GUEST SUBMISSION: Two sophisticated investors can look at the same Canadian real estate market and reach very different conclusions about what it is worth.

Earlier this year, BGO Canada chief investment officer Simon Holmes, who also manages the Prime Canadian Property Fund, said that European investors were willing to target returns of roughly six to eight per cent on Canadian real estate, while domestic institutions were looking for roughly 10 to 14 per cent.

That gap is becoming harder to dismiss as theoretical. CBRE reported that foreign investors accounted for 43.9 per cent of Canadian CRE acquisitions in the second quarter of 2026, the highest quarterly share since Q1 2023. Cross-border investment reached $4.3 billion in Q2 and $5.1 billion for the first half of the year – already more than the full-year totals recorded in each of the previous two years.

Foreign investors were the largest purchaser group in Q2, followed by private Canadian investors, which accounted for slightly more than one-third of acquisitions. Colliers’ latest global capital-flows research adds another signal: Canada moved from No. 16 to No. 9 among global destinations for cross-border real estate capital.

That does not mean domestic capital is absent. Altus Group’s Q2 Toronto CRE Market Update described GTA capital as moving from cautious observation toward disciplined deployment, with institutional and private investors prioritizing stabilized, income-producing assets.

The interesting question is not whether foreign investors are right and Canadian institutions are wrong. It is why sophisticated pools of capital can look at the same market and move with such different return thresholds and levels of selectivity.

Different capital, different hurdle rates

The answer begins with something that can get lost in comparisons of buyer activity: not all capital is solving for the same outcome.

Required returns reflect an investor’s mandate, liabilities, time horizon and opportunity set. A European allocator may compare Canadian real estate against a different range of opportunities, value geographic diversification or place a greater premium on political and financial stability.

A Canadian pension plan may be comparing the same property against infrastructure, private credit, global real estate and other investments competing for the same capital.

That does not mean one side is underwriting more intelligently or aggressively than the other.

The property can be the same while the investment case is not.

And when hurdle rates differ by several hundred basis points, that difference can materially affect which assets look attractive and which investors are prepared to move.

Is stability being repriced?

CBRE recently described Canada as a market of “safety and stability.” Those qualities arguably become more valuable in a world of geopolitical tension, shifting trade relationships and uneven economic growth.

Canada offers deep capital markets, a well-capitalized banking system, institutional-quality assets and relative political stability. None of those characteristics is new, but what may be changing is the value global investors assign to them.

When uncertainty rises elsewhere, a market that once looked conservative can begin to look defensive. For some global investors, lower perceived volatility and diversification benefits can justify accepting a lower required return.

The headline numbers still require context. Q2 investment volumes were materially boosted by Welltower’s approximately $4.1-billion acquisition of Amica Senior Lifestyles, so one quarter should not be mistaken for a permanent structural shift.

Domestic institutions have not disappeared either: CBRE reported that their share of purchases reached 11.2 per cent in Q1, the highest level in more than three years.

The important signal is not that foreign capital has “won.” It is that foreign participation has accelerated meaningfully while many domestic institutions continue to apply a higher bar.

Discipline or missed opportunity?

That leaves Canadian institutions with an uncomfortable but useful question: is caution simply good discipline after several difficult years for real estate – or could higher hurdle rates cause domestic capital to underweight attractive opportunities just as market conditions begin to improve?

There are legitimate reasons to remain selective. Not every asset class or geography has repriced equally, and different institutions face different portfolio constraints and return requirements. But there is also a cost to waiting for perfect clarity, because by the time improving fundamentals become obvious, pricing may already reflect them.

The investors that benefit most from the next phase of Canadian CRE may therefore not be those with the most optimistic view of the market. They may be those whose capital structure, return requirements and time horizon allow them to act while others still require a wider margin of safety.

The bigger question

Foreign capital returning to Canada is positive for liquidity. But the more interesting implication is what it reveals about how Canadian real estate is being valued by different pools of capital.

The same market is being evaluated through different mandates, hurdle rates and definitions of risk. That divergence can influence transaction volumes, pricing, asset ownership and ultimately which investors capture the next cycle of returns.

The question is not whether foreign investors know something Canadian institutions do not.

It is whether the value of stability, diversification and relative risk has changed faster than some investment mandates have.