The Crack in Canada's Armor

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VANCOUVER, B.C.—From shopping centers in Germany, to industrial warehouses in Mexico and multifamily properties in the US, Canadians have no fear crossing borders to place their commercial real estate investments in strategic locations around the globe. So says JLL.

In fact, according to the firm, which was in attendance at last week's ULI Spring Conference, “Canadian offshore investment accounted for a massive one-fifth of all global cross-border investment activity, totaling nearly $10 billion in 2013. But the country's prolific outbound activity does not translate inward.”

According to JLL's report titled, “The Canadian Quartet—Playing on the World Stage,” which was released at the ULI meeting, this door only swings one way: out.

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Since 2007, only 10% on average of all transactions in Canada have involved foreign groups. In 2012, that number sank to just 1%, recovering somewhat in 2013 to be 9% of all transactional activity, the report says. “With one of the world's highest rates of return, it can be a frustrating missed opportunity for foreign investors,” explained Lucy Fletcher, VP of JLL's International Capital Group in Canada.

Fletcher noted that “There's no doubt the global investment community has been stymied when it comes to finding that crack in Canada's armor…Look at Australia—a very similar market to Canada—inbound investment there regularly exceeds 30%.”

But is the lack of foreign investment holding Canada back? According to Fletcher, “Perhaps this could be true when it comes to liquidity especially when you consider how tightly held the Canadian Quartet downtown metros are by the domestic institutional investors, a market dynamic unlikely to change in the near term. Foreign investors are also an excellent source of new concepts, tenants and global best practices.”

To read more on the subject, click here to see JLL's recent blog and investment video on the subject.