- What More commercial real estate pros expect to deploy capital in 2025, according to Altus Group
- Why Concerns over capital costs are dropping as inflation eases
- What next The majority of Altus Group survey respondents believe a recession is likely within the next six months
A small but growing segment of Canadian commercial real estate pros intends to participate in the market in 2025, but there is a rising concern that an economic recession is on the horizon.
Those were some of the takeaways from quarterly survey results released by Altus Group measuring investor confidence and expectations for the Canadian commercial market during the fourth quarter of 2024.
For the Q4 study, Altus received 240 responses from pros representing close to 80 firms, among them investors, developers, brokers and lenders.
As part of the findings, 22% of respondents indicated that their top organizational priority is to deploy capital for property transactions in the next six months. That’s a 2 percentage point increase compared with Q3 and a 5 percentage point jump year over year.
Meanwhile, 46% of respondents said their highest priority is managing existing portfolios over the next six months. That number is down 8 percentage points from the past year.
Another 20% of respondents indicated raising capital was the top priority, a small drop from the previous quarter. Just 3% listed divesting assets as their top priority over the next six months.
Concerns over the cost and availability of capital were seen as top priorities over the next 12 months for respondents, albeit the sentiment was reduced from previous quarters. Eighty-two percent of respondents, in fact, are confident capital conditions will improve.
Similarly, concerns over inflation fell by 14 percentage points compared to the previous quarter, with the national inflation rate dropping to 1.8% in December.
Thirty-two percent of respondents saw housing costs and availability as central points of concern for 2025, up 7 percentage points from Q3. Issues such as municipal zoning reforms and property taxation have gained more prominence, each up by 11 percentage points.
Fifty-one percent of respondents feel a recession is somewhat or very likely, representing a 5 percentage point increase from Q3 2024, but down significantly from the 78% who in 2023 believed a recession was imminent.
Fifty-four percent of Q4 respondents think a recession will be short-lived, though a strong majority believe it will create a “somewhat challenging” operating environment over the next 12 months.
Looking at prospects for future transactions, 20% of respondents from firms with more than C$5bn of sales indicated they would dispose of property in the next six months – up 11 percentage points from Q3 2024. Meanwhile, 53% of respondents from midsize firms, with $500m to $1bn of sales, are looking to acquire assets. And 44% of smaller firms, with sales under $500m, indicated they would not take part in any commercial property transactions over the next six months.
Across sectors, a slight majority of respondents thought that industrial, single-family residential and office properties were overpriced in Q4, with a whopping 72% of the belief that land and development costs are way too high.
Conversely, the vast majority of respondents indicated multifamily, retail and hospitality properties are fairly priced across Canadian markets. Seventy-two percent were bullish on the growth of the multifamily sector over the next 12 months.
Enthusiasm for industrial properties has abated somewhat, with 55% continuing to favour the asset, representing a drop of 3 percentage points from Q3, and 25% year over year.
Other property types projected to grow this year are data centres, seniors housing and retail.
Office remained a source of concern, with 83% of respondents projecting the asset class to be a low performer during 2025.
