The Canadian real estate market is at an inflection point. Traditional investment strategies are being reevaluated in the face of higher financing costs, economic headwinds and heightened geopolitical risks. However, amidst this challenging landscape, exciting new opportunities are emerging for businesses and investors willing to adapt and innovate creatively. 

A new report from PwC highlights a mixed real estate outlook in 2025 and points towards a future where new technologies such as generative AI, emerging asset classes such as data centers and climate-resilient infrastructure will be key drivers of success. 

As we head into 2025, here are a few emerging trends:

Generative AI will reinvent the real estate industry

While still in its early stages of adoption, generative AI offers significant competitive advantages, helping organizations maximize efficiencies, accelerate innovation, and improve productivity. 

From creating architectural renderings and supporting developers with land due diligence to monitoring rental market trends, generative AI is poised to revolutionize how businesses and investors operate, even amidst economic pressures.  

Data centres and other niche assets offer new opportunities for investors

As traditional real estate investments slow down, demand for niche property types like data centres and cold storage facilities is surging, driven by the exponential growth of generative AI and continued growth in e-commerce. 

With residential real estate markets in Canada’s largest cities like Toronto and Vancouver slowing, investors are shifting their focus to other regions and specialized asset classes. Data centers present a prime investment opportunity with the potential for significant returns. Infrastructure investments, such as those in digital connectivity and sustainable energy, are also gaining attention for their stable cash flows and diversification benefits. 

This represents a shift towards integrating real estate with infrastructure to meet evolving economic and technological needs – a trend we expect to continue in 2025. 

Build for the future with climate-resilient real estate investments

Climate resilience is now a key factor in assessing real estate value due to the increasing frequency and severity of extreme weather events. These events directly impact property values, insurance costs and disclosures. 

Forward-thinking investors are prioritizing climate change preparedness, recognizing that these investments offer both risk mitigation and enhanced ROI. Buildings designed with energy efficiency, sustainable materials, and robust infrastructure are more resilient to climate impact and attract sustainably conscious tenants.

Distressed assets offer new avenues for private investors  

Capital constraints and more conservative lending standards will continue into 2025. With traditional capital scarce, private investors, including family offices, high-net-worth individuals, and those willing to consider distressed real estate will find opportunities in the new year.  

In addition, while larger real estate investors can still access loans, smaller and less established companies face higher capital constraints. This environment creates new opportunities for private investors to provide capital to projects that face financing gaps or challenges. 

Foreign investors will fuel Canadian real estate dealmaking

A resurgence in dealmaking is expected from foreign investors with available capital. These investors plan to capitalize on emerging distress in real estate, facing less domestic competition for assets like multifamily and industrial properties. 

Affordability will continue to remain a critical challenge in many Canadian housing markets. While Western Canada, particularly Calgary and Edmonton, continues to emerge as a top market to watch due to relative affordability, this region also faces increasing climate-related concerns, making sustainability a growing focus.

2025 will be a year of creative deal-making, strategic partnerships, and a willingness to explore new approaches. While the outlook is mixed, there are signs of optimism. Those who embrace emerging technologies like generative AI, prioritize sustainability, and diversify their portfolios across regions and asset classes will be best positioned to navigate the Canadian real estate market and capture significant value.