Real Estate Investment Conditions & Trends
- Interest rates remain volatile, with the CDN 10Y and U.S. 10YT fluctuating significantly. Despite daily movements, our base case is that the CDN 10Y and the U.S. 10YT will generally hover in the 3.25% and 4-4.5% range respectively, consistent with long-run equilibrium.
- Elevated financing costs and tighter construction lending have slowed speculative development, constraining new supply. For some asset classes, the price reset has also shifted the buy vs. build calculus, where there is clear focus on buying assets below replacement costs. Limited new supply will help reinforce future rent growth and insulate occupancy in key sectors like multifamily and industrial.
- Public REIT pricing has rebounded off its trough. Public discounts to NAV have improved (though still negative); such parity bodes well for eventual REIT growth and acquisitions.
- Institutional allocations to CRE in diversified cross-asset class portfolios are holding steady near 11%.
- Focus will remain on income stability and growth potential, as opposed to aggressive interest rate and cap rate compression.
- Industrial vacancy will be pressured through mid-2026 as the manufacturing and consumer sectors adjust to higher prices and weaker demand. Retail demand has remained resilient but rising costs may impact specific categories. Niche sectors (data centers, seniors housing and student housing) continue to capture a growing portion of volumes. Regarding office, the market is far from uniform, presenting a diverse and complex landscape. High performing, in demand office properties in prime locations continue to lead the pack. Multifamily residential is expected to remain stable.
Check out our Q3 2025 Cap Rate Report to learn more.
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