Relations between the United States and Canada, historically marked by close economic ties and mutual cooperation, are showing signs of strain, raising concerns about their impact on one of the most lucrative pipelines of foreign investment into U.S. commercial real estate. According to a report by Business Insider, Canadian investors, who have been the largest foreign buyers of U.S. commercial property assets since 2015, may be reconsidering their approach to deal-making south of the border.
Over the past decade, Canadian buyers have poured roughly $184 billion into U.S. multifamily apartments, office buildings, retail spaces, industrial warehouses, and other commercial properties, according to data from MSCI. This makes them the top foreign investors in American real estate. However, recent tensions between the two nations have sparked fears that these wealthy Canadian pension funds and institutional investors might slow or even halt their acquisitions in the U.S.
Mark Rose, CEO of Toronto-based commercial real estate services firm Avison Young, highlighted this growing unease among Canadian investors. “There are clients who are very upset,” Rose told Business Insider. “Their first reaction is: if the U.S. can do this to a friend, then we’re not going to invest.” He added that Canadian investors are hesitant to finalize deals in the current climate.
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Gunnar Branson, CEO of the Association of Foreign Investors in Real Estate (AFIRE), echoed these sentiments during a February conference, noting he had “never seen so many angry Canadians before.” Branson emphasized that cross-border investors have traditionally viewed the U.S. as a low-risk jurisdiction but are now reassessing political risks in light of recent developments, according to the publication.
The broader landscape for foreign investment in U.S. real estate has already been dampened by high interest rates and uncertain property valuations, which have slowed sales activity in recent years. However, optimism had been building as expectations grew for interest rate cuts and a rebound in dealmaking activity. Branson acknowledged this cautious optimism but noted that Canadian and other foreign investors remain in a “pause” mode.
Despite these challenges, A.T. Kearney’s annual Foreign Direct Investment (FDI) Confidence Index offers hope for the U.S.’s enduring appeal as an investment destination. Released this week, the survey ranked the nation as the top choice for foreign investors, followed by Canada, the United Kingdom, Japan, and Germany. While China and Hong Kong slipped from third to sixth place due to economic challenges such as a property crisis and trade uncertainty, developed markets dominated the top 25 rankings, underscoring a preference among investors for stability.
The survey highlighted key drivers behind foreign investment decisions in these leading markets. For the U.S., technological innovation, economic performance, and ease of doing business were cited as primary attractions. Canada’s appeal was bolstered by its infrastructure quality, supported by a 12-year plan to invest $180 billion—alongside strong economic performance and innovation. Similarly, economic performance and infrastructure quality were pivotal for the U.K., while Japan’s rise from seventh to fourth place was fueled by its technological innovation and robust infrastructure.
Germany also ranked highly due to its focus on innovation and economic strength. In contrast, China’s decline reflected growing geopolitical risks and supply chain disruptions that could drive up commodity prices—a concern echoed by A.T. Kearney’s report on global uncertainty.
The survey also revealed shifting regional priorities among investors. Over the next three years, the Americas are expected to lead in economic growth and technological dynamism, while Europe is seen as taking the lead in green transitions—a critical factor for environmentally conscious investors.
As geopolitical tensions rise and economic uncertainties persist globally, efficiency in legal and regulatory processes remains a top priority for investors deciding where to allocate capital. While Canada’s frayed relations with its southern neighbor may temporarily disrupt its dominance in U.S. commercial real estate investments, broader trends suggest that both nations will continue to play pivotal roles in shaping global investment flows, albeit with heightened caution moving forward.
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