capital,reflecting sustained local confidence in the market.Public and priva
227、te sector efforts to revitalize and rejuvenate Downtown remains a top priority.Rental momentum continuesEdmontons economic outlook has created an enviable multifamily market.With a strong line-of-sight on growth drivers,rental demand should continue on its current trajectory,reinforcing rent growth
228、and compressing vacancy.A significant post-secondary school presence with substantial growth initiatives will provide an additional layer of demand.Housing starts are also expected to increase,critical for maintaining the cost-of-living advantage of the city.Investment volumes will continue to be dr
229、iven by private capital,along with rising institutional interest,as groups continue to leverage high household incomes and resulting benefits provided by the CMHC MLI Select program.Entertainment and experiential retail to prevailThe Edmonton retail market should maintain steady momentum in 2025.Ele
230、vated construction costs continue to be a factor in high,required net rents and has created a temporary cap on new supply.In addition to a continued focus on entertainment and experiential uses,it is expected that other grocers will follow Loblaws lead in creating smaller,more affordable store forma
231、ts.Private investor demand will continue to outpace available investment opportunities,with institutional interest focused on necessity-based centres.EdmontonSources:CBRE Research,CMHC,Oxford Economics,2025.OfficeDOWNTOWN202320242025F YoYInventory(million sq.ft.)16.4416.3516.35tuVacancy Rate(%)22.9%
232、21.6%23.6%pNet Absorption(million sq.ft.)-0.030.14-0.32qNew Supply(million sq.ft.)0.000.000.00tuClass A Net Asking Rent(per sq.ft.)$19.34$19.01$19.01tuSUBURBANInventory(million sq.ft.)9.929.909.90tuVacancy Rate(%)18.9%15.8%14.3%qNet Absorption(million sq.ft.)0.190.290.15qNew Supply(million sq.ft.)0.
233、000.070.00qClass A Net Asking Rent(per sq.ft.)$18.58$17.93$17.93tuOVERALLInventory(million sq.ft.)26.3626.2526.25tuVacancy Rate(%)21.4%19.4%20.1%pNet Absorption(million sq.ft.)0.150.43-0.17qNew Supply(million sq.ft.)0.000.070.00qClass A Net Asking Rent(per sq.ft.)$19.18$18.78$18.78tuIndustrial202320
234、242025F YoYInventory(million sq.ft.)157.39159.03161.18pAvailability Rate(%)5.3%4.6%4.5%qNet Absorption(million sq.ft.)2.722.692.21qNew Supply(million sq.ft.)2.621.642.15pNet Asking Rent(per sq.ft.)$9.80$10.30$10.50pSale Price(per sq.ft.)$169$178$180pLand Price(per acre)$661,000$680,000$689,000pRetai
235、l202320242025F YoYTotal Retail Sales per Capita$18,814$18,395$18,352qTotal Retail Sales Growth5.3%1.5%2.1%pNew Supply(million sq.ft.)0.520.800.60qBACK TO MENUMultifamily202320242025F YoYVacancy Rate2.4%3.1%3.6%p2-Bedroom Average Rent$1,398$1,536$1,630pNew Rental Supply(units)4,8116,9254,700q47CBRE R
236、ESEARCH 2025 CBRE LIMITEDIntelligent InvestmentCanada Real Estate Market Outlook 2025High-end office success Saskatoons River Landing which features over 400,000 sq.ft.of office space across two towers has reached full occupancy nearly two years after completion.The success of this riverfront develo
237、pment has transformed the downtown office market,resulting in significant vacancies in other Class A and B product.Occupiers are increasingly prioritizing high-quality,well-designed office spaces in strategic locations.Vacancies created by this flight-to-quality will be gradually filled over time.Mi
238、ning&resource sector growth to promote wider activityEconomic development in Saskatchewan will be predominantly driven by the mining and resource sectors.Notably,both BHP and Nutrien have increased their downtown office presence in anticipation of launching long-term potash projects in the province.
239、Alongside the expected job growth within these companies,these initiatives will generate numerous new business opportunities for contractors in related fields such as logistics,engineering,and equipment manufacturing.This growth will not only benefit the companies involved,but also stimulate the bro
240、ader economy by fostering a diverse array of ancillary services.Retail remains steadyStrong leasing demand from national retailers has provided confidence for new retail projects to proceed.Saskatoons expanding East-side is becoming increasingly attractive to both established brands and new entrants
241、,thanks in part to a burgeoning population and evolving consumer preferences that favour convenience and accessibility.The threshold for the amount of rent that retail tenants are willing to pay has not yet been reached in new developments.Healthy industrial developmentThere has been a surge of indu
242、strial construction across the city that is aiming to meet demand.Development activity overall is at a healthy level and currently encompasses a combination of build-to-suit projects and speculative construction initiatives.While Saskatoons small bay industrial availability remains historically low,
243、the overall market availability is gradually reverting back toward the historical average.Despite this positive trend,industrial rental rates continue to remain inflated,reflecting ongoing demand in the market.SaskatoonSources:CBRE Research,CMHC,Oxford Economics,2025.OfficeDOWNTOWN202320242025F YoYI
244、nventory(million sq.ft.)3.323.323.32tuVacancy Rate(%)20.1%19.4%18.5%qNet Absorption(million sq.ft.)-0.030.030.03tuNew Supply(million sq.ft.)0.000.000.00tuClass A Net Asking Rent(per sq.ft.)$19.03$19.51$19.63pSUBURBANInventory(million sq.ft.)3.233.233.23tuVacancy Rate(%)13.1%11.5%11.2%qNet Absorption
245、(million sq.ft.)0.070.050.01qNew Supply(million sq.ft.)0.040.000.00tuClass A Net Asking Rent(per sq.ft.)$22.43$23.07$22.89qOVERALLInventory(million sq.ft.)6.556.556.55tuVacancy Rate(%)16.7%15.5%14.9%qNet Absorption(million sq.ft.)0.040.080.04qNew Supply(million sq.ft.)0.040.000.00tuClass A Net Askin
246、g Rent(per sq.ft.)$21.56$22.08$22.06qIndustrial202320242025F YoYInventory(million sq.ft.)24.4524.5624.71pAvailability Rate(%)3.4%3.0%2.9%qNet Absorption(million sq.ft.)0.470.200.16qNew Supply(million sq.ft.)0.040.110.15pNet Asking Rent(per sq.ft.)$12.10$12.71$12.66qSale Price(per sq.ft.)$190$194$198
247、pLand Price(per acre)$575,000$583,000$587,000pRetail202320242025F YoYTotal Retail Sales per Capita$19,592$19,360$19,031qTotal Retail Sales Growth1.8%2.1%0.8%qBACK TO MENUMultifamily202320242025F YoYVacancy Rate2.0%2.0%2.3%p2-Bedroom Average Rent$1,360$1,471$1,510pNew Rental Supply(units)1,145773950p
248、48CBRE RESEARCH 2025 CBRE LIMITEDIntelligent InvestmentCanada Real Estate Market Outlook 2025Industrial development to proceed at modest pace Industrial development in Winnipeg has experienced a notable slowdown from its peak in recent years.Rising construction costs and decreased absorption have pr
249、ompted developers to reassess future projects.While continued industrial development is anticipated in the near term,it is likely to proceed at a measured pace.This is primarily due to the significant volume of new large bay industrial space delivered over the last three years.Despite lower levels o
250、f absorption,rental rates are expected to continue to increase steadily across all types of industrial inventory.Suburban office market will continue to outshine downtownVacancy in the Winnipeg office market has stabilized in recent quarters.While downtown vacancy rates remain elevated;they appear t
251、o have plateaued,a positive sign for the market.The suburban sector meanwhile has and will continue to outperform the downtown core,as companies continue to relocate to these areas.Supported by shorter commute times,demand for suburban office product is expected to maintain robust levels of leasing
252、activity in 2025.The downtown office market meanwhile is likely to remain stagnant.Retail development playing catch-upThe Winnipeg retail market has experienced remarkable growth in 2024 and boasts the lowest vacancy rate of any commercial asset class in the city.Increasing demand for retail space h
253、as developers working diligently to keep pace with numerous significant retail projects currently underway.Many of these developments are expected to be quickly absorbed in this competitive market.Economic confidence drawing investors back to marketMarket activity has been relatively subdued due to
254、economic uncertainty and persistently high interest rates.However,2025 is anticipated to mark a turning point for these challenges,with consumer sentiment beginning to improve.Inflation is settling and lending rates have already begun to drop across the country,with more decreases projected for 2025
255、.We expect transaction volumes to normalize as lending becomes more viable and investors re-enter the market.WinnipegSources:CBRE Research,CMHC,Oxford Economics,2025.OfficeDOWNTOWN202320242025F YoYInventory(million sq.ft.)10.0110.6310.64pVacancy Rate(%)18.4%18.7%18.7%tuNet Absorption(million sq.ft.)
256、-0.200.290.01qNew Supply(million sq.ft.)0.000.380.01qClass A Net Asking Rent(per sq.ft.)$19.34$19.40$19.50pSUBURBANInventory(million sq.ft.)4.053.993.99tuVacancy Rate(%)10.9%10.3%9.5%qNet Absorption(million sq.ft.)-0.100.080.03qNew Supply(million sq.ft.)0.000.010.00qClass B Net Asking Rent(per sq.ft
257、.)$17.32$17.44$17.60pOVERALLInventory(million sq.ft.)14.0614.6214.63pVacancy Rate(%)16.3%16.4%16.2%qNet Absorption(million sq.ft.)-0.300.370.04qNew Supply(million sq.ft.)0.000.390.01qClass A Net Asking Rent(per sq.ft.)$19.34$19.40$19.50pIndustrial202320242025F YoYInventory(million sq.ft.)86.4987.368
258、7.56pAvailability Rate(%)2.5%3.2%3.2%pNet Absorption(million sq.ft.)0.09-0.160.16pNew Supply(million sq.ft.)0.570.520.20qNet AskingRent(per sq.ft.)$10.89$10.97$11.00pSale Price(per sq.ft.)$142$170$175pLand Price(per acre)$550,000$565,000$565,000tuRetail202320242025F YoYTotal Retail Sales per Capita$
259、16,408$16,217$16,037qTotal Retail Sales Growth3.1%1.3%0.2%qNew Supply(million sq.ft.)0.090.030.02qBACK TO MENUMultifamily202320242025F YoYVacancy Rate1.8%1.7%2.0%p2-Bedroom Average Rent$1,427$1,507$1,580pNew Rental Supply(units)2,5863,4132,250q49CBRE RESEARCH 2025 CBRE LIMITEDIntelligent InvestmentC
260、anada Real Estate Market Outlook 2025Growing demand for medical real estate investments London is witnessing notable investment interest in medical buildings,driven by demand for increased healthcare accessibility.Canadian and foreign investors are targeting properties in London and nearby areas,piv
261、oting focus from retail to the resilient healthcare sector.Supported by population growth and the need for specialized medical facilities,this trend underscores a significant transformation in investment strategies within the city.Industrial space demand amid uncertaintyThe anticipated St.Thomas Vol
262、kswagen and PowerCo battery cell gigafactory is the focus of conversation across Southwestern Ontario.Should the facility open as expected in 2027,employment outlooks and population growth are forecast to swell across the region.An associated rise in industrial demand is expected in nearby London an
263、d may tighten the already constrained market even further due to limited speculative construction.Investors are monitoring development opportunities as the factory will significantly impact industrial land values and influence regional market dynamics in the years to come.Population growth to fuel m
264、ultifamily demandDespite recent fluctuations in population growth,optimism remains around future trends,particularly with the anticipated opening of the Volkswagen plant in 2027.As such,demand for multifamily housing is expected to rise.Future downtown development opportunities however face hurdles
265、related to infrastructure constraints and a lack of available developable land.Addressing these challenges could pave the way for new apartment complexes and provide a solution to future housing shortages.Office market stabilization through adaptation The downtown office market in London is facing s
266、ignificant challenges,characterized by staggeringly high vacancy and a lack of demand.With companies downsizing and employees favouring suburban locations,there is potential for innovative leasing strategies to emerge.A renewed focus on office utilization and city initiatives aimed at boosting downt
267、own activity could inspire positive transformation.With the right efforts,the future of the market holds promise for growth and revitalization.LondonSources:CBRE Research,CMHC,Oxford Economics,2025.OfficeDOWNTOWN202320242025F YoYInventory(million sq.ft.)4.804.584.24qVacancy Rate(%)28.5%31.7%33.0%pNe
268、t Absorption(million sq.ft.)-0.16-0.250.03pNew Supply(million sq.ft.)0.000.000.00tuClass A Net Asking Rent(per sq.ft.)$15.07$15.43$15.35qSUBURBANInventory(million sq.ft.)1.581.561.56tuVacancy Rate(%)10.6%9.9%9.4%qNet Absorption(million sq.ft.)-0.020.010.01tuNew Supply(million sq.ft.)0.000.000.00tuCl
269、ass B Net Asking Rent(per sq.ft.)$13.30$13.70$13.85pOVERALLInventory(million sq.ft.)6.386.145.80qVacancy Rate(%)24.0%26.2%26.7%pNet Absorption(million sq.ft.)-0.18-0.240.04pNew Supply(million sq.ft.)0.000.000.00tuClass A Net Asking Rent(per sq.ft.)$15.07$15.43$15.35qIndustrial202320242025F YoYInvent
270、ory(million sq.ft.)41.6442.4342.57pAvailability Rate(%)0.7%2.8%3.3%pNet Absorption(million sq.ft.)0.41-0.10-0.08pNew Supply(million sq.ft.)0.250.790.13qNet Asking Rent(per sq.ft.)$10.05$10.37$10.00qSale Price(per sq.ft.)$184$203$195qLand Price(per acre)$450,000$450,000$450,000tuRetail202320242025F Y
271、oYTotal Retail Sales per Capita$17,579$17,248$17,253pTotal Retail Sales Growth3.4%0.8%1.0%pNew Supply(million sq.ft.)0.070.000.00qBACK TO MENUMultifamily202320242025F YoYVacancy Rate1.7%2.9%3.5%p2-Bedroom Average Rent$1,479$1,548$1,580pNew Rental Supply(units)7012,3091,925q50CBRE RESEARCH 2025 CBRE
272、LIMITEDIntelligent InvestmentCanada Real Estate Market Outlook 2025Adjusting tenant-favoured industrial market The Waterloo Region industrial market is facing increasing vacancy and declining lease rates,creating a tenant-favored environment.While the influx of new supply has eased from 2023s peak,a
273、 strong future pipeline of 2.2 million sq.ft.is projected for completion next year.Ongoing development,along with stabilizing economic conditions,indicates that the downward pressure on the industrial sales and land market may ease by mid-2025,as deal activity is expected to rise with anticipated de
274、clines in interest rates.Retail investment resurgence amidst rate cuts Interest in retail is rising,especially in the food and grocery segment which ties to consumers prioritization of convenience and accessibility.Strong demand,fueled by low vacancy and limited new construction,is driving lease rat
275、es upward.As a result,investors are increasingly pursing retail and actively seeking opportunities with enhanced property value.Further,declining interest rates are causing a mindset shift of investors from cautious to enthusiastic.This trend is expected to persist,fostering a favourable environment
276、 in the coming years.Multifamily stability with limited supplyThe multifamily market in the Waterloo Region remains steady,driven by strong demand and limited product availability.Despite a surge in completions,the market is not experiencing significant downward pressure,suggesting resilience.Invest
277、ors are keen on purpose-built rental constructions,particularly in desirable urban areas.As competition for high-quality multifamily assets intensifies,it is expected that vacancy rates will remain low,making it a stable investment class,even as new developments come online.Anticipated growth in med
278、ical office spaces The medical office sector is set for significant growth in Waterloo Region,fueled by healthcare innovations and the upcoming super hospital.A collaboration between the Regions major hospitals,this new facility will create increased demand for medical office space,making it the mos
279、t active segment in the market.Further demand is anticipated as this sector increasingly moves towards privatization.With the University of Waterloos new Innovation Arena offering 90,000 sq.ft.wet lab incubator space,the Region is poised to become a hub for cutting-edge healthcare solutions and rese
280、arch advancements.Waterloo RegionSources:CBRE Research,CMHC,Oxford Economics,2025.OfficeDOWNTOWN202320242025F YoYInventory(million sq.ft.)5.014.724.72tuVacancy Rate(%)22.9%29.6%32.9%pNet Absorption(million sq.ft.)-0.13-0.25-0.16pNew Supply(million sq.ft.)0.000.000.00tuClass A Net Asking Rent(per sq.
281、ft.)$27.14$26.47$26.05qSUBURBANInventory(million sq.ft.)11.6511.6011.60tuVacancy Rate(%)12.6%13.2%13.8%pNet Absorption(million sq.ft.)0.03-0.08-0.07pNew Supply(million sq.ft.)0.230.020.00qClass A Net Asking Rent(per sq.ft.)$16.61$16.46$16.00qOVERALLInventory(million sq.ft.)16.6616.3216.32tuVacancy R
282、ate(%)15.7%17.9%19.3%pNet Absorption(million sq.ft.)-0.10-0.33-0.23pNew Supply(million sq.ft.)0.230.020.00qClass A Net Asking Rent(per sq.ft.)$19.64$18.96$18.50qIndustrial202320242025F YoYInventory(million sq.ft.)120.27123.69125.90pAvailability Rate(%)2.8%6.0%6.9%pNet Absorption(million sq.ft.)2.02-
283、0.730.98pNew Supply(million sq.ft.)4.353.432.21qNet Asking Rent(per sq.ft.)$14.02$13.85$13.85tuSale Price(per sq.ft.)$255$259$260pLand Price(per acre,$millions)$1.05$1.04$1.02qBACK TO MENURetail202320242025F YoYTotal Retail Sales per Capita$14,623$14,378$14,401pTotal Retail Sales Growth2.7%1.8%1.5%q
284、New Supply(million sq.ft.)0.010.060.12pMultifamily202320242025F YoYVacancy Rate2.1%3.6%3.9%p2-Bedroom Average Rent$1,658$1,766$1,800pNew Rental Supply(units)1,3971,8321,075q51CBRE RESEARCH 2025 CBRE LIMITEDIntelligent InvestmentCanada Real Estate Market Outlook 2025Occupiers driving flight-to-experi
285、ence There is renewed confidence in the Toronto office market going into 2025 as tenants have become more refined in whats driving their real estate decisions.Demand for centrally located,well-amenitized,operationally efficient assets that either offer or augment what occupiers can provide within th
286、eir own footprint has put a spotlight on best-in-class properties.Healthy leasing momentum should continue into the new year right as the construction pipeline is winding down,lending confidence to a mid-term recovery of the office sector.Softer industrial dynamics to persistIndustrial dynamics have
287、 softened in Toronto,with demand shifting from 3PLs toward the end-user.Expect the development pipeline to slow over 2025 as the market continues to work through recently delivered vacant new supply.Downward pressure on rental rates will persist over the near to mid-term,with the delta between new a
288、nd older facilities anticipated to widen further.Deals will continue to happen in the year ahead but will take longer to complete amid this period of greater optionality.Positive retail sentiment and momentum Momentum and sentiment around the retail sector is expected to remain positive into 2025.Ne
289、cessity-based retail,beauty,fitness,entertainment and discount are driving demand and are poised for future growth,albeit in a more conservative manner than in years prior.A restricted new supply pipeline meanwhile will continue to constrain the market,putting pressure on vacancy and rents.Retailers
290、 will be strategic in the year ahead,either by exploring secondary nodes across the city or by modifying the scale of their typical store.Residential rental demand to stay healthyThe glut of newly completed residential condo units that delivered in 2024 has shifted purpose-built rental market dynami
291、cs in Toronto.Vacancy rates have risen from their ultra-low levels and are projected to increase further in 2025 given more new supply on the way.Higher vacancy is increasing competition and dampening overall rental rate growth.Despite curbs to national immigration policies,Toronto will remain a top
292、 destination for new residents and support demand to absorb excess vacancy over the next couple of years.TorontoSources:CBRE Research,CMHC,Oxford Economics,2025.OfficeDOWNTOWN202320242025F YoYInventory(million sq.ft.)94.1496.1197.36pVacancy Rate(%)17.6%19.0%18.2%qNet Absorption(million sq.ft.)-2.730
293、.432.43pNew Supply(million sq.ft.)1.122.321.89qClass A Net Asking Rent(per sq.ft.)$35.17$35.46$35.85pSUBURBANInventory(million sq.ft.)77.0277.0977.23pVacancy Rate(%)20.5%20.7%20.6%qNet Absorption(million sq.ft.)-0.980.010.18pNew Supply(million sq.ft.)0.060.360.15qClass A Net Asking Rent(per sq.ft.)$
294、18.92$18.98$18.95qOVERALLInventory(million sq.ft.)171.16173.20174.59pVacancy Rate(%)18.9%19.7%19.3%qNet Absorption(million sq.ft.)-3.720.442.60pNew Supply(million sq.ft.)1.172.672.04qClass A Net Asking Rent(per sq.ft.)$28.56$28.85$29.05pIndustrial202320242025F YoYInventory(million sq.ft.)832.96845.0
295、3855.21pAvailability Rate(%)2.7%4.7%5.7%pNet Absorption(million sq.ft.)2.05-2.330.68pNew Supply(million sq.ft.)16.9814.2010.18qNet AskingRent(per sq.ft.)$18.25$17.18$16.90qSale Price(per sq.ft.)$384$358$350qLand Price(per acre,$millions)$2.00$1.85$1.92pRetail202320242025F YoYTotal Retail Sales per C
296、apita$17,036$16,397$16,461pTotal Retail Sales Growth0.6%-0.7%2.0%pNew Supply(million sq.ft.)1.240.740.88pBACK TO MENUMultifamily202320242025F YoYVacancy Rate1.4%2.5%3.2%p2-Bedroom Average Rent$1,961$1,974$1,975pNew Rental Supply(units)6,5945,3615,975p52CBRE RESEARCH 2025 CBRE LIMITEDIntelligent Inve
297、stmentCanada Real Estate Market Outlook 2025Office uncertainty coming to an end Despite being one of the tightest office markets in Canada,vacancy could see an uptick as more shadow vacancies are set to emerge.Nevertheless,office occupiers will continue to drive demand for quality,well-amenitized sp
298、aces amidst a flight-to-quality.While there is some uncertainty regarding the future of the federal governments office portfolio,the upcoming election cycle and the governments new workplace strategy initiative will provide much needed clarity for the market.Leasing velocity is expected to remain st
299、able with possible upside potential in 2025.Industrial supply remains tight2024 has been a solid year for industrial leasing fundamentals with demand expected to persist into 2025.However,an overall lack of supply has strained the Ottawa market,putting upwards pressure on rents.Although some develop
300、ers are still hesitant to build on speculation,strong leasing momentum could propel some projects to start construction,alleviating some of the mid-to-large bay demand in the market.Rents are still expected to increase amidst this supply constraint,albeit at a much slower rate.Strong rental demand p
301、rovides positive outlook for multifamily Demand for multifamily was strong in 2024 with plenty of rental units continuing to be absorbed,particularly single units and bachelors.In 2025,Ottawa will observe several large scale multifamily projects start or potentially get completed,introducing new sup
302、ply to a relatively tight market and leaving room for more mid-rise projects to appear.Rental demand is expected to remain strong and yield positive absorption,albeit at a slower rate due to the number of units coming to market.Improving economic conditions will favour the retail marketOttawa observ
303、ed tight conditions in 2024 as retail tenants navigated a market with little quality supply.Heightened construction costs have slowed down the delivery of projects,placing landlords in a better position for negotiation.2025 will continue to observe strong retail demand as increased consumer confiden
304、ce will provide a boost to overall consumption.On the supply side,lowered interest rates will help reduce construction costs,which will aid in introducing new inventory and cool down the market.OttawaSources:CBRE Research,CMHC,Oxford Economics,2025.OfficeDOWNTOWN202320242025F YoYInventory(million sq
305、.ft.)18.3018.2418.24tuVacancy Rate(%)14.2%15.6%15.2%qNet Absorption(million sq.ft.)-0.59-0.280.08pNew Supply(million sq.ft.)0.060.000.00tuClass A Net Asking Rent(per sq.ft.)$23.18$23.88$24.00pSUBURBANInventory(million sq.ft.)22.6422.3422.41pVacancy Rate(%)12.5%9.9%10.1%pNet Absorption(million sq.ft.
306、)-0.460.430.02qNew Supply(million sq.ft.)0.000.000.07pClass A Net Asking Rent(per sq.ft.)$15.81$15.58$15.65pOVERALLInventory(million sq.ft.)40.9440.5840.65pVacancy Rate(%)13.3%12.4%12.4%tuNet Absorption(million sq.ft.)-1.050.140.10qNew Supply(million sq.ft.)0.060.000.07pClass A Net Asking Rent(per s
307、q.ft.)$18.97$19.71$19.80pIndustrial202320242025F YoYInventory(million sq.ft.)37.2838.6039.06pAvailability Rate(%)2.6%3.1%3.4%pNet Absorption(million sq.ft.)0.630.300.33pNew Supply(million sq.ft.)0.720.530.46qNet Asking Rent(per sq.ft.)$15.44$16.62$17.10pSale Price(per sq.ft.)$313$361$370pLand Price(
308、per acre,$millions)$1.18$1.10$1.07qRetail202320242025F YoYTotal Retail Sales per Capita$17,989$17,852$17,871pTotal Retail Sales Growth2.1%1.9%1.4%qNew Supply(million sq.ft.)0.090.000.03pBACK TO MENUMultifamily202320242025F YoYVacancy Rate2.1%2.6%3.1%p2-Bedroom Average Rent$1,698$1,880$1,955pNew Rent
309、al Supply(units)3,3374,1914,225p53CBRE RESEARCH 2025 CBRE LIMITEDIntelligent InvestmentCanada Real Estate Market Outlook 2025Mid bay to continue leading deal activity The Montreal industrial market is expected to remain tenant leaning in the first half of 2025.Large bay warehousing will continue to
310、lease slowly,as consumer spending will need a major jolt to flip this narrative.Deal flow will focus around mid bay spaces,particularly among product with clear heights above 26”and in locations with ample power.As major landlords have already reduced their asking net rents repeatedly in 2024,there
311、is consensus that lease rates will stabilize by the end of 2025.Recovering foot traffic downtown a boon for street front retailDowntown metro station entry data has shown a building momentum around foot traffic recovery.In 2023,tracked entries came in at 67%of 2019 levels;2024 has seen that gap narr
312、ow,with entries now closer to 80%.As in-office attendance continues to rise,2025 will see this trend gradually improve,and will add much needed exposure for retail tenants on Sainte-Catherine Street West.Flight-to-quality will continue to drive office leasingTrophy assets have been front and center,
313、driven by major consolidation efforts by companies like National Bank and Canadian National Rail.Vacancy rates for trophy assets Class AAA and AA buildings-will remain tight and is expected to extend into Prime A properties which have received substantial investment in modernization.Leasing momentum
314、 will be primarily focused on the central business district,with less activity in midtown and the suburban areas.2025 will be a catalyst year in determining the trough for office leasing.Institutional investors switching back to acquisition modeInstitutional investors have largely remained on the si
315、delines since the implementation of the Bank of Canadas quantitative tightening policies.However,following multiple rate cuts,there is optimism that low borrowing costs will fuel an investment market rally.It is anticipated that institutional investors will focus primarily on multifamily,linked to t
316、he pressing issue of housing affordability,and industrial assets,where availability rates are expected to peak in the first half of 2025.MontrealSources:CBRE Research,CMHC,Oxford Economics,2025.OfficeDOWNTOWN202320242025F YoYInventory(million sq.ft.)45.7047.1447.35pVacancy Rate(%)18.0%18.2%19.0%pNet
317、 Absorption(million sq.ft.)-0.721.01-0.21qNew Supply(million sq.ft.)0.251.430.21qClass A Net Asking Rent(per sq.ft.)$25.23$25.81$25.90pSUBURBANInventory(million sq.ft.)33.9934.4134.41tuVacancy Rate(%)18.9%21.2%22.2%pNet Absorption(million sq.ft.)-0.28-0.77-0.33pNew Supply(million sq.ft.)0.000.140.00
318、qClass A Net Asking Rent(per sq.ft.)$17.35$18.16$18.20pOVERALLInventory(million sq.ft.)79.7081.5581.76pVacancy Rate(%)18.4%19.5%20.4%pNet Absorption(million sq.ft.)-1.010.24-0.54qNew Supply(million sq.ft.)0.251.570.21qClass A Net Asking Rent(per sq.ft.)$22.16$22.37$22.45pIndustrial202320242025F YoYI
319、nventory(million sq.ft.)328.94332.51334.21pAvailability Rate(%)3.1%5.0%5.7%pNet Absorption(million sq.ft.)-2.22-3.05-0.73pNew Supply(million sq.ft.)3.943.231.70qNet Asking Rent(per sq.ft.)$16.48$15.24$15.24tuSale Price(per sq.ft.)$258$246$250pLand Price(per acre,$millions)$1.83$1.83$1.74qRetail20232
320、0242025F YoYTotal Retail Sales per Capita$17,179$16,803$16,853pTotal Retail Sales Growth5.5%-0.2%1.0%pNew Supply(million sq.ft.)0.330.940.09qBACK TO MENUMultifamily202320242025F YoYVacancy Rate1.5%2.1%2.4%p2-Bedroom Average Rent$1,096$1,176$1,205pNew Rental Supply(units)13,85115,49511,550q54CBRE RES
321、EARCH 2025 CBRE LIMITEDIntelligent InvestmentCanada Real Estate Market Outlook 2025Industrial net asking rates could stabilize in H1 2025 Industrial availability and rental rates have softened in Quebec City,mirroring the national trend.There is a lack of large bay listings in the region,however,202
322、5 will see small bay product as the driving force of absorption compared to mid bay inventory in Montreal.Institutional landlords have an outweighed representation of available listings and given the consecutive rental adjustments noted in 2024,are anticipated to stabilize around mid-year 2025.Tale
323、of two markets in office leasingQuebec Citys office leasing fundamentals are imbalanced between the suburban submarkets of Sainte-Foy and Laurier and the central business district.Sainte-Foy and Laurier have maintained tight vacancy rates,and as hybrid work matures,it is anticipated that these subma
324、rkets will continue their recent strong performances.Contrastingly,the Downtown Fringe and Saint-Roch submarkets have struggled to recover at the same pace as other Canadian downtown areas,particularly as certain FIRE tenants have maintained“work from anywhere”policies.Expect further negative net ab
325、sorption downtown until this narrative flips.Grocery-anchored assets will continue to be the jewel of retailLeyad acquired Mega Centre Lebourgneuf for$66.5 million in 2024.This 342,000 sq.ft.retail center features high-profile tenants including Sail,Home Depot,Sports Experts,Costco,and Maxi.The pres
326、ence of Costco and Maxi highlights the continued influence of grocery tenants on retail investment decisions,as they generate significant foot traffic.Looking ahead to 2025,retail sales as of September 2024 from Oxford Economics are projected to grow at a slow rate of 1.7%,with consumer spending exp
327、ected to increase by only 1.4%.As a result,acquisitions of necessity-based retail properties will remain a priority for investors.Multifamily construction starts moving in the right direction Quebec Citys low rental vacancy rate of 0.9%can be linked to a strong demand for housing.October year-to-dat
328、e data from the CMHC illustrates that construction starts have increased significantly,with 4,569 purpose-built rental units under development compared to 3,970 in 2023.This trend is promising and could help achieve a balanced housing market in the short term and will be particularly crucial as immi
329、gration rates are expected to decline following federal policy adjustments.Quebec CitySources:CBRE Research,CMHC,Oxford Economics,2025.OfficeDOWNTOWN202320242025F YoYInventory(million sq.ft.)7.327.327.32tuVacancy Rate(%)15.2%16.0%16.5%pNet Absorption(million sq.ft.)-0.17-0.06-0.04pNew Supply(million
330、 sq.ft.)0.000.000.00tuClass A Net Asking Rent(per sq.ft.)$15.61$15.81$15.95pSUBURBANInventory(million sq.ft.)11.6311.6311.63tuVacancy Rate(%)9.2%9.9%10.7%pNet Absorption(million sq.ft.)-0.26-0.09-0.09tuNew Supply(million sq.ft.)0.040.000.00tuClass A Net Asking Rent(per sq.ft.)$18.71$18.40$18.23qOVER
331、ALLInventory(million sq.ft.)18.9518.9518.95tuVacancy Rate(%)11.5%12.3%12.9%pNet Absorption(million sq.ft.)-0.44-0.15-0.13pNew Supply(million sq.ft.)0.040.000.00tuClass A Net Asking Rent(per sq.ft.)$16.53$16.52$16.50qBACK TO MENUIndustrial202320242025F YoYInventory(million sq.ft.)22.3722.5722.58pAvai
332、lability Rate(%)3.1%5.0%5.5%pNet Absorption(million sq.ft.)0.04-0.21-0.11pNew Supply(million sq.ft.)0.270.220.02qNet Asking Rent(per sq.ft.)$15.17$14.29$14.29tuSale Price(per sq.ft.)$250$185$190pLand Price(per acre,)$700,000$790,000$790,000tuRetail202320242025F YoYTotal Retail Sales per Capita$19,47
333、1$19,729$19,927pTotal Retail Sales Growth6.1%3.4%1.7%qMultifamily202320242025F YoYVacancy Rate0.9%0.9%1.2%p2-Bedroom Average Rent$1,040$1,159$1,195pNew Rental Supply(units)5,5345,7585,750q55CBRE RESEARCH 2025 CBRE LIMITEDIntelligent InvestmentCanada Real Estate Market Outlook 2025Retail market remains tight Retail activity remains strong,however there is a growing divide between luxury and discoun