Canada has long been the biggest investor in U.S. commercial property. Now that investment is dropping, major Canadian investors say trade tensions between the countries are forcing them to look to other nations.
Canada-to-United States commercial real estate transactions slid 32% during the 12 months ended March 31, less than half the five-year annual average of $10.7 billion that total Canadian real estate investment put into U.S. properties, Toronto-based Colliers said in its Global Capital Flows report.
The U.S. and Canada have sparred over trade, most notably tariffs, since U.S. President Donald Trump began his second term in the White House in January 2025. La Caisse, one of Canada's largest pension funds, is one of the major Canadian investors that has been cutting back on U.S. holdings over the past year.
“As with all markets, we closely monitor evolving conditions, and our investment activity reflects disciplined capital deployment,” Jean-Charles Del Duchetto, a spokesperson for La Caisse, said in an email. “We have also recently completed selective asset sales in the United States, continuously calibrating our exposure based on the opportunities and risks we see in this market.”
La Caisse, with offices across the globe, is now under contract in Chicago to sell the 862,000-square-foot office tower at 180 N. LaSalle St. for about $55 million to $60 million, a price far below the roughly $198.5 million it paid in 2016, as reported in CoStar News.
The pension giant is also preparing to bring another downtown office property to market in Manhattan after selling a 49% stake in a roughly 2 million‑square‑foot office tower.
“The idea of diversifying and not being as reliant on the U.S. market has become a motivating factor."
The political tension has picked up. Just last week, Canada called on the U.S. and Mexico to renew their free-trade agreement that's been in effect since July 1, 2020, as Trump again criticized Canada on social media. He included a link to a news report that Canada technically is in a recession on a Truth Social post that read "51st State!," repeating his suggestion that Canada become part of the United States.
To be clear, Canadian capital still has a substantial presence in the U.S. The Canada Pension Plan keeps about 47% of its assets in the United States, while other such plans, the Ontario Municipal Employees Retirement System and PSP Investments, each hold roughly 40% to 55% of their property portfolios in U.S. markets. Altogether, Canadian institutions control close to $1 trillion in U.S. assets, dominated by pension plans that heavily shape that country's commercial real estate.
La Caisse buying, selling in US
While overall Canadian commercial property investment in the U.S. is decreasing, La Caisse, with $517 billion in Canadian in assets, told CoStar News that "the United States is a key market for La Caisse, given its size, depth and long-term growth prospects."
The fund pointed to its involvement as a partner in TPG Real Estate's recent $2 billion acquisition of Echo Realty, an owner and operator of 230 grocery-anchored retail properties in the U.S. Midwest and Southeast. The Public Sector Pension Investment Board of Ottawa, known as PSP Investments, also partnered with TPG in the deal.
The decrease in Canadian investment dollars into the U.S. indicates that capital is looking to diversify to other countries, said André Brin, CEO of the non-profit World Trade Centre Winnipeg that helps Manitoba businesses' activities in international markets.
Canadian Prime Minister Mark Carney has made efforts in the past year to forge stronger trade relations with the European Union. Noting that outreach, Brin said Canada’s bilingualism and familiarity with shared cultures will only help investment dollars penetrate the continent’s key markets and that emergent Asian markets such as Vietnam and Indonesia are also of interest. Brin said Australia is another locale that could become a target because Canadian investment has historically been welcome.
“The U.S. alone would be an interesting market for trade and investment for Canada, but with what’s happened over the last year,” Brin said of the countries’ tariff dispute, “the idea of diversifying and not being as reliant on the U.S. market has become a motivating factor for those companies."
Brin added that Canada’s "companies that are exporting to the U.S. are going to try and maintain existing levels, but they’re looking to other markets because a diversified position is protection against volatility or other difficulties occurring in any one market.”
Investors look elsewhere
For years, Canadian pension funds, real estate investment trusts and large asset managers aggressively expanded into U.S. markets, which remain Canada's largest overall trading partner, Statistics Canada, the country's statistical agency, said. The United Kingdom now ranks ahead of the United States as the top destination for cross-border real estate investment.
Hazelview Investments founder and Executive Chair Ugo Bizzarri said the shift in investment allocations could be fortuitous for Canada’s commercial property. Toronto-based Hazelview has $11.4 billion of assets under management across North America, Western Europe and the Asia-Pacific region.
Bizzarri said reliability is paramount to real estate investments, and he said the wars in the Middle East are creating trepidation among investors.
“We need stability, a little bit more predictability,” he said. "Investing in real estate is a long-term game and I think that people are looking for more calmness. They like to know what the rules of the game are."
Part of the reason for the slowdown in capital flows between Canada and the United States is attributed to the current state of talks on the Canada-U.S.-Mexico Agreement, also called CUSMA, for which negotiations are slated to begin next month. It took effect in July 2020.
The agreement’s July 1 renewal date is not expected to be met, and if no deal is forthcoming despite the pact’s 2036 expiry, an annual review contingency would be triggered.
In an email to CoStar News, Simon Holmes, BGO’s managing partner and Canadian chief investment officer, described a propitious future for commercial real estate in Canada because global players consider it “a compelling market.” BGO, owned by Canada's Sun Life, is a global real estate investment manager active across the U.S., Europe and Asia, with a focus on debt, equity and real estate. In March, it acquired Bell Partners, a major U.S.-based apartment company.
“At BGO, we are seeing strong interest from global investors, including meaningful inflows from European institutional investors, reflecting confidence in the resilience of Canada’s capital markets, its geopolitical stability and the strength of property fundamentals across major metropolitan areas,” Holmes said. “Canadian real estate has long benefited from disciplined ownership and durable demand, and today those qualities are being complemented by historically low vacancy rates and valuations at or through the bottom of the cycle.
"We see opportunity for capital allocation in Canada, and our international pension fund investors increasingly agree.”