BGO, Urban Equation Leaders Provide CRE Market Insights

Today marks the final edition of Connect’s Summer 2025 Leadership Series, in which top executives from Canadian commercial real estate firms provide insights on the state of the market. Scott Cryer, CFO at Medallion Corporation; Scott Pickles, managing director of Windmill’s advisory arm Urban Equation; and Phil Stone, a BGO managing director and head of Canadian research, offer their perspectives.

What is your outlook for Canadian CRE investment over the rest of 2025 and into 2026?

Phil Stone: “We’re optimistic about the path forward for Canadian commercial real estate. This is a cyclical business, and we’ve come through the down cycle where asset values reset and are now stabilizing. For investors with capital to deploy, the next 12–18 months present a rare opportunity to buy quality assets at favourable pricing while much of the market remains cautious.

“Yes, the macroeconomic backdrop still carries challenges, but real estate is already absorbing softer near-term demand. Fundamentals for high-quality properties remain strong. Importantly, the development pipeline for industrial and office has largely shut down, after years of new supply pushing vacancies higher. With little new construction on the horizon, we expect supply to remain static, which should drive lower vacancy rates and create upward pressure on rents in existing assets.”

Scott Cryer: “It’s both asset-class and asset-specific. We’ve seen a trend in office. It’s rebounding a little bit with the back-to-office [movement.] We’ve heard the banks already talk about already seeing space issues. So, I do think that there’s some potential for uptick in office, and there’s some really underpriced assets there. We could see some momentum there, but it’s early in the game.

“Industrial was definitely a hero for the last five years as far as development and returns. [It] feels like the supply is staring to take a little bit of bite out of the demand. [It] feels like it’s a little bit less attractive and flatter moving forward.

“And then retail [has a] very interesting landscape. Grocery-anchored retail has been really strong. Obviously, a lot of the retail land-scape is become part of the multi-res picture. I do wonder if there’s going to be an oversupply of retail and transit-oriented [development projects.] But [there are] definitely some good niche plays in retail. But [they are] very asset-specific.

“Relative to my [specialty] area, obviously, the big sound bite is distress in the condo market. [There’s] just no bit, not even a pricing discussion. It’s almost that there’s just no sales to be had of new condos today. I think the narrative publicly is very negative around condos. Obviously, even single-family pricing is coming off. But the resale market on condos really priced downwards, and that put a tonne of pressure [on the new-condo market], and interest rates have had a massive impact on the condo.

“[Medallion] is probably not seeing anything extremely new, but we’re seeing a lot of the condo developers almost needing to move to rental, just as an alternative to condo [development] land sitting there burning costs and not seeing a really strong immediate return to condo sales and making the numbers work there. … Real estate goes through cycles. Repricing usually solves a lot of this. And, I think that, generally, we’ve seen some pain, and we’re going to continue to see some pain in the very short term. But I think that’ll lead to opportunities in all asset classes and, specifically around condo land that could become rental.

“And, there’s a tonne of support for rental, both politically and through [Canada Mortgage and Housing Corporation, through the entitlement processes, and there’s not a lot of exit strategies for condos right now.

“So, it’s going to take larger capital that has a longer-term view and sees the benefit of rental to build all that out.”

Which property types may be hidden gems?

Scott Cryer: “Distressed land could be good. I think mid-sized developments will be quicker to happen and easier from a lease-up-risk point of view. So, I think those will definitely be hidden gems.

“In some suburbs, there’s really strong employment growth. [It’s] easier, quicker to build less densely, required cheaper land, more support from all sorts of political elements. So, we definitely think those are some areas that are going to shine.

“But I do like the idea of land repricing, covered land plays. I think long-term, strong performance comes out of where land pricing is entered into. So, I think that’s maybe the one that’s not front and centre. But we’re hopeful that could be a bit of a shining light as well.”

Which asset classes do you expect to shine and why?

Phil Stone: “We see opportunities across the major food groups: housing, logistics, needs-based retail, and purposeful office.

“A decade ago, when rates were low, outperformance came from simply being in the right sectors. If you were overweight in multi-family and industrial, you benefited. If you held too much office or enclosed retail, you didn’t. That playbook no longer works.

“Today, asset values already reflect much of the expected fundamentals. Outperformance will come less from sector allocation and more from disciplined asset selection and strong business plan exion. That said, we remain most constructive on housing, logistics, and daily needs retail—sectors supported by powerful demographic and secular trends that extend well beyond the current cycle.”

Scott Cryer: “I think they’re all going to be fairly consistent over the next 12-plus months, and it’s really going to be very opportunistic at a specific-asset level. We’ve seen distress in a lot of asset classes, including office and condo sites and land. But I think the support behind purpose-built rental [housing], is going to be continuously strong. There’s a couple headwinds right now on condo supply coming in and creating some vacancy. But I think the long-term view is that supply-and-demand dynamics around purpose-built rental are just very strong. So, I think we’re going to see, probably, some of the better returns there.

“A leading indicator is: We are seeing significant reductions in construction costs. We haven’t seen the impact of tariffs, but construction costs have come down. Obviously, interest rates came down a little bit. With political support and financial support by the federal government, I think it’s going to be one of the better-returning asset classes.”

What potential investment barriers could people be overlooking?

Phil Stone: In today’s market, generating alpha comes down to execution. That requires experience across the full investment life cycle: sourcing opportunities, underwriting with real-time pricing and leasing data, and active management to deliver leasing, operations, and capital projects that grow NOI.

“Too often, investors underestimate how critical property management is to realizing the business plan. Having the right team on the ground can be the difference between hitting your pro forma and missing it. While interest rates have likely peaked, we also don’t expect a material decline in rates from where we are today.

“Investors shouldn’t rely on lower rates to drive returns. The real opportunity lies in income growth and value creation through active management, not financial engineering.”