Generative AI, sustainable practices, and regional growth emerge as key focus areas
The real estate outlook for investors in 2025 presented a mix of challenges and potential growth areas, according to PwC Canada and the Urban Land Institute’s annual Emerging Trends in Real Estate (ETRE) report.
With rising financial costs, global uncertainties, and other pressures, the real estate market faces stiff competition from alternative investments. However, PwC Canada identified promising opportunities, particularly in emerging asset classes, generative AI (GenAI), and select regional markets.
"Canadian real estate companies are closely monitoring catalysts like declining interest rates, government policy changes and business model reinvention to reinvigorate investment and development," said Fred Cassano, partner at PwC Canada. “At the same time, they are exploring new technologies such as GenAI to enable productivity improvements.”
Bright spots
As Toronto and Vancouver’s condo markets cool with fewer pre-construction projects, investors are exploring other regions and niche property types. Data centers, for instance, are gaining traction due to the power demands of GenAI, though these facilities require substantial energy, sparking interest in sustainable energy sources.
“The use of generative AI in the real estate sector, though still evolving, offers significant competitive advantages," Cassano said.
Investors are also eyeing other specialized property types, such as cold storage facilities and student housing, which provide stable cash flows and diversify portfolios. This interest reflects a broader trend of integrating infrastructure into real estate to meet changing economic and technological needs.
While traditional hubs like Toronto and Vancouver slow down, Western Canada—particularly Calgary and Edmonton—is becoming a focal point for investors. Drawn by the region’s housing affordability and sustainable development potential, investors see Western Canada as a market to watch. However, this region faces rising climate-related risks.
"Real estate companies who are ready to take the lead on climate resilience can start with a portfolio-level analysis," said Cassano. “In times of significant business pressures, competing priorities, and complex assets, creative deal-making and expert operations become essential for success."
Read next: Nearly 3 in 4 global enterprises see ROI in first year of GenAI use: report
With extreme weather events on the rise, the report stresses that sustainability and climate resilience are increasingly essential for long-term real estate stability. Events like wildfires and floods pose a threat to property values, prompting many investors to prioritize energy-efficient systems and sustainable building practices. These approaches not only reduce risk but also attract tenants focused on sustainability goals.
"2025 will be about taking a fresh approach to investment and development," Richard Joy, executive director of Urban Land Institute in Toronto, said in the report. "Capitalizing on newer opportunities like GenAI and data centres requires real estate players to act with creativity and conviction, which may involve developing new capabilities, forging strategic partnerships, and entering new markets."
With tighter lending standards limiting traditional capital, private investors, including family offices and high-net-worth individuals, are filling the gap, particularly in distressed real estate. Foreign investors are also eyeing the Canadian market, seizing on emerging opportunities in multifamily and industrial properties where domestic competition is less intense.
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