According to a Bloomberg report, most major Canadian pension funds have seen significant losses in their real estate portfolios due to the commercial real estate downturn. The Canada Pension Plan Investment Board (CPPIB) experienced a 5% loss, while the Public Sector Pension Investment Board faced a severe 16% loss, their worst performance since the global financial crisis. Increased borrowing costs have shaken the property market, leading at least four major funds to overhaul their operations.
The Ontario Teachers’ Pension Plan (OTPP) endured its worst four-year performance in real estate since acquiring Cadillac Fairview in 2000. Another major player, Caisse de Depot et Placement du Quebec (CDPQ), reported a 6.2% loss in 2023 and plans to merge its real estate and property lending businesses to save $100 million annually.
Once dominant in real estate, Canadian pension funds are now reevaluating their investment strategies due to higher interest rates and a more competitive market. CPPIB, for instance, has reduced its office exposure by selling stakes in several properties, while OTPP focuses on investments outside Canada.
This shift towards more centralized and flexible investment approaches reflects the changing landscape of real estate investing, driven by tighter margins and increased competition from other asset classes.
