By Renee Sylvestre-Williams
When it comes to the movement of capital, the current sentiment is a more selective, more cautious approach to real estate investment compared to the previous environments with low interest rates only three to five years ago. This was the consensus of a panel of experts from Naiop’s CR.Converge this week in Toronto.
As moderator Bryan Reid, executive director at MSCI said, bring investors in a state of surviving 2025 to the rate rust and macro -economic uncertainty. Now that the adjustment period of higher interest rates is over and portfolios have reformed themselves in the current economic climate, the big questions are: how are the big questions dealing with these challenges and how are they positioning?
Regarding the current flow, Michael Brodie, director and head, investments, real estate for company sanctuary for BMO capital markets: “A general dynamic that happens is that capital consolidates, and inherent deals will have to become larger to place that consolidated capital efficiently.” Because money in less, larger investors, these managers prefer larger financing structures.
Danny Kaufman, senior director of JLL, said that private credit has become increasingly attractive, with investors rotating equity to debt strategies. Since private credit can efficiently absorb large tranches of capital, there has been a strong trend in the direction of the growth of private credit in activa classes for more than half a decade. “I think that is a trend that is likely to continue in view of the levels of returns with subordination that private lenders can get,” he said.
Milo Dajic, CFA and head of Canadian Investments at Oxford Properties Group, agreed and said: “We are still very active in credit and it will remain a growth story. I would say that half of each dollar we now issue to net new acquisitions will go a credit agreement.”
Every enthusiasm is tempered by a higher study of development projects, with a higher approval bar based on yield and return on costs. Brian Delgado, Senior Managing Director, Global Head of Capital Markets, Transwestern Investment Group, said that the earlier return on costs and the current CAP rates had a distribution of 100 to 150 basic points. “We have now moved up to 125 to 200 basic points of distribution, so that helped us to get a little more security in the risk that we are being developed, and we think it matches our risk tolerance.”
What this means is that the market is becoming more tactical. Investors do not make a back -up of a truck with money and buy what they can get, as Kaufman said. Instead, investors want a more detailed analysis of specific assets and markets, instead of broad sector -wide investments. When demanding thematic purchases, Delgado says that the demography of age and the labor pool, health care and senior living are given a priority.
“Perhaps it is an opportunity to look at what they call the ‘Silver Tsunami’, the demographic story there, with regard to the introduction of senior living and health care,” he says. “We have been in health care for a while, in a consultancy company, and now we are looking for opportunities to satisfy that lead. And there are great opportunities in certain markets to take advantage of that demographic story.”
The panel agreed that data centers provide significant challenges about the availability of electricity and massive investment requirements, often in billions.
In addition to the sector shift, there was some discussion about the geographical shift. Delgado said that investors in the Southeast, Midwest and Southwest Markets for industrial Multi-USE, Healthcare and Senior Wonen indicate: “I think we hear more of investors than maybe 10 years ago.”
Dajic said that some of the money that would flow in the American Gateway cities went to Europe and hopefully went to Canada. But Kaufman said that they are not counting the gateway cities, because they raise money from the VAE and even Canada thanks to the natural benefits of having very large and stable populations and deep asseti bases.
This post is offered to you by JLL, the Social Media and Conference blog Sponsor of Naiop’s Cre.converge 2025. More information about JLL op www.us.jll.com or www.jll.ca.
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