Canada’s institutional investors are preparing to make acquisitions after focusing on divestments for a prolonged period, says an Altus Group analyst.

“A lot of the sellers over the last two years have been institutions, and I do expect that [situation] to continue, but we also are starting to see them looking to buy again,” said Robert Santilli, the Toronto-based firm’s head of Canadian valuation advisory services. “So, the closing of bid-ask spreads [and] stabilization of prices should result in more transactions for the balance of 2024.

“The [institutional] groups that we work with overall, I would say, could move from net sellers to net acquirers in the coming quarters.”

Santilli made the comments during a recent Altus webinar on second-quarter commercial real estate industry conditions in Canada and the U.S.

Currently, Canadian institutional investors are churning their portfolios, attempting to reduce their exposure to the troubled office sector and “high-grade” their portfolios, he said. But he expects to see more institutional investors make more acquisitions in the second half of 2024

Prior to the Bank of Canada’s June interest-rate cut, 50% of Canadian investors said in an Altus survey that they would focus on managing their portfolios during the rest of 2024.

The BoC reduced its overnight lending rate to 4.75% from 5%. Another rate cut is expected to occure this year.

“This is going to spur more deal activity, and certainly there are some groups that want to get in and ride another cap-rate cycle lower,” said Santilli. “So, I think many institutions have already started to move back into acquisition mode. 

“But, nonetheless, I think it’s still going to remain an environment where you’re focusing on operations and improvement.”