Real Estate Investment Conditions & Trends
- Interest rates remain volatile, with the CDN 10Y and U.S. 10YT fluctuating significantly. Despite daily movements, our base case is that the CDN 10Y and the U.S. 10YT will generally hover in the 3.25% and 4-4.5% range respectively, consistent with long-run equilibrium.
- While credit and risk spreads may widen in the short term due to uncertainty, the fundamentals for a gradual recovery in debt and capital markets remain strong. Risk-off attitudes will drive demand for assets with stable income. Value-add and opportunistic buyers are expected to invest in these attractive vintage years, with such deals continuing to draw selective interest as the recovery progresses.
- CRE fund flows may fluctuate as portfolios adjust to the near-term denominator effect. However, in the long term, CRE’s diversification and inflation-hedging benefits will sustain capital flows and maintain its role in institutional and private portfolios. Investors will focus more on resiliency and key drivers of income growth over time.
- Industrial vacancy will be pressured through mid-2026 as the manufacturing and consumer sectors adjust to higher prices and weaker demand. Retail demand has remained resilient but rising costs may impact specific categories. Niche sectors (data centers, seniors housing and student housing) continue to capture a growing portion of volumes. Regarding office, the market is far from uniform, presenting a diverse and complex landscape. High performing, in demand office properties in prime locations continue to lead the pack. Multifamily residential is expected to remain stable. However, rental inflation is slowing and varies by market.
Check out our Q1 2025 Cap Rate Report to learn more.
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