Canadian commercial real estate investors favoured food-anchored retail strips, suburban multiple-unit residential properties, and multi-tenant industrial assets in the fourth quarter of 2024, according to Altus Group’s latest investment trends survey.

These property types topped the list of preferred investment assets amid an overall sluggish market.

Despite an uptick in activity during the period, the Canadian commercial real estate sector recorded approximately $50.5 billion in total transactions for 2024, reflecting an 8% decline from the previous year. The sector continues to grapple with the effects of elevated interest rates and a persistent wide bid-ask gap between buyers and sellers, leading many investors to adopt a cautious approach.

Toronto, Vancouver, and Edmonton emerged as the top three preferred markets across all asset classes. The survey’s location barometre revealed a predominantly negative momentum ratio, indicating more investors were looking to sell than buy in most markets.

The overall capitalization rate for the four benchmark asset classes remained largely flat at 5.88%, decreasing slightly by three basis points in the fourth quarter. Cap rates for suburban multiple-unit residential properties dropped to 4.6%, declining by eight basis points quarter-over-quarter. Single-tenant industrial cap rates decreased slightly to 5.85%, while downtown class AA office cap rates edged down to 6.68%. Tier I regional malls were the only asset type to experience an increase in cap rates, rising by 10 basis points to 6.38%.

Looking ahead, market sentiment is cautiously optimistic as investors anticipate additional interest-rate relief in 2025, said Toronto-based Altus. While geopolitical and economic uncertainty continues to weigh on decision-making, lower borrowing costs may encourage renewed investment activity in the coming months.

The report was co-authored by Altus Senior Research Analyst Jennifer Nhieu and Ray Wong, the company’s vice-president of data solutions.

Pictured: Calgary Safeway store.

Photo: Jeff Whyte / Shutterstock.com