By: Al Barbarino
Talk of Chinese investment into US commercial real estate is rampant, but it’s our neighbors to the north who continue to invest the most money here — and by a huge margin over the competition.
Canada invested a whopping $19.3 billion into US commercial real estate in 2015, according to preliminary data from Real Capital Analytics (RCA) seen by Real Estate Capital. That’s nearly double the $10.1 billion that came from runner-up China.
The Canadians have in fact led the pack in every single post-recession year. In 2013 and again in 2014 Canada invested more than $11 billion into the US while China invested about $2.9 billion and $3.3 billion, respectively.
There are clear geographic and cultural connections between Canada and the US that facilitate that scale of investment.
Canada_120718_1425x283“They are right next door, we speak the same language, play the same sports, and many of our key business centers are just an hour plane ride away,” said RCA senior vice president Jim Costello.
“They have a high concentration of wealth without a high concentration of high quality commercial real estate,” he added, noting a “tremendous upswing in the last five years resulting from what was a strong Canadian dollar and [accumulated] petro-wealth that had to be invested.”
As a result, Canada has been involved in some major US projects. For instance, Oxford Properties Group, the real estate arm of OMERS, one of Canada’s largest institutional investors, is teamed up with Related Companies at Hudson Yards, where they are building the largest private real estate development in the history of the US. Not bad, eh?
But the Chinese still reap much of the fanfare. It’s due in part to the tremendous growth coming from a highly volatile economy in just a few short years, Costello noted. In 2012, when Canada invested $9.8 billion into the US, Chinese investment was just $358 million. The surge that followed was partly a result of loosened regulations from the Chinese government regarding foreign investment.
The Chinese have made some high profile purchases of their own, to say the least. In 2014, China’s Anbang Insurance Group agreed to purchase the Waldorf Astoria, perhaps America’s most famous hotel, for $1.95 billion, setting a record for the largest acquisition of a US real estate asset by a Chinese buyer. In September of 2015 President Barack Obama broke with tradition and declined to stay at the hotel for a United Nations event, reportedly due to security and Chinese spying concerns.
That sort of friction is exciting and garners attention. Meanwhile the Canadians continue to sit comparatively tranquil, and mostly ignored. Going forward, the Canadians will need to overcome falling oil prices to keep up the massive foreign investment, and the Chinese will continue to grapple with a volatile economy in transition as they continue to seek diversification, Costello said.
Then there’s Norway… if you were wondering who the #3 investor was in 2015. Norway invested more than $6.7 billion into the US in 2015. In 2014 the figure was nearly $4.4 billion, which, by the way, surpassed Chinese investment by $1 billion.