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David Mayrand
Chairman and Founder of Maoki
Over the past several years, the Canadian real estate market has been operating in an environment rarely seen in decades. Persistent inflation, rapid interest rate hikes, significant fluctuations in bond markets, and a slowdown in transaction activity have fundamentally changed the way investors, developers, and lenders make decisions.
Contrary to what many might assume, the main challenge in today’s market is not simply the level of interest rates. Commercial real estate has already gone through periods of expensive financing, and investors are generally able to adapt their strategies to higher costs of capital. What truly complicates decision-making today is the lack of visibility caused by market volatility.
When an investor cannot reasonably anticipate financing costs three to six months ahead, project analysis becomes significantly more difficult. Financial projections must be constantly adjusted, returns become harder to secure, and refinancing strategies lose predictability. This instability naturally slows decision-making and pushes many participants toward a more cautious stance.
In the current environment, real estate transactions require more validation, deeper analysis, and often greater patience. Many buyers are revisiting their return expectations, while some sellers remain anchored to values observed in more favourable market conditions. As a result, timelines are longer and transactions take more time to close.
This reality is particularly evident among real estate developers. With higher borrowing costs and more sensitive financial markets, many projects now need to be restructured to remain viable. Margins for error have narrowed, and the quality of financial structuring has become just as important as the quality of the project itself.
From the investor side, the approach is also more selective. Assets with stable income, strong locations, and high-quality tenants are attracting greater attention. In more volatile markets, the resilience of cash flow has become a central component of risk assessment.
Property owners approaching refinancing maturity are also feeling this pressure. Many loans originated in a low-rate environment are now coming due under very different conditions. Debt service coverage ratios are tighter, leverage levels are lower, and many owners are required to inject additional equity to maintain acceptable lender requirements.
Financial institutions, for their part, remain active, but with a far more disciplined approach to risk management. Lenders now evaluate deals with particular attention to asset quality, borrower experience, available liquidity, and the project’s ability to withstand multiple economic scenarios.
Despite this more demanding environment, it is important to remember that a volatile market is not a paralyzed one. Well-structured projects continue to secure financing, and prepared investors continue to identify attractive opportunities. In many cases, periods of uncertainty even favour the most disciplined and well-organized participants.
More than ever, financial strategy has become a central element of real estate success. Understanding markets, anticipating rate movements, and properly structuring capital can now create a real competitive advantage.
Economic cycles will eventually stabilize. However, the current period reinforces a fundamental reality of real estate: in uncertain environments, the most successful decisions are rarely the most aggressive — they are usually the best prepared.
Contact us today to discuss your real estate financing needs.
(514) 507-3990
info@maoki.ca