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The commercial real estate market in Canada is closely tied to fluctuating interest rates, which hit a two-decade high of 5.00% in 2023. Experts predict that the Bank of Canada will start lowering its policy interest rate around mid-2024. In the office sector, Altus Group reports 56 office projects under construction, mainly in Toronto and Vancouver. However, the office market is expected to remain sluggish, with landlords needing to offer incentives or amenities to attract tenants. CBRE's office market report indicates a growing disparity between Class A and Class B buildings, with demand higher for quality spaces and vacancies rising in Class B buildings, particularly in downtown cores.

The industrial sector in Canada, on the other hand, continues to thrive despite elevated interest rates and inflationary pressures. Altus Group notes that investors favor the industrial asset class for its minimal risk and stable returns. In Q4 2023, the national availability rate for industrial space increased slightly to 4.3%, reflecting the completion of 16.3 million sq. ft of new space. The retail sector is experiencing a shift to e-commerce, increasing the demand for industrial space, such as warehouses and distribution centers. Investors are cautiously optimistic about the industrial sector, anticipating a continued trend of rising demand for modern industrial spaces, especially in suburban outskirts of major markets.

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