- What Colliers expects a return to growth for Canadian commercial property investment
- Why Interest rate cuts and strong market fundamentals likely will lure Canada’s institutional investor base back to domestic markets
- What next Deal activity is expected to pick up in the next six to 12 months
Deal activity is expected to pick up next year, Colliers said, as pension funds and other large institutional investors return to the market.
That said, the brokerage is preaching patience and projecting it will be six to 12 months before an uptick in transactions is seen.
Noticeably absent from the market for the last several years, domestic institutions are expected to return in 2025. According to Colliers, institutional investment in Canada represents just 23% of overall market activity this year through the third quarter. While that’s up from levels seen in 2021 to 2023, it remains well below the long-term average of 30% to 40%.
“However, improving interest rates and a narrowing pricing gap between buyers and sellers are expected to draw … institutions back to the local market, likely boosting transaction activity by late 2025,” the brokerage said in an annual report tracking the outlook for commercial investment across global markets based on local market research and feedback provided by the brokerage’s client base.
Colliers also expects Canadian markets to continue to draw international investors attracted by the country’s strong macroeconomic fundamentals, growing population and relatively stable political outlook.
“With private investors currently dominating the market, activity will broaden beyond more prominent U.S. private equity players and Asian institutions to sources from other global regions, such as Europe, and more diverse mid-sized investors,” the brokerage said.
In terms of sectors, Colliers highlighted grocery-anchored retail assets in the GTA, Vancouver and Montréal as the top pick, followed by the multifamily sector in the GTA, Calgary and Ottawa, and industrial assets in secondary markets such as Kitchener-Waterloo and Winnipeg with strong leasing fundamentals.
The brokerage said the office sector could “yield deals for patient investors.” As employers bring employees back into physical spaces, the tide could be turning.
“With valuations significantly down and recent major transactions in cities like Vancouver and Calgary gaining traction, renewed leasing interest in prime suburban properties may encourage more owners to accept write-downs to jumpstart sales,” Colliers said.
The brokerage pointed to high seller expectations as a possible headwind to renewed activity. Also, if the U.S. goes into recession, Canadians may be enticed to opportunities in that market.
