Principal, President, Canada
Over the past few months, amidst multiple tariff announcements out of the United States, we’ve had leadership uncertainty in Canada. With a new Prime Minister, we will see renewed certainty and forward momentum.
There's no doubt that the lack of clarity of the past few months, both from a leadership standpoint and from a tariff standpoint, has had clients pushing the pause button.
Occupiers and investors have been trying to understand the impacts of tariffs and a new government in Canada. Now, the new government is in place and will be in a solid position to address the challenges of tariffs and our relationship with the American administration and other trading partners around the world. In Alberta, for example, the pause button has less to do with tariffs and more to do with the new government, because the outcome of our election in Alberta is significant, given how all policies touch this province. Hopefully, Prime Minister Carney reconnects with our friends in this important part of the country.
Although we may still see some challenges ahead with a minority Liberal government, rather than a majority, I see great potential for Mark Carney and Pierre Poilievre to set aside differences in their policies and beliefs and, instead, reach common ground for the strength and resilience of Canada – given these leaders do in fact share some mutual ideas.
What do I mean? Both parties promised to eliminate the Goods and Services Tax (GST) for the purchase of a first home of less than one million dollars. Both parties also committed to lowering taxes for the middle class, which should help consumer spending. In terms of energy infrastructure, both leaders said they would create a one-stop shop to expedite the approval and construction of major projects. Both leaders also agreed that Canada should focus on energy, which will benefit Alberta's economy but also create energy security for Canada. Further, both the Liberals and the Conservatives are promoting more efficient government management and reduction of red tape and bureaucracy. These measures are all good for our economy and for commercial real estate – key campaign promises made by both parties that will be beneficial for commercial real estate, and should technically be facing little or no opposition now.
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As we know, Canadians have been seeking change. Our young people, especially, want change, and they want our governments to address the housing shortage, interprovincial trade barriers, reduction of government spending, and better investment in our people. Basically, setting up Canada for winning conditions, whether it's business, education, immigration, all the things that impact our ability to grow and prosper. Let’s keep in mind that our GDP per capita has been anemic for the last decade and we need to seize the opportunity to grow GDP.
Congratulations to Prime Minister Carney. He brings incredible credentials, having held major global positions as the head of the Bank of Canada, and then head of the Bank of England. He has a stellar business background working for Goldman Sachs and Brookfield. This is somebody that can help guide and lead us in hopefully developing new trading partnerships and policies. As our Prime Minister, he will explore and build new relationships for Canada.
We were going into the last quarter of last year feeling confident about 2025. And the recovery within commercial real estate and the economy is still in excellent shape. We have low unemployment and inflation is under control, so far. A lot of positive things were leading up to a recovery for commercial real estate in 2025.
The US election and new leadership has caused a lot of turmoil leading to uncertainty. Yet, what we're finding going into the first quarter is that large and upper mid cap companies both on the occupier and on the investor side continue to make decisions on the long term. Trade policy isn’t affecting their decision-making as much as the smaller midcap and small-cap companies. Those companies tend to be more cautious.
This combined with strong fundamentals like low inflation and falling interest rates is a winning combination for the real estate industry.
Office conditions are more positive than you might initially be led to believe. Smaller transactions are moving ahead in the current landscape. In particular, local private buyers are active, encouraged by the long-term upside at current valuations. Suburban office assets have emerged as a bright spot. A consideration for suburban office demand is the connectivity to the employment base from nearby residential suburbs. Many leasing markets are showing positive absorption, which means more space is being leased than vacated. There is little or no supply on the horizon, while return to office momentum is firming up. We can see the light at the end of the tunnel. For this reason, I suggest that this is an asset class to watch closely for opportunity if you’re a patient investor.
Meanwhile, large transactions have slowed significantly. In general, capital remains in tighter supply for office buildings, and continue to favour multiresidential assets; as borrowers are choosing conventional financing over CMHC-insured due to the added flexibility at stabilization. Overall, developers of all asset classes are cautiously approaching what space they want to deliver to the market, now that interest rates are lower.
Reach out to Mark Fieder to learn more
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