From various classes of commercial real estate (CRE) all the way to the residential housing, the impacts of consumer habits and preferences are in a constant state of change. Canadian retail real estate is no exception.
The markets depend on the consumer behavior and the investments into CRE. Both domestic and foreign investments into the market affect the value and ultimately the demand.
Let’s disucss the latest trend noticed in the investment sales, specifically foreign investments in the commercial sector and its effect on Canadian CRE.
Foreign Investment in Canadian Real Estate
Each week we discuss the positive momentum for both foreign and domestic investments in CRE. The trends for retail continues to be positive. Many new retailers continue to choose Canada as their headquarters and/or for expansion projects. Construction projects are stable and renovation projects are up.
Despite this positive trend, recent news from Bloomberg News notes that foreign investment in Canadian commercial real estate has slid 70%. The data period analyzed was first half of 2019 versus first half of 2018. During this period, it was noted that all transactions totalled $1.5 billion versus last year, for the same period, the transactions totalled $5 billion.
Data Analyzed: What Does it Mean?
As we look carefully when analyzing these numbers the first question is to ask is why does the foreign investment appear to be decreasing and in what sector are they analyzing.
Data from Altus Group Ltd, notes that foreign investments in Canadian commercial real estate spiked in 2018. This was in part due to the purchase of a Canadian industrial landlord for $3.8 billion by Blackstone Group Inc. and Ivanhoe Cambridge Inc. Removing this transaction from 2018 and the numbers show that investment in the first half of 2019 are actually stronger than in 2018, at $1.5 billion (2019) and $1.2 billion (2018 less that one purchase by Blackstone and Ivanhoe). Foreign investment in 2019 is also stronger than in 2017 as well.
Data from Altus Group Ltd also shows that core assets that large institutional players favor includes top-tier office, urban rental apartments, industrial/retail developments, etc. Currently Canadian real estate market has a short supply of these investments so naturally prices have risen higher to match demand.
Expectations remain positive for 2019, and as the market continues to fulfill demand and a few pending sales transactions close, data shows that 2019 foreign investments will be the clear lead over the previous years.
Summary
It’s quite normal to see fluctuations in foreign investment trends, especially in the years following major investments in the Canadian commercial real estate market.
On the other hand, industrial/retail commercial real estate, top-tier office and urban housing are flourishing year after year, and they continue to attract foreign and domestic investments.
Ready to invest in retail/industrial Canadian CRE? Contact ReDev for more information.