Canada Construction Outlook

Development activity to face growing pressures in 2025. Entering the new year, construction costs continue to rise at a fast pace despite falling interest rates and improving labour availability. As the elevated cost structure necessitates a compelling return on investment, builders increasingly require robust and sustained space demand to justify new construction projects. A recovery in space demand across all commercial real estate sectors is set to take shape – driven by the Bank of Canada’s efforts to boost economic activity – but mounting uncertainties surrounding trade policies and demographic challenges could derail this outlook. These downside risks have likely eroded developer confidence, possibly leading to a slowdown in construction activity throughout 2025.