The commercial real estate (CRE) market isn’t without its fair share of excitement. Recently, they’ve been a spate of trends in retail real estate and residential housing that have largely swayed consumer habits and preferences.
Both domestic and foreign investments in the market play a role in the value of CRE and ultimately, its demand.
The latest trend to hit town? Foreign investment in the commercial CRE sector! Let’s talk about this a little more.
The CRE Market and Foreign Investments
The core assets that draw in institutional investors are top-tier office buildings and rental apartments in urban areas. However, these are in short supply and as a result, prices may soar higher than what buyers are willing to shell out. Thus far for 2019, such types of transactions have totalled about $1.5 billion.
New retailers are tossing their hat into the CRE ring for several reasons, one of them being that Canada affords opportunities for growth and expansion. Renovation projects have witnessed a welcome surge in recent times as a result.
Despite this positive upswing, reports from Bloomberg suggest that foreign investment in the Canadian commercial real estate market backslid by about 70% since last year. The data period taken into consideration was the first 6 months of 2019.
Against the backdrop of the $5 billion racked up over the first half of 2018, 2019 has seen a downswing to about $1.5 billion, giving forecasters and real estate gurus plenty to ponder about.
What the Future Holds For Foreign Intervention in the CRE
Upon analyzing these numbers, the first thing that should come to mind is the factor/s that are causing this decrease in foreign cash inflows.
Altus Group Ltd., reports that foreign investments in this sector spiked in 2018 due to the purchase by Blackstone Group Inc. and Ivanhoe Cambridge Inc. of a Canadian industrial landlord for a whopping $3.8 billion.
If we do not consider this transaction, the figures for the first half of 2019 perform way better than the figures seen in the first half of 2018.
Fluctuations in foreign investments are nothing new, however, industrial and retail CRE, top-tier corporate investments and urban housing are performing really well, as they have been doing year after year.
Like a fly to honey, these attract more foreign and domestic investments.