Although Canadian institutional and private real estate investors think the market has yet to reach its lowest point, they are cautiously optimistic that a fast recovery is on the horizon and are honing their expansion strategies, suggests a survey released Tuesday.

According to global real estate services company Colliers International’s 2010 Global Investor Sentiment Survey, 65% of Canadian investors indicated they are considering further acquisitions over the next 12 months, mirroring the global trend (64%).

The global survey of more than 240 major real estate investors (including 26 large Canadian institutional property investors) with a total investment portfolio of over $300 billion, also found a strong appetite for domestic investments. Eighty-five per cent of Canadian respondents who indicated acquisition plans intend to focus on the domestic market, especially in locations such as Toronto (27.8%), Vancouver and Montreal (16.7% each), Edmonton and Calgary (14.8% and 11.1% respectively). The lack of appetite for foreign investments is also reflected globally with eight out of 10 respondents having no off-shore portfolio or intentions to invest overseas.

“On a risk adjusted basis, Canadian investors still see Canada as a preferred investment destination that offers a higher return on investment compared to the U.S., in part because of the turmoil that still lingers south of the border,” says Milton Lamb, chairman, national investment team, with Colliers International in Canada. “Additional reasons respondents gave for focusing on domestic investments range from the quality of assets to diversification of income stream, availability of capital or better valuation matching income.”

The survey also reveals that Canadian investors are not only looking for buying opportunities, but also looking to divest under-performing or non-core assets (54%). At the same time another 42% of investors are playing the waiting game, holding firm on any asset selling plans to avoid sale at the bottom of the cycle. Respondents predict that the price-expectation gap between buyers and sellers, which has brought deal flow to a near standstill, will narrow closer to the end of the year. The consensus among investors surveyed is that the market will resume to normalcy of transaction stream starting in Q3 2010 through to Q2 2011.

“If there is a lesson to be learned from this recent recession it would be about the importance of proper assessment of investment opportunities in the context of market cycles. The commercial real estate market is not a stock market where one can enter and exit so easily, which means proper research and analysis become more important than ever,” concludes Lamb.

IE