CANADA - Commercial property in oil-rich provinces contributed to Canadian returns of 16.1%, compared with 10.5% for equities, and 4.7% for bonds, according to IPD figures published last week.
Property's performance, down from 18.4% the previous year, "is still a good return", said Douglas Rowlands, IPD global account manager for Canada.
Geography was more significant than sectors in delivering returns, as among oil-rich and highly-developed regional markets, Alberta capital Edmonton delivered 31.2%, Vancouver generated 20.7% and Calgary saw a return of 20.4%.
In contrast, Montreal returns declined to 12.7% from 18.2% the previous year. Rowlands attributed the relatively low returns for Montreal to its location.
"It's a regional downturn. You can divide Canada into east and west. Neither of them offered bad returns but compared with Vancouver and Edmonton, which have oil and gas, Montreal returns were pretty low," said Rowlands.
Sector-wise, office performed best at 18.9%, driven largely office market is likewise regionally based, centred on Toronto and oil-rich Edmonton. Rowlands described the office market as "overwhelming".
Residential real estate returned 17.9% - an increase over 2006 - as Rowlands noted "housing hasn't had the fun times everyone else has had, but investment-grade stock is trying to catch up".
Industrial and retail returned 14.3% and 13.6%, respectively.
Rowlands believes the growth of oil revenue was more likely to be responsible for the return on property than the relatively recent domestic focus of Canadian pension funds, which tend to allocate greater portfolio percentages to property than their European counterparts.
"[Edmonton real estate] will be attractive to anyone looking at it. There's a strong argument for any investor to invest. The difference in returns is so different it's often easier to go with stock you know that has diverse benefits."
With the exception of OMERS, the $48bn (€32bn) Ontario Municipal Employees Retirement System, aggressive Canadian pension funds have historically diversified geographically into international property and infrastructure markets.
CPP Investment Board (CPPIB), the investment arm of Canada's CA$121.3bn (€82bn) public pension fund, acquired a 40% in an Edmonton office block for CA$64m earlier this month. The asset will be the scheme's eighth in the Alberta capital.
A spokesman for the scheme said it expected Edmonton prime office market to remain strong as market momentum would likely increase the market's attractiveness to institutional investors.
"You could argue that institutional transactions are drumming up returns," he said. "A return of 16.1% for the year will look very favourable. F0r UK investors, it's going to look absolutely fantastic," said the CPPIB spokesman.
