Sylvain Charpentier, the former head of real estate investments for Hydro-Québec’s pension fund, feels that Canada and Europe are well positioned to attract commercial real estate capital in search of safety and predictability.
Charpentier, who started his advisory shop CharpInvest last month, said Canada has many advantages for investors amid U.S. President Donald Trump’s trade wars and unpredictable policy shifts.
Green Street News spoke with Charpentier about navigating crises, the appeal of Canadian and European markets, emerging assets classes in today’s cycle, and the future of ESG and DEI in real estate.
How do you approach today’s issues in the historical context of your career?
Each crisis is different. You think that you’ve seen it all, but no. What we have to remember is that it won’t last forever.
I saw senior chief investment officers panicking over the Covid situation and interest rates surged. The key is do not panic — the market always comes back, one way or another. It’s important to be concerned, but we must remain solution-oriented and alert to new opportunities.
In times of crisis, we have to go back to the basics. Real estate is a place for people. What did people do during Covid? They continued to live in their homes, they still continued to consume and work. So in Canada, even if the trade war is the toughest thing you’ve ever come across, people will still keep living, consuming and working. The question becomes: Where are the places people will still need in the next three to five years to live, work and consume?
Yes, the current U.S. political climate adds uncertainty, but good sense usually prevails. Investors need to position themselves for that eventual rebound.
Are you seeing increasing interest in asset classes viewed as necessities?
Yes, I’m starting to see it with grocery- and pharmacy-anchored retail properties, and with affordable apartments. For me, those are the two asset classes that first come to mind when it comes to necessities in real estate.
Beyond that, I think Canada will potentially become an important education hub, which means rising demand for student housing and the demographic trend will continue to put pressure on senior housing. Data centers and communication towers are also core to the new economy. The explosion in AI, digital infrastructure and Internet of Things is generating demand that’s not going away.
“I think Canada will potentially become an important education hub, which means rising demand for student housing”
What’s your market thesis?
What we experienced in the past couple of years was a reset of values. I don’t see big discounts like in 2008 to 2010, but rather I see a more disciplined market.
In the United States, policy volatility is a major headwind. If this wasn’t happening, I think this would be an opportune time to re-enter the market with core, core-plus and value-add strategies.
How could the trade war affect the flow of capital?
Canada and Europe can be viewed as safe havens. Canada has a lot of advantages. It is politically and economically stable, it has disciplined institutions, interest rates are more stable than in the U.S., [capitalization] rates are still relatively high, and the Canadian dollar is cheap. So it’s a good time to invest in Canada for foreign investors.
“In normal circumstances, if it wasn’t for the hesitation created by political, legal and economic uncertainty, the United States would certainly be the first market to rebound.”
I think Europe is also an interesting place to invest. They are less affected by what is happening in the U.S. [compared with Canada], and in certain jurisdictions, they were more disciplined in adjusting their values after March 2022, after the start of the central bank hikes aimed at controlling inflation.
In normal circumstances, if it wasn’t for the hesitation created by political, legal and economic uncertainty, the United States would certainly be the first market to rebound. Also, the rule of law is critical for capital. Canada and Europe offer predictability and legal security. Those are essential for institutional investors.
What inspired you to start your own business?
After years managing major institutional portfolios and leading real estate investment teams, I wanted to share that knowledge more directly with clients. CharpInvest allows me to focus on what I enjoy most: solving complex real estate challenges and helping clients create durable, responsible value.
How do you view the evolution of office demand?
There’s nothing like a recession to bring people back to the office. With more tension in the labor market, I believe we will start to see a pickup in office usage again. Even if people are coming in only three times per week, that means we still need 100% of the space. So, I am fairly confident when it comes to office.
That said, there is no such thing as an “average office” anymore. There will be good office and bad office. Investors will need to be very, very careful in how they evaluate each asset and each location. Employers are realizing that they need people in the same room again to talk, socialize, collaborate and create value together.
ESG has played an important role in real estate in recent years. How do you see that evolving, or devolving, amid political and economic chaos in the U.S.?
I’m concerned. When investors and institutions focus on cost-cutting, ESG tends to fall by the wayside, even though it’s crucial for long-term value.
Right now, there is a clear political headwind against ESG and DEI coming from the U.S. I’m concerned that sentiment could spread to Canada and beyond. Globally, I think there will be less emphasis on ESG, at least in the near term.
The good news is that I think, long term, it still leads to lower operation costs and better access to financing. If you’re not thinking about ESG, you’re giving up long-term value and future-proofing your assets. We need to keep working on it, focusing on where ESG can create value and reduce costs.
