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CANADA RANKS NUMBER ONE FOR INVESTMENT

With a robust economy and strong fundamentals, Canada remains one of the best places in the world for international business, creating an ideal low-risk environment for real estate investors.

May 2015

A strong and stable financial system, low taxes, one of the highest standards of living in the world, a business-friendly environment, world-class cities, and a well-educated and multicultural workforce have made Canada a preferred destination for foreign investors.

Over the last 10 years, Canada’s economy grew faster than any other G-7 country, according to the World Bank. Canada offers foreign direct investors one of the strongest banking sectors in the world and a government fiscal position that is better than any other G-7 country including the USA; it continuously ranks as one of the most cost-effective global investment destinations.

According to CBRE, Canada’s real estate investment market is experiencing simultaneous maturation and expansion. New players, capital sources, and heightened scrutiny will be important factors in the current year for commercial real estate investors.

“We have never seen the capital markets so deep, with domestic and global capital pursuing commercial property across Canada. Real estate has a larger role than ever before in many investment portfolios. The challenge is finding a home for all this capital,” says Peter Senst, CBRE’s President of Canadian Capital Markets.

INVESTOR PREFERENCES

In 2014, real estate investors’ interest remained strong across all asset classes. Retail and office assets remained the preferred choices and outperformed all other asset types, representing CAD 6.5 billion and CAD 6.4 billion of total flow of capital in 2014, as per CBRE. The investment outlook remains positive for 2015, supported by excess affordable capital in the market, strong interest for quality assets from institutional buyers, and long-term confidence in Canada’s commercial real estate.

“Toronto, Montreal, and Vancouver are the leading cities in Canada for cross-border transactions,” comments Adam Kosoy, Senior Managing Director, Capital Markets & Investment Services (Canada) at Colliers International.

According to Colliers, in the past two years Toronto had 45 cross-border property transactions totalling 41.4% of total volume in Canada, while Montreal had 13 cross-border property transactions accounting for 14.5% of total volume. Vancouver had 11 cross-border property transactions giving 12.5% of total volume.

INVESTMENT HOT SPOTS

Researchers predict that in 2015, investors will continue focus on core, quality product in Canada’s largest cities.

“Investment activity remains focused on the core markets and institutional grade product, given the state of the equities/commodities markets,” says Adam Kosoy.

Paul Morassutti, Senior Managing Director of CBRE’s Valuation & Advisory Services notes, however, that an issue facing the whole commercial real estate industry in Canada is the difficulty of differentiating between core and secondary product.

“The line is not absolute. Our cities are changing rapidly and so too is our concept of location and redevelopment potential,” explains Morassutti.

According to PwC’s Emerging Trends in Real Estate 2015 report, there will be significant opportunities for real estate investors in western Canada with Calgary and Edmonton as the top two markets in residential, retail and office sectors.

“Despite the drop in oil prices in the latter half of 2014, there’s a sense of long-term momentum and growth in Calgary,” agrees Greg Kwong from CBRE. “Construction in all sectors – office space, hotels, industrial, retail – is infusing new supply into the market and is expected to be absorbed quite comfortably.”

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