Canada offers favourable investment conditions for commercial real estate investors amid the trade conflict with the U.S., says a new report by Colliers Canada.
There is no shortage of reasons to invest in Canada, ranging from government finances and cost of debt to demographics and return on capital, said a Monday report by the commercial real estate firm.
“Real estate is very dependent on the fundamentals, on just demographics, population growth, immigration, job market, and I think that’s always been something in Canada’s favour when you line it up against any country,” said Adam Jacobs, author of the Aug. 25 report.
Colliers Canada’s head of research said Canada has a “perception issue,” however, with higher taxes, a weaker dollar, a smaller market size and less investor familiarity.
U.S. dollars, bonds and tech stocks have traditionally been safe havens, although this may be changing amid volatile U.S. policy, Jacobs said.
“Usually, the U.S. benefits when the world is really chaotic and crazy and everybody’s scared and they’re running for safety,” he said. “We’re in kind of an unprecedented situation where the U.S. is sort of the instigator of a lot of this chaos globally.”
“That perhaps adds to the appeal of Canada in terms of, like, ‘Hey, I want somewhere safe to go, but you know, the U.S. seems a little wilder than maybe it used to be,’” he said.
Jacobs’ report highlighted Canada’s strengths versus the U.S. in the following areas:
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Better office performance in major cities. Vancouver’s office vacancy rate was less than a third of San Francisco’s in the first quarter. Return-to-office mandates by employers are also driving office demand.
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More favourable government finances. Canada’s debt-to-GDP levels at the federal level are significantly lower than those of the U.S. Canada’s favourable fiscal position provides more long-term flexibility.
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The cost of debt is significantly lower in Canada. The U.S. has been slower to cut rates, and the gap between U.S. and Canada borrowing costs is currently much larger than normal.
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The U.S. still has significantly more space per person for both office and retail. Canada’s much lower level of development means there is room for future growth.
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Canada has a demographics advantage. Much higher population growth in Canada boosts demand for commercial real estate. The current correction in immigration levels may be temporary.
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A less volatile investment market. The U.S. sees higher highs and lower lows, whereas Canada has an outsized presence of institutional investors, making “fire sales” and overreaction less likely.
- Returns may be higher in Canada, with one commercial property price index showing positive returns, compared to persistent declines in the U.S. since mid-2022.
