One area of the North American economy that often gets overlooked is investment in commercial real estate. While so much of the discussion in the construction sector focuses on housing, as well as past and future “housing bubbles,” the commercial side of that equation provides investors with some unique opportunities that continue to remain in growth mode.
Specifically, a review performed by commercial real-estate firm Avison Young not only shows that investment in Canadian commercial real estate is strong, but that the investments are flowing over the border into the United States, too, therefore providing investors with plenty of opportunities to capitalize on a strong continent-wide commercial real-estate sector.
Strong economic fundamentals
First, regarding Canada, the review shows that Canada’s fundamentally-sound economy is serving as somewhat of a haven for commercial real-estate investors — both domestic and foreign. In 2016, within Canada’s six major markets, a total of $28.4 billion was invested in commercial real-estate sales, while the first half of 2017 saw almost $19 billion of investment in the sector, which is a 29-percent increase from the previous year.
More than $10 billion of the trades transacted this year were in office and retail assets, which represents more than half of the total investment in commercial real-estate so far this year. Transactions in the offices category was particularly strong, with $5.3 billion in sales — a 16-percent increase from the previous year. Toronto and Vancouver were the largest recipients of investments in this sector, although all the major markets experienced growth.
Crossing the border
Also according to the review, surplus capital that cannot be placed in Canada’s domestic commercial real-estate sector is flowing over the border into the United States. In fact, the review says that “Canada has retaken its place as the primary source of foreign investments in commercial real estate” in the American market, in part by filling the void left by Chinese investors dealing with their own government’s recent regulations in the sector.
In addition large institutional investors are experiencing satisfactory returns in the American commercial real-estate sector, and are expected to maintain or increase their exposure in the category for the foreseeable future. Although large metropolitan office markets remain a viable option, some larger investors are seeking opportunities in suburban offices as well as retail strip centres.
As a result, if there’s one big takeaway from analyzing North America’s current commercial real-estate market, it’s that there are plenty of opportunities available for those currently investing in Canada, as well as those looking southward to invest any available surplus capital.
ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.