Canadian and U.S. commercial real estate is on the verge of a new cycle as interest rates fall from peak levels and economic growth concerns fade, says a LaSalle Investment Management report.

LaSalle sees considerable differences between this upcoming cycle and prior ones across both countries.

Specifically, interest rates are expected to remain higher despite their drops, leading to a more moderate pace of value recovery. Although the pace of capital flows to real estate is expected to accelerate in 2025, conditions across sectors and markets will remain uneven.

“Our outlook for Canadian real estate next year resembles many of our global projections, with some important distinctions,” said Chris Langstaff, LaSalle’s head of research and strategy for Canada. “Optimism is a bit more contained as economic performance has lagged and there’s been uncertainty around trade policies, but favourable demographics, healthy fundamentals in most sectors and forecasts for improved GDP and job growth in 2025 and 2026 will continue to drive opportunities across markets, including in specialty sectors.”

The differences across sectors and markets suggest that investing in the coming real estate cycle won’t be a simple story of a rising tide lifting all boats. Selectivity at the sector, market and submarket levels will likely add value, according to LaSalle’s outlook.

Brian Klinksiek, LaSalle’s global head of research and strategy said market sentiment is gradually imporving across the globe, but risks remain on the horizon and investors are advised to focus on diversified that are broad and flexible.

“A comprehensive look at value across a wide range of sectors and markets will be required to build a well-positioned real estate portfolio,” he said.

Chicago-based LaSalle ranks among the world’s leading real estate investment managers.

Pictured: LaSalle Investment Management headquarters in downtown Chicago

Photo: LaSalle

With files from Paul Bubny, Connectcre.com