- What Large real estate deals are seeing delays amid trade war threats
- Why Developers, investors and financiers are still weighing the potential fallout
- What next Canada has under 30 days to convince the U.S. not to apply import tariffs
The threat of a costly trade war between Canada and the United States continues to hang over the commercial real estate sector, even as U.S. President Donald Trump granted Canada a one-month reprieve from his promised tariffs hours before they were set to take effect.
Canadian Prime Minister Justin Trudeau and Trump reached a deal late Monday to “pause” for one month the 25% tariff the American president sought to apply to Canadian imports. In exchange, Trudeau agreed to a suite of measures to strengthen border security.
Market pros say the uncertainty from the on-again off-again trade war is delaying decisions across the transaction pipeline, as developers, investors and financiers continue to weigh the potential fallout from the Trump tariffs, which are scheduled to take effect on March 4 if Canada fails to follow through with its commitments.
Jason Child, senior vice president and land disposition specialist at CBRE, said uncertainty about everything from employment and interest rates to political leadership gives people a good reason to not make an investment decision today.
“It could be the developer, investor, land owner, home buyer or business owner. This trade war conversation gives people a reason to defer decision-making, specifically for major capital commitments,” he said. “The lack of urgency in the marketplace continues to resonate through the industry.”
But time adds costs to projects, which creates “tremendous pressure on projects that are overlevered or on projects that were underwritten with aggressive timelines,” he said.
Transaction delays are affecting two types of groups, said Jeremiah Shamess, executive vice president of Colliers’ private capital investment group.
The first is private capital buyers, those looking to invest under $20m and for whom real estate isn’t their primary business.
The second group is “development land buyers looking to take advantage of the correction in the development land market but believe it could get worse.” So they are waiting for more attractive prices.
“Private vendors are, for the most part, not looking to chase the market down, so [they] aren’t ready to list or sell unless they absolutely need to,” he said.
Mike Scott, senior vice president of business development for CFO Capital, acknowledged that investors are delaying decisions. However, he said the crisis is an opportunity to improve the long-term durability of the Canadian economy and commercial real estate industry.
“The long-term positives of Canada remain: Get our own house in order, less redistribution and more productivity, and capital will follow,” he said.
