MIAMI—Canadian investors are grabbing plenty of UScommercial real estate, but not just any US realestate will do. In part three of this exclusive interview series,we're tackling this question: What's the downside?

| asked Dan Carlo, a principal withAvison Young for his take on these topics. If youmissed part one, you can still read it: Why Canadian Investments in US Are Surging. You can also readpart two: Are Canadian Investors Moving TowardOffice?

| Is there any downside to the rush fromCanadian investors?


Carlo: We do not feel there is. By and large,Canadians are stable, patient and sophisticated investors. Again,we see the surge of Canadian capital as a reaffirmationthat—notwithstanding the issues our country faces—the US remains aglobal beacon for investment safety and stability.

| Is it creating more competition forUS-based buyers?


Carlo: Of course! Most Canadian investors areboth well capitalized and credible. Their significant presence inour investment market for several years now has helped buoy priceson existing properties. At the same time, Canadian investment hashelped spur the development of new opportunities. It's allgood!

| Are we getting too dependent on foreigncapital?


Carlo: An exhaustive response to the questionwould require a broader discussion of international and fiscalpolicy, as well as an analysis of the impact of foreign capital onbonds, stocks, exchange rates, et cetera. Sticking to real estatefor now, the US real estate market is of such a size that there isample space—if not a need—for foreign capital to play a meaningfulrole.


Foreign capital has been a market stabilizer. Similar concernswere raised in the 1980s when Japanese investors were taking majorpositions in prominent US properties such as Rockefeller Center inNew York. We seem to have come out from that “over-dependence” justfine.

| How long do you expect this interestfrom Canadians to last?


Carlo: We see Canadian demand in US real estateremaining strong for the foreseeable future. A big variable will behow quickly US real estate prices recover from the Great Recessiontroughs and return to replacement-cost levels.


At that point, we can reasonably expect Canadian capital—as wellas that from other global players—to taper its US allocation andreallocate elsewhere. Emerging markets such as Mexico and Brazilshould be the beneficiaries of such a potential pivot.

| Is this just a blip on the radar screenor a longer-term strategy?


Carlo: The reality for Canadian investors isthat their domestic market is highly concentrated in a fewindustries and, for the most part, in the hands of the largestdomestic players. So, foreign investment is a portfolioimperative. The US offers the largest and most familiar investmentalternative and, as such, can reasonably be expected to continuallyreceive large amounts of investment across all real estate assetclasses from Canadian investors.

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