Foreign Investment in Canada: Unearthing Opportunities Beyond the Urban Frontier
Canada’s robust economic landscape has always been a magnet for global investors. Still, its allure has significantly heightened in recent years. Recent conversations at the 2023 Expo Real gave us fresh insights into why Canada continues to be appealing for foreign investments, particularly in the real estate sector.
A Stable Banking Environment Paves the Way
For investors, it is reassuring to hear that Canada’s banking environment is amongst the most stable globally. The Canadian banking ecosystem provides the stepping stone and foundations for project financing for long-term investment opportunities. The stability and framework ensure that business dealings are built on trust, in which reputation plays a key role – and in the vast expanse of the Canadian Real Estate industry, reputation is paramount, as stated by Brett Miller at EXPO Real 2023.
The significant impact of foreign investors on the market must be considered. For example, the entry of diversified firms into the Canadian industrial space has significantly impacted commercial real estate in this space. Given that the average rent in the industrial sector hovered between $5-$7 per sq. ft., new players recognised the potential to push rents $10-$12 and, presently, up into the higher teens. This sharp trajectory is a testament to the vast potential to be harnessed yet somewhat unsee by domestic investors.
Venturing Beyond Mainstream Cities
As investors, where should we invest? While still essential to any investment strategy The 3 or 4 large cities in Canada offer opportunities. However, according to Canderel’s CEO, secondary cities like Windsor and Essex Co in Ontario exemplify strong investment potential due to steady population growth, increased construction, and expanding job opportunities.
Other Canadian cities, such as Squamish, British Columbia, and Mirabel, Quebec, demonstrate great long-term potential. Each brings its unique set of compelling factors and associated risks, and to determine which is best for the next opportunity, investors must astutely gauge these criteria.
Canadian institutional investors have dominated activity over the past 15 years. Private companies found it challenging to match strides with pensions funds and their low cost of capital. As Canadian fund managers now seek to proportionally decrease their weighting to Canada a new dynamic is emerging. Canadian private capital, often in partnership with non-domestic investors, is taking advantage of some unique buying opportunities. The combination of foreign capital with local entrepreneurial Canadian expertise is a powerful combination that will replace the vacuum left by exiting Canadian Institutions.
The Canadian landscape is an attractive option for foreign investors, along with the right partners and lenders; acquiring the right commercial property in the right place, strategically investing in it, and transforming it from a Grade “B” to an “A” investment can yield unparalleled returns. In the words of Brett, as property investors, it isn’t the time for us to retreat from challenging market conditions; it’s time for us to roll up our sleeves and use what we have to create value for all our stakeholders.