Many wealthy individuals are “shocked” by the results of the US presidential election, including the CEO of Starbucks, Amazon billionaire Jeff Bezos, and others. Many investors in the stock market appeared to bet against a Trump win. However, now that the uncertainty is over, what are the dynamics that accredited real estate investors and family offices should be looking for and how might new regulations and trends impact the landscape in Western Canada?
Until we see the actual results that the new administration can accomplish, much is still speculative. However, President-Elect Trump clearly lists his priorities on his new website GreatAgain.gov, and investment legends like CIO and fund manager Ray Dalio have written that they are sure some major reversals are coming. This may include inflation, higher interest rates, more aggressive lending practices and over $500 billion in infrastructure investment.
Western Canada’s Economic Recalibration
It’s no secret that Western Canada has had some economic challenges recently. The fall in oil prices, the stalled Keystone XL pipeline plan, its resulting impact on the housing market, and the exit of some older businesses have all be a part of this.
However, rather than seeing the decline of commerce in major Albertan cities like Edmonton and Calgary, we appear to be going through more of a calibration or pivot, as these economies are continuing to evolve. Both the Calgary Herald and the Financial Post have continued to report on the boom in new startup activity and some predict that 2017 could finally be the year of the Canadian startup IPO, as many of these new tech ventures begin to mature.
The fallout of the US presidential election and the displeasure of American based tech firms should be good for Western Canada as well. We are currently seeing Uber move into Calgary and a stronger US dollar could make expanding in Canada more profitable to a wide range of high-tech firms in the upcoming months. This is all good news for local commercial real estate, as more commerce and more demand for office and retail space will certainly benefit landlords.
Energy & Interest Rates
Some of Canada’s oil and gas companies have already announced increased capital spending plans for 2017 by as much as 70%. This is likely in response to the expectation that Trump will fast track the approval of the Keystone XL pipeline. However, higher interest rates could hamper some corporations and investment types across the board. In particular, higher rates may impact large publicly traded REITs, and even more so those which have been relying on the residential rental market in the United States.
In reaction to these trends we could see more family offices and sophisticated individual investors moving more of their portfolios over to direct investments or investing through smaller private partnerships in commercial real estate. Yield may become less of a challenge in some respects if there is a new higher inflation environment, although the savviest investors will continue to seek value-add and growth investments as now is the time to find these ripe opportunities in Western Canada.
While we may still be in the transitional phase of the new White House administration, intelligent investors are already quickly looking to adjust their portfolios to best benefit from the changes ahead. With many dynamics in play that could benefit Western Canada, this might be prime time to investigate valuable acquisition opportunities before the best gains are eaten up.