Private Canadian Investors Beating Public Investors in Commercial Real Estate Deals
According to the latest data, private Canadian investors have finally managed to beat off big pension funds in order to close on more commercial real estate deals.
As individual Canadian investors got serious about investing at home, investment in local commercial real estate improved during the second quarter of 2014.
According to the Real Property Association of Canada (REALpac) Q3 2014 Canadian Real Estate Sentiment Survey, the most comprehensive study of confidence in the Canadian commercial property industry remained strong. Opinions regarding the availability of debt, equity capital and low interest rates were all positive.
However, it’s also noted there is some separation beginning to appear in gateway markets and class B properties. Although new development remains brisk, retrofitting existing properties has also gained momentum.
The Digital Journal reports that private investors scooped up the lion’s share of the $5.1 billion of commercial real estate deals completed in the second quarter of 2014. Action from public REITs collapsed to under 10 percent. Pension funds took in just 11.4 percent of the deals, while private investor activity soared by almost double to over 60 percent.
Total activity was up almost 10 percent year over year. The bulk of transactions were smaller deals, yet increased volume is expected for the final two quarters of 2014.
Big funds and public REITs are unable to compete effectively in smaller deals and operate too slow for fast moving markets like Edmonton. This trend is anticipated to continue as more investors chase the superior returns and better security of other alternatives such as private syndications and real estate partnerships offering direct investment opportunities.
Analysts expect there to be more opportunity ahead for smaller investors that can move fast, especially if they can pool money together in partnerships with other accredited investors in Canada.