Foreign Capital Focused on Canada

According to a recent report by Colliers on the 2026 Real Estate Investor Outlook, after sitting on the sidelines through recent market volatility, institutional investors, particularly in the US, are starting to reposition themselves and they're looking north of the border. Canada is positioning itself as an attractive destination for global capital in 2026, even as economic headwinds create uncertainty elsewhere. The shift is driven by something counterintuitive: Canada's notoriously difficult development environment is actually working in investors' favour. Those regulatory hurdles and supply constraints that make housing affordability such a challenge are creating scarcity value for existing properties.

Capital Is Moving, But Differently

The way investors are deploying capital has fundamentally changed. Traditional fund structures are losing ground to more direct approaches. According to Colliers' 2026 Global Investor Outlook, nearly half of all investors now prefer direct investments and separate accounts rather than pooling money into conventional funds. Platform joint ventures and mergers and acquisitions are becoming the preferred routes for entering markets quickly and maintaining control. This shift reflects a broader impatience among investors who've been holding capital on the sidelines. Colliers Canada notes that fundraising on the equity side is improving, though still below previous peaks, while lenders remain selective but open to quality opportunities. The pressure to deploy capital that's been accumulating is building, which should translate into more transaction activity as the year progresses. There's also a notable mismatch between what investors want and what's being offered. While 37% of investors prefer core and core-plus investment strategies, only 9% of real estate funds currently being raised target these conservative approaches. This disconnect is pushing sophisticated investors to structure their own deals.

The Supply Constraint Advantage

Canada's appeal rests on a paradox. The same factors that make development difficult, namely the lengthy approval processes, high construction costs, and complex regulatory requirements, are exactly what make existing properties valuable. When it's hard to build new supply, the assets already in place become more defensible. According to the report, Canada is much less overbuilt than most comparable markets across virtually every asset class. That limited development pipeline creates a relatively clean competitive landscape for investors willing to acquire stabilized properties. The multifamily sector exemplifies this dynamic. Investment volumes jumped more than 20% in 2025, and expectations point to continued strength this year. Despite recent tightening of immigration policies, Canada's population growth still outpaces most developed economies. Major cities like Toronto, Calgary, and Ottawa continue to face housing shortages that keep rental demand elevated. The rental market vacancy rate did climb to 4.3% in the third quarter of 2025, marking the highest level in five years. But that's still below the 5% threshold generally considered balanced. Meanwhile, housing starts dropped 17% in October to just 232,765 units annually. New rental supply simply isn't materializing fast enough to relieve pressure on the market.

Where the Action Is

Necessity-based retail continues drawing institutional interest. Grocery-anchored shopping centers and properties housing pharmacies and dollar stores generate predictable income streams and maintain high occupancy rates. These assets benefit from limited new construction as developers direct capital toward other opportunities. For investors seeking defensive positions in uncertain times, this type of retail delivers stability. Industrial and logistics properties are performing strongly, particularly urban infill locations and smaller facilities. The pandemic accelerated e-commerce adoption and pushed companies to rethink their supply chains. The result is sustained demand for distribution space closer to consumers, enabling faster delivery times. Urban infill industrial space is scarce and expensive to develop, which supports pricing. Facilities in the 10,000 to 50,000 square foot range serve last-mile logistics and local distribution, offering attractive yields while maintaining strong tenant fundamentals.

Canadian institutional players are also becoming more active after a period of restraint. Pension funds and major landlords are shifting away from development-heavy strategies toward stabilized, income-producing assets and platform-level partnerships.[1] Their renewed focus on domestic opportunities signals confidence in underlying fundamentals.

The public-to-private space is opening up as well. Several Canadian REITs are trading below their net asset values, creating arbitrage opportunities for strategic buyers exploring privatizations and joint ventures. When you can buy existing portfolios cheaper than developing or acquiring properties individually, patient capital finds opportunity. Emerging sectors are also capturing attention. Data centers accounted for 31% of global real estate funds raised in the first three quarters of 2025, overtaking industrial as the most active property type. Canada offers competitive advantages here through abundant renewable energy, particularly hydroelectric power; cold climate that reduces cooling costs; and strong data privacy regulations that attract enterprise customers. Even office properties are experiencing renewed interest after years of pessimism. The work-from-home trend is moderating as companies bring employees back to offices, at least part-time. High-quality office space in prime downtown locations is stabilizing, though the flight to quality trend continues. Class A buildings are holding value while Class B and C assets in suburban locations struggle, creating repositioning opportunities.

The Risks Remain Real

None of this means the path ahead is smooth. Prime Minister Mark Carney has warned that Canada's economy could contract nearly 2% in coming years if growth stalls, largely due to ongoing uncertainty around U.S. tariffs. Canada's deep economic integration with the United States makes trade disruptions particularly damaging. Tariffs fragment supply chains, reduce export competitiveness, and create the kind of uncertainty that freezes business investment decisions. The global capital landscape is also shifting. North America's share of worldwide fundraising fell from 50% in 2024 to 40% in 2025, while Europe surged 50% and Asia Pacific jumped 130% year-over-year. Multi-regional investment strategies now represent nearly 30% of global fundraising, reflecting a push toward geographic diversification.

Yet within this changing environment, Canada is maintaining its position. Even as North America's overall share of global capital declines, Canada's portion of regional investment activity remains stable or is growing. The year ahead will likely reward investors who can combine execution speed with strategic patience. As financing conditions improve and interest rates normalize, both domestic and international investors are preparing to engage more meaningfully. For Canadian real estate markets, that translates to increased competition for quality assets, better pricing for sellers, and continued support for valuations despite economic uncertainty. Global capital is moving, and Canada has positioned itself to capture a meaningful share.