The commercial real estate market experienced a sluggish start in early 2024, as economic uncertainties and high interest rates initially dampened investor confidence and market activity. Transaction volumes were low, and both investors and tenants adopted a cautious approach. However, the landscape began to shift as the year progressed. Two key events this quarter were the increase in capital gains tax on June 25th and the Bank of Canada’s first 25 basis point rate cut.

This interest rate cut has made financing more accessible, encouraging businesses to expand and invest in new properties. The actual 25 basis point decrease is not particularly significant, but the sentiment is. The consensus is that rates will continue to decrease throughout the year. In addition, around mid-April 2024 it was announced that on June 25th the capital gains tax in Canada was going to increase. This increase pushed many sellers who were on the fence to dispose of their assets to avoid this increased tax. Both factors were significant in the increase in activity this quarter.

The office market, while still navigating the challenges posed by flexible work arrangements, is seeing renewed interest in adaptive reuse projects and innovative leasing strategies that cater to hybrid work models. The land market continues to experience struggles with some deals getting done but at major discounts in comparison to prices before the interest rate hikes in 2022 and 2023.

Looking ahead, economic adjustments and monetary policies are expected to further stabilize the commercial real estate market. Investors and stakeholders should stay alert to capitalize on emerging opportunities. With the right strategies and insights, there are promising prospects for growth and success in the commercial real estate sector in 2024 and beyond.