Over the past decade there has been circa £17.5 billion of Canadian money invested in UK commercial property. The Canadian Pension Funds in particular have been one of the key international investment groups in the UK market in recent years, with notable examples including Brookfield, Oxford Properties and CPPIB.
The capital deployed hasn’t just been focussed on the traditional offices in central London but has also been invested in the regions, as well as across multiple asset classes. The most cursory glance at newspaper headlines reveals the extent of their recent combined activity:
“Canada’s Brookfield buys UK holiday resort group Center Parcs” – Financial Times
“Qatar, Brookfield Take Full Control of Canary Wharf Group” – Bloomberg Business
“Canada’s CPPIB Buys U.K. Student-Housing Portfolio” – Wall Street Journal
“Hermes Infrastructure partners with CPPIB in £1.6bn UK ports deal” – IP Real Estate
“Oxford Properties joins forces with German fund manager on Watermark Place” – Property Week
The ‘Canadian invasion’, as it has been known colloquially within the industry, is a consequence of some simple fundamentals. Canada, in the context of real estate, is a relatively small marketplace in which the available product is illiquid. The UK is known to be a friendly international jurisdiction for inbound investment. Coupled with a high degree of liquidity, along with shared cultural and language heritage, this makes it a natural home for Canadian capital.
Looking at the track record of these funds – whether it is the purchase of the Canary Wharf Group or extensive student housing portfolios – it's clear that Canadian Funds have benefitted from a variety of opportunities within the UK market along with its capability to absorb large amounts of capital in single transactions.
Going forward in the hunt for income in a world currently defined by historically low interest rates, low inflation and quantitative easing, we might expect these funds to further consider alternative asset classes as well as moving up the risk curve.