BGO's Head of Canada on the considerations that set investors up for success
The Canadian commercial real estate market is poised for a resurgence, asserts Christina Iacoucci, BGO’s Head of Canada and BPM Hot List 2024 winner.
She explains that central banks have pivoted their interest rate policy, and historically, the commencement of interest rate declines signals an improving outlook for commercial real estate return performance.
Property fundamentals remain solid, with many sectors still at or below long-term average vacancy levels. Valuations are likely at or near bottom for this cycle, and investor sentiment is improving.
“Transaction activity is expected to rise as risk appetite grows,” she adds. “Opportunities remain for investors to acquire assets across the risk spectrum at attractive prices.”
Given this positive backdrop and an increasingly more appealing investing environment, Iacoucci shares how BGO is helping guide investors to make sound and well-informed decisions.
Tap into knowledge arbitrage to access opportunities that others do not see
“BGO combines global perspectives with local expertise and on-the-ground execution capability,” says Iacoucci. “Complementing that expertise is an advancing in-house capability in data science with AI-driven tools that are already helping to inform how we can deploy capital more effectively.”
She suggests considering sectors and markets where negative sentiment may be overstated or impacted by overly broad generalizations. This dynamic presents astute investment managers with the opportunity to rise above market misconceptions to seize on compelling deals rooted in strong, underlying fundamentals.
Seek income growth where valuation is discounted
At this point in the cycle, there are opportunities to acquire assets at pricing well below the levels of a few years ago. Investment managers with the insight to source acquisition opportunities with inherent upside and the capability to execute value-add strategies can position their investors for strong returns.
High-quality, stabilized properties in sectors with strong fundamentals are available at below replacement cost and attractive going-in yields.
“Robust data analytics and real-time access to market intelligence is how BGO thoughtfully deploys capital to increase income yield, strengthen tenant credit, and increase the value of assets,” notes Iacoucci.
Don’t sleep on Canada
Many Canadian investors have looked abroad in recent years for higher yields and diversification. However, investing globally presents additional considerations, such as economic and political fluctuations, currency exposure, and tax complexities, potentially impacting investment returns.
“As geopolitical risks are rising, we see global investors looking to Canada more than ever because of its stability,” she adds.
According to BGO’s research, Canadian investors should take a second look in their own backyard for a few reasons:
- historical Canadian real estate investment returns continue to exhibit superior risk-adjusted returns compared to other advanced economies
- asset prices have corrected more dramatically than any other time period since the 1990s, offering a compelling entry point
- property fundamentals remain healthy, buoyed by strong population growth
The confluence of these factors has created a compelling opening for investors to re-examine Canadian commercial real estate opportunities, where current conditions offer a rare and advantageous moment to invest, Iacoucci believes.
