Real Estate On Upswing

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    Real estate around the world is on an upswing, presenting a golden opportunity for Canadian investors to diversify away the risk of being overly exposed to their home market, says Richard Johnson, managing director of UBS Global Asset Management. Participating in a Globe and Mail report on the risks associated with Canada having one of the hottest commercial real estate markets in the world, he said with most Canadian institutional real estate investment focused on domestic real estate, “pension funds could be seriously overexposed in the event of a downdraft in the market. At the same time, we are expecting attractive returns over the intermediate term in some markets in Europe and Asia, so this is an excellent time to think about diversification and look at opportunities in those markets.” Canadian commercial real estate has delivered a 10-year annualized total return of 11.9 per cent, says the Investment Property Databank. That’s the highest of all developed markets covered by IPD and second only to South Africa in that time period. William Hughes, global head of the UBS real estate group, says near-term performance will be more impacted by perception and pricing than fundamental changes; the timing of which is very difficult to predict. “Canadian commercial real estate has enjoyed the status of safe haven, attracting new investment capital and driving down yield. If capital becomes less risk averse and seeks higher yield, commercial real estate values may be affected,” he says.