When it comes to investing in Canada, Canadian firms and pension plans still dominate the market. However, recent reports suggest that more foreign capital may be making its way into the country in 2014 and the years to come.
A November report by Jones Lang LaSalle (JLL) pointed out that Canadian investors parked an increased amount of capital offshore in 2013. Indeed, direct overseas investments from such investors as the Caisse de dépôt et placement du Québec, Manulife Financial and the Canada Pension Plan Investment Board accounted for nearly 60 percent of all Canadian real estate investments in 2013. The report, however, also noted an increased influx of global capital to the country.
For the last six years, the US, Germany and the UK have been the biggest foreign investors in the Canada, but Chinese capital has been increasingly active in 2013 “seeking out land and development opportunities for condominium and town-home projects, as well as significant investments into the hospitality sector,” according to the report.
Lucy Fletcher, co-author of the report and vice president of capital markets at JLL, noted that, along with the increase of foreign capital coming to Canada, there is an increased interest from Canadian fund sponsors to attract foreign investors. “Some of the Canadian fund managers that have brought new funds to the market or have held closes this year have done a lot of global marketing, but there’s so much domestic capital that they’re able to raise it much more easily locally,” she said. “They’re very interested to tap into the influx of foreign capital.”
Indeed, Standard Life Investments’ Canadian Real Estate Fund (CREF) is one vehicle certain to bring more international money into the country in 2014. The fund, which held a first close on C$77 million in September, has a main vehicle targeting Canadian investors as well as a feeder fund for non-Canadian commitments. Such a structure is intended to provide access to the market for both Canadian and international investors.
Meanwhile, another November report from PwC and the Urban Land Institute outlines the strong prospects in such cities as Calgary and Edmonton as well as such sectors as retail. Survey respondents for the Emerging Trends in Real Estate 2014 named Calgary as their unanimous choice for Canada’s top market in the areas of investment, development and homebuilding for the coming year. The report named its ‘best bet’ for 2014 as urban and infill retail development due to “a shortage of retail to serve a population that increasingly wants to live, work and play without using transit.”