2025 was supposed to be the year that economic conditions normalized and the commercial property market in Vancouver and around the country would start its recovery - and perhaps even accelerate. 

That obviously has not happened, said CBRE Chairman Paul Morassutti on Wednesday at the Vancouver Real Estate Forum, in a keynote address that surveyed market conditions and each asset class (listed below). 

"After five years of almost non-stop challenges, the Canadian real estate industry was well positioned into 2025,” he said.

But instead, developers and owners in industrial, office, retail and multifamily assets are dealing with a range of nagging troubles including decreased immigration, stricter borrowing conditions and continued tumult in office usage.  

U.S. President Donald Trump's trade war has only supercharged that uncertainty. 

"It is undeniable that U.S. trade-policy uncertainty has passed a heavy cloud over both investor and occupier sentiment,” Morassutti said. "The president ended the old certainties that underpin the world economy, replacing them with extraordinary levels of volatility and confusion."

Uncertainty wrought by Trump won’t last: Tal  

But the uncertainty wrought by Trump can't go on forever cautioned Benjamin Tal, managing director and deputy chief economist, CIBC Capital Markets, in a separate keynote address. 

Trump has several vulnerabilities: "He cannot have a situation in which the stock market enters bear territory,” Tal said.

Second, the U.S. consumes 22 million barrels of oil per day, but only produces 13 million barrels, Tal said. Much of the rest comes from Canada. Americans won't tolerate increasing gas prices, but those prices are going to go up, he said. 

Third, inflation will drag U.S. trade policy back from the brink, Tal said. "He has been campaigning against inflation for a long period of time." 

The trade conflict will likely boost the cost of goods and services in the U.S. and the Fed may even have to raise interest rates, instead of cutting them — a major source of tension between Trump and Federal Reserve Chair Jerome Powell. 

Time is another major factor, Tal said. With mid-term elections roughly a year away, Trump won't have time to bring his anti-globalization project to fruition before then. While the goal of his trade war is to repatriate manufacturing jobs to the U.S., that would take years or decades to happen.  

The upshot is most likely a renegotiation of the USMCA to include more surgical, targeted tariffs, but at much lower percentages than what we're dealing with today, Tal said.

"I'm actually optimistic about (reaching the) equilibrium that we are marching (towards), because it makes sense. The situation is unsustainable." 

Office market

The Bad: 

Liquidity is still a challenge, and lenders are still being selective about financing office projects, Morassutti said in his asset class assessments. Moreover, the cost to build and operate offices continues to rise as expectations and requirements over sustainability and tenant experience mount.

"It will become more expensive to own and operate office buildings going forward," he said, listing rising costs of amenitization, tenant improvements, base building build-outs, insurance and decarbonization.

The Good: 

Morassutti said there are signs of ongoing recovery. 

"Canada has experienced very little in the way of true distress, from peak to trough. Assuming 2019 was the peak of office market demand, then history would suggest the market will continue to recover through 2026, with vacancy peaking this year.”

In Toronto and Vancouver, a wave of new supply has wrapped up and deliveries will touch 30-year lows in the next two years, creating "a profound positive effect on vacancy and rents.”

In Vancouver and Toronto, the highest-quality office spaces are actually undersupplied, with vacancy decreasing in the trophy assets. It's older buildings that are struggling, and they may never recover. "We are not oversupplied, we are under-demolished.”

Vancouver continues to outperform all Canadian office markets, he said: "From a North American perspective, Vancouver reflects the lowest vacancy of any city."

CBRE's most recent occupier survey suggests tenants are looking to grow this year and sublease space is dropping. 

Retail market

The Bad: 

"The biggest challenge to the retail sector is . . . a slowing economy, households face a cooling labour market, slower wage growth and severe tariff uncertainty."

Morassutti said the collapse of The Bay has earned plenty of negative attention, but shouldn't be taken to represent the broader challenges of the retail industry. "The HBC story has little to do with Canada's retail environment and has been years in the making. Retailers who are unable to evolve face a similar fate."  

The Good: 

Nationally, retail remains a relative strength, Morassutti said, with vacancies below four per cent, and the pace of leasing reaching a multi-year high. "Necessity-based retail (and) discount retail has been exceptionally strong."

Industrial 

The Bad: 

In response to historically-low vacancy rates and surging rents, construction ramped up considerably in 2023 just as demand was waning, he said. Third-party logistics companies were the main sector to pull back, after expanding in previous years. "They simply took too much space . . . and that was before the tariffs, so weak demand and increased supply means that nationally, rents are down, but it's not across all building types or sub markets."

The most pronounced weakness is in the larger-bay segment. 

The Good:

"The industrial sector remains fundamentally sound, but again, trade policy uncertainty is clearly weighing down the sector," Morassutti said. "But let's also keep in mind that Canadian rents more than doubled over the past five years, and our major industrial markets remain the tightest in North America."

Residential

The Bad: 

Troubles in new condo market will continue, for now. There are record numbers of unsold condos in Toronto and Vancouver, and many projects have been converted to rentals or paused. 

"Reduced immigration targets will only further weaken growth," Morassutti said. "However, we view this as more of a short-term cyclical issue, rather than a long-term headwind. Canada's population growth, even accounting for the fully reduced immigration targets, is still expected to lead the G7."

In Vancouver, the 2024 condo sales market was a disaster, and 2025 isn't shaping up to be much better, he said. 

"What we haven't seen is more actual housing. In mid-2022, the CMHC recommended that 5.8 million new homes be built by 2030 in order to restore housing affordability . . . We are not even close."

The Good: 

It's tricky to find the positives in the condo market, but Morassutti suggested slower construction in Toronto and Vancouver, combined with immigration growth returning to normal in coming years, could lead to a demand resurgence. 

"There have been very new projects launching in 2024 and . . . in 2025, and very few sales. And so what the numbers tell us is that if nothing's selling today, then in two to four years from now, there will be a severe shortage of units to buy, and that could very well set off another condo boom."