CANADIAN MONEY MANAGER NAVIGATE TRADE WINDS AROUND US REAL ESTATE INVESTMENTS
Nation that's top outside investor in American property pressured by changing popular sentiment
By Kristian Gravenor
CoStar News
May 7, 2025
Tariff tumult and chatter from U.S. President Donald Trump about Canada becoming the 51st state have done more than just lead some Canadians to cancel vacations to visit their southern neighbor — and even sell American properties out of concern.
The cross-border tension is drawing attention to a push for Canadian pension funds to adjust their strategy and invest more domestically. Such a move would mark a symbolic shift for the nation that's the largest foreign investor in U.S. commercial property.
The tensions reached a new level this week as Canadian Prime Minister Mark Carney met in the White House with Trump, with Carney saying Canada wasn't for sale and Trump responding that no one should rule such a deal. Disputes since Trump began his second term in January over levies the U.S. is putting on Canadian goods — and the annexation talk — follow demands by almost 100 prominent Canadian business leaders that domestic pension funds invest more of their assets in Canada. The new circumstances revive that push begun more than 18 months ago, according to its organizer.
“Recent trade disputes have only exacerbated this issue, highlighting the urgent need for decisive action,” said Daniel Brosseau, a partner at management consulting firm McKinsey & Co. and a leader in the push for more domestic investment.
Investment managers at the Caisse de dépôt et placement du Québec head office in Montreal could be forced to change their investment strategies if new rules get adopted. (CoStar)
Business Leaders Urge Measures To Keep More Pension Fund Cash in Canada
The group has noted that Canada’s pension fund assets have increased by $1.2 trillion over the past decade but that none of the growth was reinvested domestically in that time. That's even while the overall domestic investments held by Canadian pension plans declined 25% in real terms.
Brosseau said the pattern of pension plans investing primarily in the U.S. and other countries has a major downside. “Canadian financial sovereignty is at risk due to our pension funds' lack of substantial domestic investment, potentially depriving our country of much-needed capital,” he told CoStar News in an email.
The effort to push for more investment in Canada has attracted support from a range of business leaders, including Couche-Tard founder Alain Bouchard, former Scotiabank CEO Brian Porter, former Blackberry Chief Executive Jim Balsillie and hotelier Howard Pechet.
Not everyone agrees that pension funds should forgo U.S. investments for Canadian assets. Some say money managers need to put aside emotional decisions and look to the bottom line — and only change strategy after immediate news events can be digested.
“The pension funds support the Canadian economy in a strong way, and with regards to trade wars I think it is really premature to make any judgments," Brett Miller, CEO of Montreal-based real estate developer Canderel, said in an interview. "Real estate is a long-term hold with long-term returns. I don’t necessarily agree with the premise that Canadian pension funds are not loyal to Canada."
Canada's US property investment
A drop-off in Canadian investment in U.S. commercial property could affect an American sales market that is showing signs of a rebound. Canada investors poured more money into United States offices, warehouses and other commercial real estate assets and debt than did any other country in the second half of 2024, according to a report from CBRE. Canada also topped CBRE's list in 2023.
While Canadian investors were the top source of inbound capital for commercial property at 4 billion U.S. dollars in the second half, the total represented a drop of 28% from the same time in 2023, according to CBRE, amid concerns about high interest rates.
The Texas Tower in downtown Houston was built by and is co-owned by Quebec pension fund CDPQ and Hines. (CoStar)
The Texas Tower in downtown Houston was built by and is co-owned by Quebec pension fund CDPQ and Hines. (CoStar)
The initiative to get pension funds to increase their investments in Canada has led to much discussion but so far no commitments, with Canada’s pension funds staying out of the debate. Representatives of the Canada Pension Plan Investment Board, Caisse de dépôt et placement du Québec, QuadReal, the Ontario Municipal Employees Retirement System and other major Canadian pension funds did not respond to email queries from CoStar News asking for comment on their plans to invest in the United States.
New real estate investments into the United States appear to be slowing.
“Anecdotally, there's a general sense of pencils down for the moment,” said Gunnar Branson, CEO of the Association of Foreign Investors in Real Estate, or AFIRE, a group that represents approximately 180 large international investment organizations from 25 countries. The group collectively oversees more than US$3 trillion in assets under management in the United States.
The pause comes as Canadian interest rates have become more manageable after seven cuts in the past year, and the economic outlook generally is seen as brighter than in 2024.
Nonetheless, 80% of the large-scale non-U.S. real estate investors queried in a recent survey identified global political tension and economic realignments as the greatest threats to cross-border investment in 2025. Almost two-thirds, or 63% of investors, maintain a negative outlook for foreign investments into the United States this year, up from 42% in the fall of 2024, according to a recent AFIRE survey taken just prior to Trump's tariff announcements.
Gunnar Branson, CEO of AFIRE, said institutional investors will be unmoved by the current sentiment. (AFIRE)
Gunnar Branson, CEO of AFIRE, said institutional investors will be unmoved by the current sentiment. (AFIRE)
Despite their apprehensions, investors recognize the United States as a safe place to put their money, Branson said. “There is an understanding generally in the institutional investment community that the U.S. property markets overall are in very good shape from a real estate perspective and are interesting to them,” he said.
The tariffs imposed by the United States and the retaliatory trade taxes put on United States goods coming into Canada already have tamped down desire by Canadians to travel to the States. In March, the number of Canadians returning to their country from the United States by car was 1.5 million, a drop of nearly 32% from the same month in 2024, according to Statistics Canada. "March 2025 marked the third consecutive month of year-over-year decline," StatsCan said in a report.
The number of return trips Canadians made from the United States by air travel in March was 13.5% lower than the same month in 2024, StatsCan said.
RETAIL SALES POP AS CONSUMERS RUSH TO BUY GOODS AHEAD OF TARIFFS
Recent gains appear to be transitory as consumers are expected to pull back on future spending
By Brandon Svec
CoStar Analytics
April 21, 2025
According to U.S. Census Bureau data, retail sales jumped significantly in March, with nominal and inflation-adjusted sales posting their strongest year-over-year gains since 2022. The surge in retail sales, occurring across a broad group of retail categories, contrasts sharply with a weakening broader economic backdrop, including falling consumer confidence, a weakening labor market, and a significant sell-off in equity markets.
While the 1.4% month-over-month gain in headline retail sales was impressive and suggests consumer resilience, the underlying drivers appear to be more temporary tailwinds rather than lasting momentum.
The biggest factor in the March boost likely stemmed from consumers accelerating purchases ahead of the enactment of higher import tariffs. While consumers did not know the exact timing or magnitude of the increases back in March, it was widely reported that significant tariffs were coming and would likely increase pricing on a wide swath of goods. Similar to trends observed in past trade conflicts, consumers appear to be front-loading purchases, aided by additional dollars afforded by tax refunds.
The variance in category performance in March supports this line of thought, as four of the five strongest performing retail categories during the month have significant exposure to higher import tariffs. This includes motor vehicles and parts, which were up 5.3%, building materials and garden, which were up 3.3% (and additionally aided by an early planting season across much of the U.S.), sporting goods, hobby and musical, which were up 2.4%, and electronics and appliances, which rose 0.8% in March.
The increase in electronics and appliances and motor vehicles and parts was especially noteworthy and indicative of households advancing big-ticket purchases ahead of expected price hikes on imported goods.
The one retail sales sector that did not outperform as would have been expected in a tariff front-loading environment was the furniture and furnishings sector, which saw sales drop 0.7% during the month. That said, much of the underperformance in this sector may have resulted from furniture sales reverting to the mean following a couple of consecutive months of elevated sales.
Outside of furniture and furnishings, the only other retail sector to see sales slip in March was gasoline stations. While convenience store sales have generally performed well due to strength in the freshly prepared food category, falling gasoline and diesel prices pushed sales receipts at gas stations down by 2.5% in March and by 4.3% during the past year.
Falling prices at the pump are good for U.S. consumers and retailers, but they will not be enough to offset the higher costs expected elsewhere. As a result, the March numbers are best viewed as a temporary spike rather than a sign of a sustained rebound.
In the most recent April update, Oxford Economics lowered its forecast for retail sales, which are now expected to decline in the third and fourth quarters of 2025, which would be the first two-quarter contraction in retail sales recorded since the height of the COVID-19 pandemic.
This increasingly fragile outlook carries implications for the retail real estate market. While many brick-and-mortar operators benefited from the March uptick, especially those in electronics, home improvement and general merchandise, the potential for sustained sales erosion casts a shadow over leasing and expansion plans for the remainder of the year.
Fortunately, retail space markets should remain tight throughout most of the U.S. as near-historic lows in available retail space and muted construction activity have helped to keep supply and demand balanced in the face of a weaker consumer environment.
PHILADELPHIA SAW ACCELERATED POPULATION GAINS IN 2024, LED BY SUBURBS
Recent migration trends led to further tightening in suburban apartment markets
By Brenda Nguyen
CoStar Analytics
April 17, 2025
According to the latest data from the U.S. Census Bureau, the Philadelphia metropolitan area added an estimated 88,100 new residents between 2019 and 2024, marking one of the region's strongest five-year growth periods in decades. In 2024, the region experienced accelerated population growth, adding 49,520 residents—comprising 56% of the five-year population gain in a single year.
The recent population surge has bolstered apartment demand, with nearly 10,200 new units leased in 2024—the second-highest performing year, behind only 2021's post-pandemic boom. Moving van rental firm U-Haul released its Midyear Migration Trends analysis, indicating that the Philadelphia region primarily attracts residents from New York City, Central New Jersey, Washington D.C. and Wilmington, Delaware. People have increasingly sought Philadelphia's relative affordability while maintaining access to Northeast economic opportunities.
Suburban areas are the primary drivers behind the region's expansion, with Burlington County in New Jersey leading at a 1.1% growth rate in 2024, followed by Chester County, New Castle County and Gloucester County, each expanding by 1%.
This continues a five-year trend where Burlington, Chester, and Gloucester counties each averaged 1.3% annual growth. In contrast, Philadelphia County showed a slightly negative average growth rate of -0.1%.
This suburban population expansion has led to tight rental markets. Due to limited new supply and growing demand, suburban apartments have experienced higher annual rental increases than units located in the city's urban core.
Several factors drive suburban appeal, including excellent school districts, expanding corporate campuses along Route 202 and I-295 corridors, and the development of walkable town centers. Communities like Phoenixville, Media and Conshohocken have become particularly attractive to millennials, forming families who desire space and accessibility.
Despite recent robust growth, demographic experts anticipate Philadelphia's population to moderate in the near future. For a region historically dependent on international migration to offset domestic outflows, future immigration policy shifts could significantly impact Philadelphia's demographic trajectory. Oxford Economics forecasts the region's population growth to average just 0.2% annually through 2029.
For real estate stakeholders, these population trends suggest continued but potentially moderating apartment demand.
TRUMP’S TARIFFS IN 2025 COULD TRIGGER A CAP RATE CATASTROPHE FOR REAL ESTATE INVESTORS
By Michael Johnson
United States Real Estate Investor
April 9, 2025
Trump’s 2025 tariffs could wreck investor portfolios by inflating costs and spiking cap rates. Discover how to protect your NOI and avoid value loss in this urgent breakdown of political and market forces.
Similar to That Shocking Feeling After Realizing You Had a Spiked Drink
If you haven’t noticed lately, everyone is talking about Trump’s Tariffs in 2025 like it’s a new pandemic.
Cap rates are spiking—and now, Donald Trump’s proposed 2025 tariffs could push them into uncharted, destructive territory.
Investors already juggling interest rates, inflated home prices, and tighter lending are about to face a perfect storm.
If you’re not recalculating your deals with tariffs in mind, you’re playing a dangerous game with your equity.
Because what starts as a political move could become the silent killer of your portfolio.
Trump’s promised 10% universal tariff and potential 60%+ tariffs on Chinese goods won’t just shake up global trade—they’ll drive up the cost of everything tied to construction, renovation, and development.
And when investor expenses go up, NOI goes down. And when NOI drops, cap rates jump—slashing your property value and crushing your ability to exit or refi.
Here’s how this plays out and what you need to do now to avoid disaster.
What Cap Rates Really Mean—And Why They’re Under Siege
Cap rate = Net Operating Income ÷ Property Value.
Simple formula.
Dangerous implications.
If you own a property pulling in $24,000 in NOI and it’s worth $400,000, that’s a 6% cap rate. Not bad—until inflation kicks in, labor costs double, and that $24,000 starts shrinking.
Now imagine materials for your next rental rehab jump 30% because of tariff-fueled import restrictions. Cabinets, copper wire, drywall, PVC—all rising in cost overnight.
Your expenses balloon.
Your NOI shrinks.
Your property value sinks.
What felt like a safe 6% deal in 2023 turns into a nightmare by mid-2025.
Trump’s Tariffs Will Weaponize Your Operating Costs
You’re not just fighting interest rates anymore. You’re fighting politics.
Trump’s 2025 economic platform includes:
A 10% tariff on all imports
60%+ tariffs on Chinese goods, including building materials, appliances, and tech
This means the cost of renovations, flips, and multifamily maintenance will surge. Contractors will charge more. Supply chains will slow down. Delays will become the norm.
Even if your rents stay stable, your operating costs won’t—and that means a shrinking NOI, a rising cap rate, and a falling valuation.
How to Survive the Tariff-Driven Cap Rate Storm
1. Lock down fixed-rate financing before chaos hits.
If Trump wins and tariffs are triggered, banks may tighten even more. Get your financing fixed and closed before new risk models come into play.
2. Cut renovation fat—focus on cash flow, not aesthetics.
Granite counters won’t save you when NOI drops. Keep your upgrades efficient, rent-justifying, and minimal. Think insulation, security, curb appeal. Skip imported fluff.
3. Only buy properties with day-one cap rates over 7%.
If your margin is too thin to handle a 1.5% rate shift, you’ll drown fast. Filter your buy box accordingly. Tariff fallout will separate savvy investors from speculators.
The Bigger Picture: 2025 Could Reshape Real Estate as We Know It
This isn’t just about politics. It’s about pressure.
A single policy shift—like a universal 10% tariff—can create shockwaves across construction, insurance, lending, and tenant behavior.
Investors working on tight margins may see entire portfolios go upside-down by Q3 2025.
Your cap rate is no longer a number to glance at. It’s your survival indicator.
If Trump’s economic plan becomes a reality, and you’re holding overpriced properties with soft income, you won’t just lose value—you’ll lose liquidity.
No buyers.
No cash-out refis.
No outs.
NEW WAVE OF TARIFFS EXPECTED TO ROCK US RETAIL
Analysts predict higher prices for consumers, lower margins for chains
By Linda Moss
Costar News
April 3, 2025
President Donald Trump accelerated a global trade war this week in a move that's expected to dramatically disrupt the U.S. retail industry, a major user of commercial real estate.
Wall Street overall didn't react well to the "Liberation Day" news that Trump announced Wednesday. The stock market plunged, with the Dow Jones Industrial Average dropping Thursday nearly 1,700 points. It was no secret that the president was going to increase the tariffs he imposed on China and Canada in February, but the scope of the new round and their size — and immediacy of their impact — left some in the retail industry surprised and two industry trade groups spoke out against the new policy.
In a live earnings call Wednesday, the CEO of furniture retailer RH, formerly Restoration Hardware, uttered an expletive when he saw how his chain's stock tumbled after Trump's announcement. RH's shares were down about 40% end-of-day Thursday, the top loser among U.S. stocks. Also among the day's worst-performing stocks were VF Corp., the footwear maker behind such brands as Vans and Timberland, as well as home furnishings retailer Wayfair and apparel firm Gap.
Real estate industry professionals say it's early to gauge how Trump's tariffs, aimed at keeping manufacturing in the United States, will pan out for retailers, their landlords and warehouse operators. At least one Wall Street analyst expects the president to reduce the announced tariffs, starting out high as a negotiating ploy.
The uncertainty comes as retail real estate demand is relatively strong, making it better able to withstand any lulls in leasing that might result than at other times; industrial property owners have already said tariffs are causing some tenants to express concern about taking more warehouse space. The U.S. retail space market, with about 12.2 billion square feet, remains close to its historic low at just 4.2%, according to CoStar data.
In fourth-quarter earnings reports, some retailers said they had reduced their dependence on goods from China in preparation — now only to see high tariffs imposed on Vietnam, one of their new sources for goods. Others said they had dealt with tariffs before and knew how to navigate them. Some chains conceded they would be forced to have shoppers bear the brunt of the tariffs.
"Ultimately, retailers will have to determine how much of the additional costs they can absorb versus pass on to consumers," Brandon Svec, national director of U.S. retail analytics for CoStar Group, said in an email Thursday. "It becomes a choice between lower margins or lower sales, with most likely choosing a mix of both."
Sales slowdown
The National Retail Federation and the U.S. Fashion Industry Association immediately voiced their opposition to the new round of tariffs. In fact, the NRF announced Wednesday it expects the growth of U.S. retail sales to slow down this year, to 2.7% and 3.7% over 2024 to between $5.42 trillion and $5.48 trillion, because of inflation and consumers’ anxiety over tariffs. The NRF added that tariffs will disproportionately impact small retailers.
“Tariffs are a tax paid by the U.S. importer that will be passed along to the end consumer. Tariffs will not be paid by foreign countries or suppliers." David French, NRF executive vice president of government relations, said in a statement.
The U.S. Fashion Industry Association represents textile and apparel brands, retailers, importers and wholesalers based in the United States that do business globally. The new tariffs will disproportionately impact the textile and apparel industries, which have "been paying higher tariffs for decades with little impact on reshoring manufacturing," the trade organization said in a statement.
ICSC, the trade group that represents retail landlords, declined to comment on the new proposed tariffs.
Neil Saunders, a retail analyst and managing director at analytics firm GlobalData, in an email to CoStar News said he was taken off guard by some of the proposed tariff rates.
"The impact is hugely disruptive," Saunders said. "The tariffs come as no surprise, everyone knew they were in the offing. However, the comprehensiveness of the new tariff regime is more shocking, as are some of the tariff rates. Basically, there is no escape from tariffs. Every company that imports is going to have to deal with higher costs that result from this new way of conducting trade."
In a report this week, UBS Research said Trump is probably using tariffs as "bargaining chips … likely to be toned down." Until and unless that happens, retailers will be challenged, according to Svec.
"The magnitude of the impact depends on how long these new rates remain in place (and certainly differs greatly by sector and retailer)," he said.
Target said it began importing fewer goods from China in the face of tariffs. (CoStar)
Target said it began importing fewer goods from China in the face of tariffs.
Preparations made
Retailers have been taking steps since November to minimize the impact of tariffs, such as "pressuring suppliers to offset the costs with lower prices and increasing inventory on hand ahead of the announcements," according to Svec.
For example, in March, Macy's CEO Tony Spring told Wall Street analysts the retailer was ready for tariffs.
"Our outlook tries to take into account the pieces that we know and the things that we don’t know," he said on an earnings call. "Our first-quarter inventories are in good shape. There’ll be no impact from the pending tariffs. As we look at the remainder of the year, we’re taking a case-by-case basis and trying to react in real time as we learn more."
Earlier this year, Target Chief Commercial Officer Rick Gomez told Wall Street the discounter was importing fewer goods from China in the face of tariffs.
"In terms of our owned brand production, we've reduced what we source from China from roughly 60% in 2017 to around 30% today and on our way to less than 25% by the end of next year, a goal we expect to achieve four years ahead of our schedule," Gomez said.
But these kinds of measures "will not be able to fully insulate earnings," according to Svec. "Put simply, the outlook for retail space demand has become more bearish because of higher tariffs."
Price hikes ‘likely’
The apparel industry isn't the only retail sector expected to be hit hard by tariffs. Consumer electronics sellers such as Best Buy are, too.
"International trade is critically important to our business and industry," Corie Barry, the chain's CEO, said during a March earnings call.
She added that "the consumer electronics supply chain is highly global, technical and complex. China and Mexico remain the No. 1 and No. 2 sources for products we sell respectively. While Best Buy only directly imports 2% to 3% of our overall assortment, we expect our vendors across our entire assortment will pass along some level of tariff costs to retailers, making price increases for American consumers highly likely."
And on his earnings call this week, RH CEO Gary Friedman warned that "anybody of scale in the home [furnishing] business has a high percentage of their content coming out of Asia."
In February, Walmart Chief Financial Officer John David Rainey told CNBC that roughly two-thirds of what the discount giant sells comes from or is put together in the United States. He also warned that Walmart would not be "completely immune" to tariffs on imports from Mexico and Canada.
“We’ve lived in a tariff environment for the last seven or eight years, and we’ll do what we know how to do,” he said. “We’ll work with suppliers. We’ll lean into our private brand. We’ll shift supply where necessary to try to take advantage of lower costs that we can then pass on to consumers.”