The low transaction volumes of recent years proved beneficial for well-capitalized real estate companies which were able to leverage the decreased competition to make acquisitions at more favourable prices. Their strong balance sheet, access to credit, and better banking relations will continue to be a differentiator supporting growth and liquidity in the coming year as smaller, less-established firms may face continued financial challenges and slower growth expectations.
A stronger financial footing also allows established companies to strategically direct available capital toward property improvements and enhancing residents’ living experiences, which contributes to property value appreciation when market conditions make acquisitions less accessible and increases their marketability over the long term. While market-driven value declines from 2022 to 2024 have moderated the positive impact of these upgrades, declining interest rates and cap rate compression should allow the gains to have a stronger effect in 2025.
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Real estate developers are adapting to shifting resident preferences to remain competitive. Across purpose-built rental and condo markets, there is a growing demand for larger, more functional units that prioritize livability, moving away from investor-driven designs focused on volume and cost. By prioritizing thoughtful layouts, community-focused spaces, and convenience, developers can better serve this market.
As always, location plays a crucial role in this shift. Secondary cities like Hamilton, Ottawa, London, Kitchener, and Waterloo are recently gaining traction for their balance of quality of life and affordability. Unlike bedroom communities, these cities offer opportunities to live, work, and play without long commutes, making them attractive to a wide range of residents. Boutique developments in established neighbourhoods offer a desirable alternative to crowded towers in overly dense, underserved development corridors.
Questions around the investment climate appear clearer, prompting growth-oriented investors to prepare for a resurgence in real estate. At the same time, those prioritizing wealth preservation may view aspects of the economic environment differently. These investors are increasingly turning toward private Canadian multifamily real estate, attracted by its diversification potential and stability.
Although Canadian inflation measures have fallen within the Bank of Canada’s target range in the final months of 2024, some inconsistencies can suggest inflationary pressures might remain unresolved.
