MIAMI—Where are Canadian investors most drawn? Is there any downside to the rush from Canadian investors? How long do you expect this interest from Canadians to last?
GlobeSt.com caught up with Brian Ward, president of Colliers International’s Capital Markets group in the Americas, to get his thoughts on these and other questions. If you missed part one, you can still go back and read it: What’s Really Motivating Canadian Investors?
GlobeSt.com: Are there certain geographic areas that are a stronger focus for Canadian investors? How are Canadian investors picking their markets?
Ward: Canadian investors are no different than any other sophisticated global investor. They want a couple things: markets in geographic proximity to their home turf, such as Seattle, Chicago, Boston, New York and coastal markets that offer the best opportunities for strong real wage growth and demonstrated multiple exit strategies, such as San Francisco, Southern California,, Washington, D.C., and South Florida. Note that I am seeing more Canadian investors going global like many US private equity funds, and are now aggressively competing for product in the UK and Western Europe.
GlobeSt.com: Is there any downside to the rush from Canadian investors? Is it creating more competition for US-based buyers? Are we getting too dependent on foreign capital?
Ward: There is no unique downside to Canadian investors coming to the US that is different from any other capital coming to the US. They are every bit as sophisticated as US investors in their search for product, and the management of risk and return.
Yes, Canadian investors are creating more competition for US buyers, but so are APAC and EMEA investors. As noted above, this is not a “foreign capital” issue. It is a “global capital issue, including both domestic and offshore resources. The mentality for commercial real estate investment has changed fundamentally, even with the 2009 market correction, and global investors now see real estate as a core component of their overall investment strategy into all asset classes.
GlobeSt.com: How long do you expect this interest from Canadians to last? Is this just a blip on the radar screen or a longer-term strategy?
Ward: This is a long-term trend, unless there is a shake-up in the global capital markets, which causes investors to shift to alternative investment strategies, or re-balance their portfolios. One issue for all global investors will continue to be the potential for misalignment between real estate, which has traditionally been a long-term investment class, and the need to generate returns that are not consistent with that fundamental, such as short term real estate investment executions to meet higher yield requirements.
As long as global investors understand that real estate generally involves a long-term investment thesis, I see little near term change in strategy. Also, keep in mind that much of the capital driving this market is equity, and not necessarily higher-leveraged debt. When there is a correction, the ramifications on—and reaction by—and equity will be different than if it were debt.