Investor interest in Canada’s commercial real estate (CRE) market is poised for a resurgence in 2025, industry leaders told BNNBloomberg.

The experts are predicting a new cycle of investment activity in tandem with more capital allocations, as borrowing costs decline.

Reid Taylor, senior vice-president of capital markets at Colliers Canada, highlighted the improving sentiment within the sector. He pointed to a macroeconomic environment of lower interest rates and inflation as factors contributing to a more optimistic outlook.

“We’re still in the midst of a period of quite sluggish investment activity after both 2023 and this year. So some patience is required,” Taylor told BNNBloomberg.

He added, “We’re not going to see a surge of activity necessarily in Q1, Q2, but I can tell you, the consensus certainly seems to be that this is the start of a new cycle, like the worst is over.”

Taylor also noted growing global interest in Canadian real estate, particularly in necessity-based retail properties like grocery-anchored centres.

“This is anecdotal, but those top the priority list for new acquisitions in many of the conversations that we’re having with our institutional clients today,” he told BNNBloomberg.

Phil Soper, president and CEO of Royal LePage, noted that the market is already experiencing the gradual return of individual landlords and residential investors.

“There is the slowly returning investment market as well,” he told BNNBloomberg. “By investment market, I mean those small businesses or individuals who are landlords, who own an investment property or a handful. They make up a majority of our rental stock in the country, and it’s been a really tough couple of years for them.”

Soper attributed the decline in small-scale landlords to rising interest rates and cash-negative properties. However, he noted that interest in investment properties remains strong, with approximately nine million Canadians expressing aspirations to become property investors within the next three years.

“We anticipate that there’ll be an even stronger investment market once we settle in at neutral interest rates, which hopefully occurs sometime in the second half of 2025,” he said told BNNBloomberg, describing the sector as “a growth market.”

Soper also predicted a robust recovery in Canada’s residential market, with lower borrowing costs encouraging first-time buyers. He forecast overall home prices to rise by about 6% by the end of 2025, with single-family homes seeing a 7% increase and condominiums gaining 3.5%.

Despite the challenging years, Soper told the TV network: “Home prices hung in there due to the housing shortage in the country.”

The Canadian office market has lagged other sectors, but Taylor suggested a potential turnaround could occur in 2025, driven by improvements in suburban office properties and a flight to quality.

“We’ve seen an uptick in office trades here in Toronto, particularly for suburban office products, and that’s on the back of improving leasing headlines,” he told BNNBloomberg.

Taylor emphasized the importance of downtown office properties as a barometer for the sector.

“That’s always been the bulk of office transaction volumes in Canada,” he told BNN Bloomberg.

Both Taylor and Soper expressed optimism for a more dynamic and resilient real estate market in 2025, underpinned by improving economic conditions and a renewed appetite for investment across commercial and residential sectors.