What does the future of real estate look like in Canada?

Head of Canada and CIO at BGO highlights opportunities within the real estate space, inflation concerns and a return-to-office dynamic

What does the future of real estate look like in Canada?
Christina Iacoucci, head of Canada and CIO at BGO

Amidst a global backdrop of economic fluctuation, the real estate industry faces unique opportunities, especially within the Canadian market, driven by strong demographic trends and robust investment strategies.

That’s the view espoused by Christina Iacoucci, head of Canada and Canadian CIO at BGO, who navigates the evolving Canadian real estate market with a keen focus on strategic growth, niche sector investments, and comprehensive asset management.

The recently nominated BPM Elite Woman uses a hands-on approach in her role, leading BGO's charge into innovative investment areas such as data centres and cold storage assets, while simultaneously enhancing core and value-added investment strategies. Her role not only addresses immediate market challenges but shifting economic cycles and investor needs. She highlights a few opportunities the real estate industry is seeing, as well as the dual impact of inflation on the real estate market and the importance of sustainable investing.

“The growth in our demographics in Canada directly translates to strong fundamentals for many real estate sectors,” she said. “As much as there's been impacts to real estate in Canada, there's a lot of very strong characteristics for the Canadian real estate market that has provided outsized pace in terms of opportunities and growth,” she noted.

Iacoucci reflects that pre-COVID and pre-interest rate hikes, the real estate industry, from a fundamental perspective, was strong. While there's been downturn or headwinds within the marketplace, she highlighted, those challenges have been offset by a relative basis in terms of where we were from before that happened.

“I think we're finding some really unique opportunities. There is some distress on the market for sure,” she added. Some of these unique opportunities include data centre and cold storage assets, two areas she thinks will perform well not just in Canada but around the world.

The real estate industry faces a supply and demand imbalance, Iacoucci noted, because inflation has affected the residential and industrial sectors as they face outpacing inflation. In addition to those sectors, development for real estate in general has also been affected.

“Development costs continue to increase as inflation increase. The cost of goods makes it a little bit more challenging to start development. But because of that slower development, it's fuelling the other side of the coin there, which is this inflation relative to market rents.”

As for whether metro offices will stay vacant or not, she believes Canadians will be returning to work in offices in some capacity. “I believe people will use offices in different ways,” she says. “They may not need as much space, they may not need the same space, but they're going to need the spaces in the best possible buildings. When you think about core assets, [like public transit and net zero features], those are the assets that will continue to be sought after and do well. They do better from an occupancy perspective, and they do better from a rent perspective.”

Iacoucci asserts real estate is fundamentally about people and relationships and how people use real estate for their wants and needs. Additionally, she is a firm believer when it comes to investing in sustainable real estate.

“Creating something that can work with the built environment that can sustain over time that can have enhanced value, both from the users and the investors, is critical. Without those components, you cannot have longevity in this business,” she says. This also means having diverse voices at the table. She attests this is what will create long-term value and solutions to their clients.

While there is indeed a ramp up towards more organizations embracing sustainable real estate investing, she says there’s always more work that can be done.

“Five years ago, [sustainability] wasn’t in the top five questions. They’re in the top five questions of every RFP that we answer today. People want to understand what our goals and objectives are in this area. The more people care about it, the better we're going to get at focusing on it and doing this.”

In her role as head of Canada and Canadian CIO at BGO, Iacoucci manages the entirety of the business, which also means ensuring growth for the firm. Not just from a strategy perspective but from an employee perspective as well, she highlighted, as she says BGO teams must have opportunities to grow.

“The thing that I love best is that there is no such equal day in the life of Christina,” she says. “It is different every single day. I spend a lot of time talking to people, both internally and externally. I spend a lot of time with our clients and potential clients. I spend a lot of time with our global leadership team and touring around the world, seeing what's happening in real estate in different countries and being able to bring that information back to Canada.”

“It's been a very interesting journey,” she added. “It's great because I still learn new things every day and that's really what helps drive me personally and that's what helps drive our business as well.”