Canada tops global investor in U.S. commercial property in 2014

A NEW report released by the world’s premier, full-service real estate services company – CBRE revealed that Canada is the unrivaled global investor in United States (US) real estate with nearly $10 billion of direct investments in 2014, ahead of Norway, China, Japan and Germany.

   Global direct investment in U.S. real estate totaled $41 billion in 2014, about 11per cent of all investment in U.S. property assets. This represents a 6per cent increase in global investment when compared to 2013.

   Canada was the lead global buyer of U.S. real estate last year with 26per cent of direct foreign investment – $9.7 billion. Canadian investors have already transacted a significant $2.75 billion in U.S. real estate as of mid-January 2015. Canadian real estate investment in the U.S. was one of the largest cross-border capital flows in the world in 2014 after U.S.-to-U.K. and Hong Kong-to-China capital flows.

   Norway was the second largest global investor in U.S. real estate in 2014 with 11per cent of direct foreign investment—$4.4 billion and a 120per cent increase year-over-year. China and Japan reached total investment levels in the U.S. of $3.8 billion (+6 per cent) and $3.5 billion (+397per cent), respectively, each representing 9per cent of the global total. German buyers transacted $2.9 billion (+5per cent) in U.S. real estate, representing 7% of the global total.

   “While we have seen rapidly rising Chinese global investment and oil-rich countries in the Middle East or Norway increasing their allocations to global real estate, Canadian buyers continue to dominate foreign investment in the U.S. and should remain on the radar screens of American investors and owners of U.S. real estate,” said Chris Ludeman, Global President, CBRE Capital Markets.

   “Canadians, other global investors and Americans share the same challenge—finding attractive opportunities with reasonable pricing that can produce a favorable risk-adjusted return. That said, we expect the investment climate to remain brisk and U.S. volumes will continue rising in 2015.”

   The U.S. is by far the largest destination for Canadian global capital. Of the $22 billion that Canada invested outside of its borders in 2014, 44per cent went to the U.S. The next highest shares—17per cent and 14per cent—went to Australia and the U.K., respectively. It should be noted that the U.S. market share of Canadian global investment dropped below its 2007-14 average of 48per cent in 2014.

   “Canadian investors find U.S. real estate attractive for many of the same reasons that other countries do. The U.S. offers opportunities for value creation, healthy cash flows and favorable risk-adjusted returns,” said Ross Moore, CBRE’s Director of Research for Canada. “The level of Canadian investment is highly correlated with the health of the American economy and exchange rates, but the overriding motivation is that Canadian institutional investors need to look beyond their borders to find product and achieve greater diversification.”