Canada vs US Market?
What are the major differences in the Canada vs US RE markets?
Interested to get some perspective on this.
Thanks
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US has more viable markets, more capital flows, better pay, etc.
Canada is tough because there's only a handful of viable markets for MM and above-sized transactions, but there's a ton of capital chasing deals in these markets and many of them are institutions investing on a relative return basis, which has made it tough for PE firms to compete if they are targeting absolute returns.
My shop does deals in both countries - about 95% of our new deals in the past 4 years have been in the US. It's just very tough to make anything opportunistic/value-add pencil in Canada these days.
OP here. Appreciate the insights! Very interesting
This is so true.. The market in Canada is hard. My team and I have been looking for assets large enough for acquisition and we didn't find 1 viable deal at a good price.
For example, I'm looking at a site in Oshawa, Ontario for development of 36 units (rental).... The owner wants $350K over the actual worth of this site....
That price is hard to justify for a tiny development....
Whereas in the US, we can find more sites in similar to Oshawa and likely to make a higher ROI...
Yup development side in particular is brutal... We can get deals to pencil to a 6-6.5% yield very easily in a lot of secondary markets in the US, but we're lucky to get over 5% in Canada in markets trading at similar cap rates.
I would echo the same.
Our firm plays in both Canada and US, particularly looking at value-add hotels. We barely get any deal flow from Canada for a couple reasons:
1) the market is so small
2) returns are rarely justified given so much capital chasing deals, nothing pencils
The US market is much more broad, diverse and so many markets to play in. Think about the amount of gateway / secondary markets in Canada - I'm sure you can list majority, if not all off the top of your head. However in the US there is a larger sandbox to play in.
Not to highjack the thread - but does anyone know how a small operator ($3MM-$5MM CAD) of Equity can invest in the US? Would love to connect with someone who has experience on getting into the US market.
Bro...
My team are looking at a 70+ unit apartment building all the way up in Sudbury....
Its 100% occupancy but Owner will sell at 4.75% cap rate. Ideally he wants to do it at 4.5%
But my team says the deal only works at above 5.15% cap rate....
All the way up in Sudbury.... smh
That is insane. Right now there is a huge bid-ask spread so I can't see many transactions closing.
Especially with inflation numbers in the US coming in that high, I can see it being a slow period for the next 6 to 12 months until the dust settles.
IMHO, long term Canada is just garbage overall. Sure we have free healthcare, but fuck I'd rather pay 20K in insurance premiums a year if I'm making 2-3x my current base.
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