Canadian commercial real estate investors may not invest as quickly in 2025 as they first indicated due to U.S. President Donald Trump’s threatened 25% across-the-board tariff, says an Altus Group vice-president.

Altus reported recently that more Canadian CRE investors were looking to invest in the near term compared to those willing to deploy capital at the start of 2024. But Ray Wong told Connect that investor sentiment has shifted in recent weeks.

“I think there’s a lot of dry powder there, there’s capital available, but I think that we’re going to see a bit of a pause [in investment] until a few things shake out, especially if the tariffs are brought in,” said Wong, a leading market analyst.

Trump has indicated that he could impose financial penalties on February 1. During the election campaign, Trump threatened to do so on his first day in office but he held off.

If he follows through, U.S. businesses in all industries would be subject to 25% tariffs on all goods, including natural resources, that Canada sells to U.S. customers.

The added costs would be passed on to U.S. consumers, businesses and other organizations that buy the products.

The federal government has vowed to counter with matching tariffs on imports of U.S. goods into Canada. Essentially, many Canadian customers could be hit with a tariff double-whammy, given that many raw materials shipped from north of the border are manufactured or refined in the U.S. and then exported back to Canada.

Wong said Canadian investors have become more apprehensive since they were surveyed between October 9 and November 5, the date that Trump was elected.

“I think the optimism during that timeframe was a little bit better,” said Wong. “Now, with all the discussion of potential tariffs, because we’re not really sure what’s actually going to transpire in the next couple weeks, it’s caused a little bit more apprehension in the market.”

The company’s fourth-quarter 2024 industry conditions and sentiment survey found that 77% of Canadian respondents intend to transact within the next six months, up from 67% a year earlier, reflecting a growing sense of market optimism despite lingering economic concerns.

The finding marked a notable shift in sentiment, suggesting that investors were gradually moving beyond portfolio management toward capital deployment following a series of Bank of Canada interest-rate reductions.

“I think the belief is still 2025 will be better than 2024, but there’s a little bit of cautious optimism in the marketplace right now, especially with the tariffs discussion,” said Wong.

Wong said investors are also being cautious due to some uncertainty surrounding Bank of Canada interest-rate decisions in 2025. The BoC is widely expected to introduce a 25-basis-point cut next week to help thwart the effect of Trump’s anticipated tariffs. But the central bank has voiced plans to proceed more slowly on rate cuts going forward, now that inflation is within the target 2% range.

“I think we’ll still see decreases in interest rates going into this year,” said Wong. “But the challenge is, basically, the speed of the decreases, especially if some of the things transpire in the U.S. policies and [that] interrupts the global economy.

“That may cause slower growth or may impact the value of the Canadian dollar.”

According to the Altus report, slightly more than half (51%) of Canadian survey respondents believed that a recession was “somewhat likely” or “very likely” within the first six months of 2025, up from 46% who held that view in the third quarter of 2024. However, most respondents expected any downturn to be shallow and short-lived, in line with previous survey results.

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