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.

Billions of dollars spent on renovations and infill development during the pandemic have boosted the overall value of residential housing and supported higher prices for single-family homes in Toronto and Vancouver, despite broader market pressures, according to the 2024 Re/Max Canada Changing Landscapes Report.

National spending on home renovations up 8% to nearly $300 billion — Toronto and Vancouver lead the way

The report highlights how ongoing revitalization efforts in these cities have significantly impacted housing supply and affordability, especially in urban cores. From 2019 to 2023, national spending on home renovations — including additions, upgrades and equipment — reached nearly $300 billion, an 8.0 per cent increase from the previous five years. Toronto and Vancouver were at the forefront of this trend.

Contrastingly, throughout the same time, residential building permits for single-family homes in the Toronto and Vancouver Census Metropolitan Areas (CMAs) totaled just over $27 billion — a near-24 per cent decline from the previous five years and a trend that’s expected to continue.

However, the value of permits for multi-family housing rose by 60 per cent from 2014-2018.

“With all available tracts of land in the city committed to high-density construction, the single-detached home is quickly becoming a unicorn,” says Re/Max Canada president Christopher Alexander.

“Existing homeowners who can’t find what they want in the market will buy an older home in an area of their choice and renovate or build their vision. We expect this trend will strengthen in the years to come and serve to drive price growth in single-detached housing even further. There are a variety of variables at play, but renovation and revitalization is having significant implications for housing supply and affordability.”

Revitalization & gentrification

Revitalization is still one of the most underestimated elements impacting rising housing values.

Renovation and infill development have transformed neighborhoods, particularly in areas where land values have far outpaced the value of existing homes. Older bungalows and two-storey homes are being replaced by custom-built houses, changing the face of working-class areas into desirable hotspots.

The report also highlights gentrification, particularly in Vancouver, where single-detached homes are growing larger, while condominium units are shrinking. Despite the overall decline in single-family home numbers, new construction has led to bigger houses in the Vancouver CMA, with the average home size reaching 3,600 square feet — the largest among major Canadian cities.

In Toronto, the number of vacant land properties dropped significantly (by 6,680) between 2019 and 2021, reducing opportunities for new single-family developments. As much as 30 per cent of the Greater Toronto Area (GTA)’s housing stock was built before 1960, making renovation a key strategy for updating older homes.

Stable prices: Those who can make their moves now vs later may be better off

Renovation activity, combined with rising affluence and intergenerational wealth transfers, continues to impact the housing market. The average price of a detached home in the GTA has increased by almost 35 per cent between 2019 and 2023, rising from $1.05 million to $1.42 million. In Vancouver, detached home prices have climbed nearly 38 per cent over the same period, from $1.42 million to $1.96 million.

However, Alexander points out that prices are currently stable compared to 2023: “Those in a position to make their moves now may be better positioned than those in 2025, as prices currently remain close to year-ago levels in the Toronto CMA and modestly higher in the Vancouver CMA.”

As Canada’s major cities continue to evolve, Re/Max expects that renovation and infill development will play an even larger role in shaping the housing market in the years to come. 

“The detached housing supply in urban centres is in the midst of a monumental metamorphosis that will unquestionably impact housing inventory and composition for further generations of real estate consumers,” notes Alexander.

Review the full report here.