Trends to Watch
Interest rates are expected to remain elevated throughout most of the year as the Bank of Canada monitors the lagged effects of monetary policy on the economy.
Forecasts suggest Canada might achieve a ‘soft landing’ in 2023, where the economy still records positive growth for the year despite a few quarters of near-zero growth.
Long-term fundamentals for the Canadian economy remain strong and will continue to attract global investment capital over the next few years.
01
02
03
CAPITAL MARKETS
DECARBONIZATION
OFFICE/OCCUPIER
RETAIL
INDUSTRIAL
MULTIFAMILY
ECONOMY
ECONOMY
CAPITAL MARKETS
Investors hoping to act at the bottom of the cycle may find that window to be shorter than in previous downturns as a soft landing for the economy and stabilization in interest rates could solidify confidence and pricing while bolstering market activity in the later half of the year.
03
Capitalization rates will continue to rise in 2023, but the upwards pressure will be mitigated by continued market strength in certain sectors.
02
Investment volumes for 2023 are anticipated to reach similar levels as seen over the last two years as interest rate and economic uncertainty eases.
01
DECARBONIZATION
Mass timber has emerged as a popular building material, acting as a more sustainable built form. Various commercial and residential developments are planned or underway in British Columbia, Ontario and Quebec that will double the count of significant developments in Canada.
03
Creative financing solutions are needed to support carbon retrofits as these projects often return positive rates of return, though below the cost of borrowing. CMHC’s MLI Select program will promote climate, affordability and accessibility advances within the residential sector.
02
Commercial real estate presents a major obstacle and opportunity as it relates to meeting the goals set out by the Paris Agreement. Owners and operators will upgrade, retrofit and decarbonize assets in the years ahead, all with the goal to reduce emissions and achieve net zero carbon operations.
01
OFFICE/OCCUPIER
Despite the headwinds facing the office sector, Canada remains well-positioned on a relative basis. Canadian cities have some of the lowest office vacancy rates in North America and, looking forward, Canada leads the G7 in employment growth, the single best indicator of office space demand.
03
The performance of office space will continue to bifurcate, with highly differentiated office space outperforming commodity space. Not all buildings are created equal, however, and it is therefore likely that this will keep structural vacancy rates elevated amongst certain product types.
02
Spaces that help attract workers back to the office will be a priority as employers aim to increase office attendance. Commute times have emerged as a key factor for employee satisfaction and will be as important as amenities and design in site selection.
01
RETAIL
The relationship between online and offline has continued to evolve, however the role of the store has never been more important. Despite the rise of e-commerce during the pandemic, Canadians have returned to physical retail spaces, seeking experiences and services that cannot be offered online.
03
Inflation and elevated interest rates have started to constrain wallets and ultimately will lead to a more cautious consumer in the year ahead. Both retailers and consumers will be more cost-conscious, however quality of service is not to be overlooked.
02
The latest wave of development will see mall assets be repositioned into centres that cater to all facets of live-work-play. Major projects have been announced that will add density to existing properties through residential towers to unlock value in underutilized parking or surrounding surface lots.
01
INDUSTRIAL
The third-party logistics industry is expected to continue driving leasing activity in 2023 as more companies look to outsource their supply chain processes.
03
A record amount of new supply is expected to deliver in 2023, but this will have a minimal impact on availability as robust pre-leasing and a relatively conservative approach to construction keeps market conditions tight.
02
Rent growth is forecast to moderate to more sustainable levels in 2023 as some tailwinds dissipate. However, growth will still outpace the historical average pace seen over the last 10 years.
01
MULTIFAMILY
The Canadian multifamily sector faces increased regulatory risk in 2023 amid peak housing unaffordability and greater political scrutiny.
03
Demand for multifamily rental is expected to continue rising and outpace supply, further driving down vacancy rates and accelerating rental rate growth.
02
Housing affordability has eroded to its worst level in over 30 years, leaving renting as the only viable housing option for an increasing number of Canadian families.
01
Trends to Watch
Investment volumes for 2023 are anticipated to reach similar levels as seen over the last two years as interest rate and economic uncertainty eases.
Capitalization rates will continue to rise in 2023, but the upwards pressure will be mitigated by continued market strength in certain sectors.
Investors hoping to act at the bottom of the cycle may find that window to be shorter than in previous downturns as a soft landing for the economy and stabilization in interest rates could solidify confidence and pricing while bolstering market activity in the later half of the year.
01
02
03
CAPITAL MARKETS
DECARBONIZATION
OFFICE/OCCUPIER
RETAIL
INDUSTRIAL
MULTIFAMILY
REGIONAL OUTLOOKS
CAPITAL MARKETS
ECONOMY
CAPITAL MARKETS
Investors hoping to act at the bottom of the cycle may find that window to be shorter than in previous downturns as a soft landing for the economy and stabilization in interest rates could solidify confidence and pricing while bolstering market activity in the later half of the year.
03
Capitalization rates will continue to rise in 2023, but the upwards pressure will be mitigated by continued market strength in certain sectors.
02
Investment volumes for 2023 are anticipated to reach similar levels as seen over the last two years as interest rate and economic uncertainty eases.
01
DECARBONIZATION
Mass timber has emerged as a popular building material, acting as a more sustainable built form. Various commercial and residential developments are planned or underway in British Columbia, Ontario and Quebec that will double the count of significant developments in Canada.
03
Creative financing solutions are needed to support carbon retrofits as these projects often return positive rates of return, though below the cost of borrowing. CMHC’s MLI Select program will promote climate, affordability and accessibility advances within the residential sector.
02
Commercial real estate presents a major obstacle and opportunity as it relates to meeting the goals set out by the Paris Agreement. Owners and operators will upgrade, retrofit and decarbonize assets in the years ahead, all with the goal to reduce emissions and achieve net zero carbon operations.
01
OFFICE/OCCUPIER
Despite the headwinds facing the office sector, Canada remains well-positioned on a relative basis. Canadian cities have some of the lowest office vacancy rates in North America and, looking forward, Canada leads the G7 in employment growth, the single best indicator of office space demand.
03
The performance of office space will continue to bifurcate, with highly differentiated office space outperforming commodity space. Not all buildings are created equal, however, and it is therefore likely that this will keep structural vacancy rates elevated amongst certain product types.
02
Spaces that help attract workers back to the office will be a priority as employers aim to increase office attendance. Commute times have emerged as a key factor for employee satisfaction and will be as important as amenities and design in site selection.
01
RETAIL
The relationship between online and offline has continued to evolve, however the role of the store has never been more important. Despite the rise of e-commerce during the pandemic, Canadians have returned to physical retail spaces, seeking experiences and services that cannot be offered online.
03
Inflation and elevated interest rates have started to constrain wallets and ultimately will lead to a more cautious consumer in the year ahead. Both retailers and consumers will be more cost-conscious, however quality of service is not to be overlooked.
02
The latest wave of development will see mall assets be repositioned into centres that cater to all facets of live-work-play. Major projects have been announced that will add density to existing properties through residential towers to unlock value in underutilized parking or surrounding surface lots.
01
INDUSTRIAL
The third-party logistics industry is expected to continue driving leasing activity in 2023 as more companies look to outsource their supply chain processes.
03
A record amount of new supply is expected to deliver in 2023, but this will have a minimal impact on availability as robust pre-leasing and a relatively conservative approach to construction keeps market conditions tight.
02
Rent growth is forecast to moderate to more sustainable levels in 2023 as some tailwinds dissipate. However, growth will still outpace the historical average pace seen over the last 10 years.
01
MULTIFAMILY
The Canadian multifamily sector faces increased regulatory risk in 2023 amid peak housing unaffordability and greater political scrutiny.
03
Demand for multifamily rental is expected to continue rising and outpace supply, further driving down vacancy rates and accelerating rental rate growth.
02
Housing affordability has eroded to its worst level in over 30 years, leaving renting as the only viable housing option for an increasing number of Canadian families.
01
ECONOMY
REGIONAL OUTLOOK
Interest rates are expected to remain elevated throughout most of the year as the Bank of Canada monitors the lagged effects of monetary policy on the economy.
03
Interest rates are expected to remain elevated throughout most of the year as the Bank of Canada monitors the lagged effects of monetary policy on the economy.
02
Interest rates are expected to remain elevated throughout most of the year as the Bank of Canada monitors the lagged effects of monetary policy on the economy.
01