Although the global economy is still on shaky ground, Canada’s principal institutional and private real estate investors are optimistic and have a greater appetite for risk, according to Colliers International’s Global Investor Sentiment Survey. An overwhelming majority (86 per cent) of Canadian respondents indicated they are planning to expand their portfolios over the next six months. This is distinctly higher than the global investor stance (71 per cent) and up from 61 per cent the previous year. Furthermore, two-thirds (68 per cent) of Canadian investors believe the market will continue its upswing trend over the next 12 months.
The level of optimism expressed by Canadian investors is also translated into increased tolerance towards risk. Nearly two-thirds (64 per cent) of the survey participants from Canada confirmed they are willing to be more risk aggressive, the strongest level of risk tolerance among all regions surveyed globally.
“The shift in Canadian investors’ stance towards risk is only natural considering the relative strength of our economy and the ability to access capital for acquisitions,” says Ian MacCulloch, National Research Director with Colliers International in Canada. “With these supporting factors coupled with the low cost of debt, Canadian investors are positioning themselves to take advantage of opportunities in other markets abroad and are willing to take greater chances to reap higher yields.”
According to the survey findings, 59 per cent of Canadian investors believe access to credit has improved and the cost of debt is on the decline (68 per cent). To some extent, this explains investors’ bullish stance as well as their renewed interest in overseas investments, citing the U.S. and Europe as the most sought after destinations.
“The scarcity of ‘for sale’ assets in Canada is also pushing domestic investors to look for growth opportunities outside,” adds Ian MacCulloch. “The U.S. and Europe, mainly Germany, are considered lucrative destinations for Canadian investors who see a unique window of opportunity to buy low in primary markets.”
On the flip side, the survey also highlights some of the issues and challenges investors are facing. Three in four Canadian investors (73 per cent) believe the pricing of commercial real estate has increased too fast coming out of the recession. A similar number of respondents (73 per cent) also cited having aging assets in their portfolio (obsolescence) as a major concern.