RCA Insights

Hey Big Spender: A Look at Canada’s Cross-Border Flows

By on May 22nd, 2019

Just as with the fortunes of Canadian teams in the Stanley Cup playoffs, Canada lost out to the U.S. for the title of top global capital source over the past year. Unlike the ice hockey championship though, the race to be the leading source of cross-border capital was close.

Toronto-based Brookfield, in fact, was the largest global investor for the 12 months through March, with more than double the cross-border deal activity than that of Blackstone, the perennial #1 global investor. Much of this activity from Brookfield was tied up in the acquisition of GGP and Forest City in the U.S.

However, the story of the past 12 months is not all about Brookfield, nor is it all about the U.S. as a destination. Capital flows to commercial property investments outside Canada totaled $55.1 billion (C$74.1 billion) in the year through Q1 2019. Of this total, $12.2 billion was deployed in countries other than the U.S.

Canadian investors have more of a need than their U.S. counterparts to seek other countries for investment opportunities: Canada is wealthy, but with respect to population and investment options, the country is small.

1905 Canada flows overview MAIN_300-01

After the U.S., Canadian outflows were strongest to Australia, China, and the U.K. Oxford led the charge into the office market of Australia with the $3.2 billion buyout of Investa Office Fund. SDP Investments was the leading Canadian buyer in China; it was part of the consortium which bought the Sino Horizon Beijing Portfolio for $1.3 billion. The investments in the U.K. were completed by 10 different firms in a variety of deals.

Capital inflows to Canada were limited and dominated by U.S. investors. Cross-border investors were behind only 15% of all transaction activity in Canada over the 12 months through Q1 2019.

It should be noted that these figures do not include Anbang’s sale of the Bentall Centre Portfolio in Vancouver to Blackstone. This transaction has not yet closed. Still, when it does close, it will reinforce the U.S. position as the leading cross-border investor in Canada.

This analysis first appeared in the latest edition of Global Capital Trends, published May 9. If you are an RCA client you can log into the RCA website to download the latest reports and data files.

Also on RCA Insights:

Global Commercial Real Estate Activity Sags in Q1

Chart: Putting Canada’s Flow to US in Perspective

Jim Costello

Jim Costello

Senior Vice President
jcostello@rcanalytics.com

Jim Costello has worked in the CRE space on issues of urban economics since 1990, including a 20-year stint at Torto Wheaton Research. Jim expanded the reach of the Torto Wheaton Research team developing forecasts of global market fundamentals. He also developed approaches to pair the forecast results with frameworks to answer investor questions on asset values and relative investment opportunities.

In the aftermath of the Global Financial Crisis, Jim provided advice to the Treasury Department and helped educate these professionals on commercial real estate performance. Jim is a member of the Commercial Board of Governors of the Mortgage Bankers Administration, where he helps policy makers understand the commercial real estate industry.

Jim is expanding the capabilities of the Real Capital Analytics team on issues of real estate market dynamics. Jim has a master’s degree in economics and is a member of the Counselors of Real Estate.