Despite economic uncertainty, brokers forecast steady to increased activity fueled by demand for high-performing assets
Commercial real estate brokers across Canada are projecting steady to stronger investment momentum through the second half of 2025.
While macroeconomic and trade-related uncertainty continues to cloud the market, market fundamentals have shown resilience, according to findings from Avison Young’s Mid-Year Outlook.
The report showed that cap rates remained stable in the second quarter, supported by steady bond yields and financing costs. However, caution from investors has led to a more selective approach, with greater emphasis placed on asset quality and fundamentals.
“Opportunities are emerging for asset types that were slower to recover post-pandemic,” said Matthew McWatters, principal at Avison Young.
Office buildings, especially those with strong leasing and tenant profiles, have seen renewed interest from institutional buyers over the past six months.
“Enclosed malls are also drawing renewed attention from institutional buyers, REITs, and private developers, driven by improved leasing fundamentals and the long-term potential for residential redevelopment,” McWatters added.
In Avison Young’s June survey, 93% of industrial and project management experts said they expect CRE activity to remain stable (48%) or increase (45%) in the second half of the year.
“While the Canadian economy and commercial real estate market have demonstrated short to medium-term resilience, attention remains focused on a positive resolution to the ongoing trade conflict,” McWatters said.
Avison Young Canada president Mark Fieder noted that sectors are adapting the tariff ambiguity, “from office transformations and retail resurgence to steady multifamily demand as investor activity ticks upward,”
Investors prioritize cash-flow-stable assets with strong tenant covenants, modern specs, and low vacancy. This trend reflects a broader “flight to quality.”
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Despite tariff-related risks clouding the start of the quarter, Avison Young notes that investment sales momentum has remained intact. Buyers are scrutinizing property characteristics more closely than in previous cycles, but there is a clear appetite for assets that meet rigorous investment criteria.
With the Bank of Canada holding its policy rate at 2.75% in June, economists are closely watching for the July 30 policy decision, which could provide a further boost to investor confidence by lowering financing costs and narrowing bid-ask spreads in the transaction market.
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