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TPG buys stake in Canadian warehouses from Oxford for $1 billion

In a significant move signaling resilience in the Canadian commercial real estate market, U.S. private equity firm TPG Inc. has successfully acquired a majority stake worth $1 billion in a portfolio of warehouse properties around Toronto. The deal, yet to be officially announced, involves TPG gaining a 75% ownership share in two strategically located industrial parks in the suburban cities of Brampton and Vaughan.

People familiar with the matter, who chose to remain anonymous, have confirmed that the current owner, Oxford Properties Group, will retain a 25% interest in the acquired properties and continue to manage the assets post-transaction. This acquisition comes as a notable development amid a commercial real estate market that has seen a slowdown due to interest rates reaching multi-decade highs.

Despite the overall market conditions, investors remain optimistic about the future of warehouse and logistics properties, a segment that has consistently outperformed others. The surge in e-commerce, although cooling since the pandemic's peak, has sustained the demand for efficient and strategically located warehousing facilities.

Warehouse vacancy rates in many Canadian cities are among the lowest in North America, and the construction of new facilities has been hampered by various challenges, further tightening the supply. This scarcity has made Canada's industrial real estate an attractive investment for foreign entities. Notably, in February, Singapore's sovereign wealth fund GIC completed a $5.9 billion buyout of Summit Industrial Income REIT in partnership with Dream Industrial REIT.

Blackstone Inc. has also been a key player in expanding its Canadian industrial real estate portfolio over the years. The recent move by TPG further underlines the growing trend of foreign investors eyeing Canada's robust industrial property market.

Oxford Properties Group, representing the pension plan for Ontario's municipal employees, has been strategically divesting some of its real estate holdings in Canada, aligning with the broader trend among pension funds in the country. These funds have shifted focus towards building new properties as a means of achieving more substantial returns on investment. In Ontario specifically, Oxford has been actively involved in the development of new industrial properties.

The TPG transaction values the acquired portfolio, spanning an impressive 5.1 million square feet (473,800 square meters), at an estimated $1.3 billion. The deal not only adds momentum to TPG's strategic positioning in the Canadian market but also emphasizes the continued allure of Canada's industrial real estate sector for global investors.

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