CBRE breaks down the commercial sector's challenges and opportunities in 2023
While the outlook for Canadian commercial real estate appears to be uneven in the near term, a soft landing remains a distinct possibility for the sector, according to a new report by CBRE.
“Eight successive interest rate hikes by the Bank of Canada saw the pace of commercial real estate investment slow in the latter half of [2022] following the records set in the first half,” CBRE said in its latest market analysis. “Key indices including the TSX, oil pricing, housing prices, and Canadian REITs ended the year in the negative.”
Learn some options of real estate investment in Canada here.
However, CBRE stressed that “context is key” when considering these indicators.
“When measured against early 2020, before this period of change, each of these indices yielded positive returns,” CBRE said, adding that despite the likely higher costs of capital impact asset values in 2023, “there is likely more good than bad to come.”
The anticipated slowdown is not likely to impede the commercial sector’s overall performance in 2023.
“A soft landing is expected where the economy should see a technical recession while still being positive on the balance of the year,” CBRE said. “Capital market volumes are expected to rebound in the spring, interest rates will be closer to going down than up, and the continued growth of the digital economy will only benefit Canada.”
More importantly, Canada is likely to set the pace among the world’s most developed economies, although challenges like housing affordability, commute times, and decarbonization could persist for some time.
“While the pace of change will not ease, real estate is a long game where performance is driven in large part by the broader economy,” CBRE said. “Across all key indicators – population, GDP, and employment growth – Canada is set to lead the G7 over the coming five years.”
