Canada has billions in US real estate. Trump's threats put that at risk.

• For a decade, Canada has been the largest foreign investor in US commercial real estate.
• The billions of dollars that flow into the US from its northern neighbor could now be in jeopardy.
• The rift comes as President Trump has threatened tariffs on Canada and mused of annexing it.

President Donald Trump upended relations with one of the country's closest allies and trading partners when he suggested that the US should annex Canada and threatened punishing tariffs on certain Canadian imports.

The fraying relations between the two nations could also disrupt one of the biggest pipelines of money into US commercial real estate.

Since 2015, Canadian investors have acquired roughly $184 billion of US multifamily apartments, office buildings, retail spaces, industrial warehouses, and other commercial property assets, according to data from MSCI. That's more than any other foreign investor.

There are now worries that Canadian buyers, which include some of the world's wealthiest pension funds, might slow or even postpone US real estate dealmaking.

"There are clients who are Canadian clients who are very upset and their first reaction is if the US can do this to a friend, then we're not going to invest," said Mark Rose, the CEO of Avison Young, a commercial real estate services firm that has its headquarters in Toronto. "I don't think that Canadian investors are running to close deals in the US today."

Gunnar Branson, the CEO of the Association of Foreign Investors in Real Estate, a trade association based in Alexandria, Virginia, that represents foreign buyers, said that during a February conference for the group, he had "never seen so many angry Canadians before."

"If you're a cross-border investor, the US has been a lower political risk jurisdiction," Branson said. "Risk managers are looking and saying: We need to assess that."

Branson said that foreign investment had been broadly diminished in recent past years by a sluggish sales market caused by higher interest rates and uncertain values. The outlook, however, had brightened in recent months, as expectations grew that interest rates would fall and deal activity would accelerate, allowing foreign buyers to reboot US acquisitions.

Foreign investment had already begun to pick up, according to the real estate services company CBRE, which reported that international buyers invested $37 billion during the second half of 2024, a 31% increase from the same period a year before.

Canada led all foreign investment with roughly $4 billion of deals in the second half of the year, according to CBRE, more than double the next closest country, the UK, which purchased $1.62 billion of property assets in the US.

That rebound could now be in jeopardy.

"There is certainly a pause going on," Branson said, referring to both Canadian and foreign investment at large.

CBRE predicted that foreign investment in US property would grow 8% in 2025, but cautioned that "downside risks remain, particularly due to elevated long-term bond yields, potential tariffs and geopolitical uncertainties."

Major Canadian funds could turn elsewhere

Large Canadian pension funds have been major acquirers of trophy US commercial assets. Oxford Properties Group, a subsidiary of the roughly $100 billion Ontario Municipal Employees Retirement System, is a partner in Hudson Yards, an ongoing real estate mega-development on Manhattan's West Side that is one of the country's largest private real estate projects.

Caisse de dépôt et placement du Québec, a pension manager that oversees about $340 billion, owns several prominent real estate assets, including the Manhattan office tower 3 Bryant Park and a majority stake in 1211 Avenue of the Americas.

The arrival of President Trump and his new administration in January has disrupted the global order for commerce and trade — and potentially also the flow of investment.

In March, the US placed a 25% tariff on Canadian goods and energy outside of what is protected by North American free trade agreements. The move included a 25% tariff on Canadian steel and aluminum.

Aside from the painful duties, Trump has inflamed Canadians with remarks that suggested he thought of the country as little more than a US satellite. In March, Trump said during a White House press conference that "Canada only works as a state" of the US.

In late March, Canada's prime minister, Mark Carney, responded, declaring that Canada "will need to dramatically reduce our reliance on the United States. We will need to pivot our trade relationships elsewhere."

The souring relationship has influenced investor decision making, experts say.

"Does the comments coming out of Washington impact real estate trading? Yes, it does," Rose, the CEO of Avison Young, said.

Rose said that the company's Canadian executives were outraged by Trump's remarks and the US's suddenly aggressive economic posture.

Rose said that he has had to personally navigate the fallout by assuaging Canadian employees and clients who "were offended and wanted to know what were we going to say."

He released a public statement in which he said he was "distressed over the impact of actions and commentary emanating from the U.S. toward its ally and neighbor to the north."

"We are here to support our people in North America, all of our clients in North America, no matter what side you come down on," he wrote.

Europe emerges as an alternative

There are some signs that investors may be shifting their focus away from the US.

David Steinbach, the global chief investment officer of the development and investment firm Hines, said that interest has picked up in European investment funds managed by the company.

He said that Hines has recently had "more conversations about our European funds and investments" with global investors and that the company was looking to raise additional capital for an open-ended fund that invests on the continent.

"We do have an unprecedented amount of dry powder for Europe right now," Steinbach said, noting that he believed at the start of the year that global investors would be overwhelmingly attracted to US property markets.

"This year it's going to be a bit more balanced than I originally thought," Steinbach said, referring to the pickup of interest in European deals.

Aaron Bennett, the chief investment officer of the University Pension Plan, a roughly $8 billion system representing Ontario-area college faculty and employees, said he believed the "US will eventually get back to what it was" as a key destination for global investment dollars.

He acknowledged, however, that the trade barriers, dimming economic outlook for the US, and the bellicose rhetoric towards longstanding international allies and trade partners from the White House has prompted investors to consider alternatives.

"The opportunity for diversification in other markets like Europe and others, which was interesting before, becomes more interesting," Bennett said.

On April 2, Trump escalated his reordering of global trade by unveiling sweeping tariffs against dozens of nations.

Few alternatives can compete with the US

There are reasons to believe, however, that global investment into US real estate, which is not directly impacted by trade barriers, might remain robust even in a world where the US faces economic backlash and retaliation for its new policies.

"Does that mean the US is going to get blacklisted? The answer is absolutely not," said Dirk Aulabaugh, the global head of the advisory services group at Green Street. "The US still has the best growth, we still have the most transparency, we still have the most stable government. So there are a lot of things that investors have to check boxes on that the US is still going to be the best."

Sam Tenenbaum, the head of multifamily insights, at the real estate services firm Cushman & Wakefield said that he had recently had a conversation with a Canadian investment firm that was considering a US acquisition. The investor, he said, was bothered by the international tensions between the US and Canada, but would pursue the deal if it made economic sense.

"They're not happy about it, but I wouldn't characterize it as affecting their investment decisions," Tenenbaum said.