Commercial Snapshot: Exploring Key Economic Indicators for Q1 of 2025

Looking at commercial real estate data for the first quarter of 2025, the Canadian Real Estate Association (CREA) observed signs of a weakening commercial real estate market amid tariff uncertainty. A decrease in the value of non-residential building permits issued compared to the previous year coupled with a slowdown in new housing supply, a worsening employment market, and the potential for further weakening in Canadian exports to the United States, are all factors. In the coming months, the possible removal of interprovincial trade barriers could mitigate some of the negative impacts of a trade war.

The value of non-residential building permits issued fell in the first quarter of 2025 owing to weaker intentions to build institutional and industrial facilities nationwide. 

Rising costs continue to make it challenging to increase housing starts, which continue to come in well-below the levels seen in 2021 and 2022. Contributing factors include high material and labour costs, high land values, and permitting/regulatory hurdles. The trade war’s impact on the Canadian economy could also keep builders sidelined as consumer confidence falters.

The labour market continues to show signs of weakness as a response to U.S. tariffs that take aim at Canada’s automotive sector. There are more people in Canada entering the labour force than there are getting jobs, and many younger Canadians and newcomers are finding it difficult to secure employment. CREA has advocated for improving credential recognition between provinces to help with the skilled labour shortage.

For the commercial real estate market, 2025 will continue to be challenging as costs remain high and trade uncertainty lowers consumer and business confidence. The decrease in interest rates may make it more financially feasible to participate in the market, however, the potential for worsening global trade could be highly disruptive to the Canadian economy and commercial real estate.

Here’s a deeper dive into some of the data CREA is monitoring on the commercial side of real estate.

Non-Residential Building Permits

From December 2024 to February 2025, approximately $12.9 billion in non-residential building permits were issued. This was down 10.2% compared to the same three-month period one year ago with notable declines in the institutional, and industrial sub-sectors mitigated by slight gains in the commercial sector.

A change in federal government policies around supporting economic growth amidst generational changes in global trade partnerships could help support the non-residential sector in 2025. 

Governments and private firms may find it challenging to increase investments in the non-residential sector as they face rapid cost increases. Political leaders have mentioned removing regulatory barriers to help offset some of the cost challenges and improve timelines. 

Labour Market Dynamics

The national unemployment rate in Canada moved higher to 6.9% as of April 2025, back to levels not seen since the second half of 2021, when the Canadian economy was still recovering from the pandemic, underscoring cooling labour market conditions amid higher uncertainty around global trade policy. 

Looking at differences between provinces, Newfoundland and Labrador leads the country with the highest unemployment rate, followed by Prince Edward Island and Ontario, underscoring weakening economic conditions. Saskatchewan and Quebec continue to have the lowest unemployment rates in the country.

Public sector job growth has vastly outpaced job growth seen in the private sector and for self-employed individuals over the last decade. Prime Minister Mark Carney has stated that his government will try to reduce regulatory barriers and help use government incentives to try to unlock investments to help boost private sector economic growth. 

According to the Bank of Canada’s First-quarter 2025 Business Outlook Survey, business sentiment has deteriorated and uncertainty is widespread due to the trade conflict with the U.S. Fewer firms are expecting growth in their workforce over the next 12 months. Uncertainty surrounding tariffs are making it tough for companies who must now exercise further caution with making major investments and hiring intentions.

Housing Starts

Canadian housing starts were down more than 10% in the first three months of 2025 compared to the three months prior and 9% compared to the same period last year.

The Canadian federal government has released an ambitious plan to more than double the number of housing starts nationwide by cutting taxes and red tape, and investing billions of dollars in new building technologies like prefabricated homes.

Rising costs continue to challenge homebuilders in bringing new supply to the market at a quick and affordable pace. A report by the Canadian Mortgage and Housing Corporation highlights that government-related costs can increase the cost of new home construction by as much as 30% in some markets. 

A report by CREA, produced in conjunction with, the Ontario Real Estate Association (OREA), British Columbia Real Estate Association (BCREA), and the Conference Board Of Canada, emphasizes the need to improve collaboration between provinces, regulators, and employers to address barriers with credential recognition to help improve worker mobility within Canada. This is crucial as provinces are discussing how best to enhance interprovincial trade and credential recognition in the face of tariffs.

Gross Domestic Product (GDP) Growth

In its April 2025 Monetary Policy Report, the Bank of Canada (BoC) noted that the Canadian economy ended 2024 strong, but escalating trade conflict is diminishing growth prospects for 2025 and high unpredictability of U.S. trade policy is making the economic outlook uncertain.

The Canadian federal government has announced plans to work with their provincial counterparts to vastly expand investments into major capital projects and other infrastructure required to improve economic corridors and expand our economy nationwide.

As Canada is a top trading partner for more than 20 U.S. states, further worsening of the trade conflict could negatively impact Canadian businesses and reduce economic growth across various regions and industries. The BoC indicates that uncertainty regarding tariffs is already weighing on consumer and business confidence and investment intentions and has raised inflation expectations.

The potential removal of interprovincial trade barriers and deregulation in key industries to improve timelines could add $200 billion in annual GDP growth to the Canadian economy according to figures from the federal government.