Forum closing panel members from left, Fengate Real Estate’s Jaime Mc Kenna, Deka Immobilien’s Alexander Heijnk, King Sett Capital’s Rob Kumer, Slate Asset Management’s Blair Welch, Ivanhoe Cambridge’s Annie Houle and CBRE’s Jon Ramscar. (Steve Mc Lean RENX)
Three top Canadian real estate leaders and a guest from Europe wrapped up a recent Toronto forum by shifting the focus from “Just get through 2025” to “Let’s fix things in 2026.”
Jaime Mc Kenna, president of Fengate Real Estate, and Jon Ramscar, president and CEO of CBRE Canada, led the chat at the Real Estate Forum where they talked about the risks and chances ahead plus what might come next.
“What we’ve seen unfold, at least across our platform over the last two years, is a capital recession and not an operating recession,” King Sett Capital CEO Rob Kumer said. “I think it’s an important distinction because one is structural and one is cyclical.
“The properties in our world are generally full, rents are generally growing, tenants are healthy and paying rent, and there’s lots of cash flow.”
Investment returns
Mc Kenna pointed out that bonds and guaranteed investment certificates have given better returns than real estate over the past year or two. She asked Alexander Heijnk from Frankfurt-based Deka Immobilien how to make real estate investing make sense right now.
Heijnk said Canada isn’t alone – these challenges are worldwide so countries can learn from each other. He sounded optimistic about 2025 saying real estate returns should beat bonds then.
Blair Welch from Slate Asset Management-which manages about $12 billion across nine countries in North America and Europe-said money will chase wherever it gets the best return easiest.
He added that while interest rates matter a lot, “rents are everything for real estate.” He thinks we need more investing to kickstart growth which will then push rents higher.
Kumer doesn’t see a big building boom coming soon but believes buying activity, deal numbers and property prices will pick up again. “We’re on the verge of a very strong, very competitive bull run,” he said.
Annie Houle leads Ivanhoé Cambridge in Canada; they manage CDPQ’s huge portfolio worth $452 billion globally with holdings in over 1,500 buildings mainly logistics, residential, office and retail sectors. At end of 2023 their gross real estate assets were $77 billion.
Houle said real estate needs borrowing so it carries more risk than other investments. She noted institutional allocations to real estate rose 20% over ten years but have stalled lately-with most institutions wanting to cut back while only some want to add more.
Office
Deka Immobilien owns around 580 properties spread over 27 countries on five continents. Earlier this year they bought Vancouver office buildings at 401 W. Georgia St. and 402 Dunsmuir St., paying roughly $300 million for them from CPP Investments and Oxford Properties.
Heijnk described Vancouver as North America’s strongest office market thanks to solid fundamentals plus good quality of life city planning along with infrastructure.
Kumer added there is “a huge disparity between investment value and operating value-that’s where opportunity lies.”
He also said “spread investing is back-it’s basically low-risk investing today.” For example: buy an office building at seven cap rate financed at five percent interest then just sit back collecting rents.
The demand for newer offices with great amenities remains strong-and as A-class offices fill up Kumer expects more demand returning even for class-B spaces though many B- & C-grade buildings in Toronto could struggle for quite some time.
“We’re not oversupplied; we’re under-demolished,” Kumer remarked.
Residential
Kumer pointed out Canada still has a housing shortage-and recent immigration policy changes didn’t really consider all consequences well enough. Immigration should increase but focus on bringing skilled workers who help grow economy he said.
This also means there must be housing plus infrastructure ready for newcomers he added.
Ivanhoé Cambridge has less exposure in Canadian residential markets so Houle said they plan to boost their retail business by adding multiresidential projects too.
Heijnk mentioned rent controls in Germany annoy landlords but bring stability making multifamily homes attractive internationally for investors there.
Industrial
Kumer called industrial property fundamentals solid despite rents leveling off after big jumps earlier plus vacancy rising from under one percent to five percent-not worried about supply-demand mismatch though.
Ivanhoé Cambridge owns or partly owns industrial/logistics assets worldwide including Canada, Singapore Australia Brazil China U. S Indonesia Germany France UK Netherlands Houle mentioned plans to expand this portfolio further soon too.
“With supply chains , we moved away from just-in-time toward just-in-case ,” Houle explained , adding Canadian industrial sector looks strong with notable pricing differences when revalued.
Retail
Slate holds over 600 grocery stores globally enjoying mid-90s occupancy levels plus rising rents. Welch sees few new grocery stores built since US financial crisis back in ’07/08 so feels bullish on essential retail assets seeing lenders increasingly supportive.
Ivanhoé Cambridge runs multiple malls which suffered rough patches last eight years yet sales traffic now climbing again – retail topped returns among asset types during ’23 per MSCI/REALPAC Canadian Property Index data.
” Supply dropped while demand rises ,” Houle commented noting quality malls mostly full with same-property net income growth hitting high single digits.
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