The World of Commercial Real Estate

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The World of Commercial Real Estate

Entering the world of commercial real estate can be daunting for most people. Whether you are looking to invest in a property or purchase a property for your business, now may be the opportunity.

Looking For A Tenant?
During the past 4 years, many business improvement areas (BIAs) in the GTA saw the value of their commercial properties increase. In particular, Toronto witnessed a 40.9% increase over the four years and a 60% increase in 10% of those BIAs. As commercial property values increase, small business owners are feeling the effects spill over into their rental fees. Many mom and pop type shops cannot afford the increase in rent, thus opening the door for more online retailers to enter the market.

Online retailers establishing a presence in the real world, in addition to their virtual ones, is an emerging trend in retail. Landlords are taking advantage of this opportunity to find a new wave of tenants. Companies like Vistaprint and Indochino have realized that having a brick and mortar location provides their customers with a physical location to see the company’s products. “When we open a showroom in a market, online sales in that market grow twice as fast versus markets that we’re not in” indicated CEO of Indochino Drew Green.

Another steady tenant for landlords has been the medical professional. Stats Canada reports that nearly 25% of Canadians will be older than 65 by 2031 ensuring that medical services will always be in demand, especially in the country’s urban, suburban and rural areas.  Medical buildings often fall under the Field of Dreams philosophy – If you build it, they will come – as long as there is parking.

“We have universal health care so all of the doctors’ [salaries] are guaranteed by the government and that makes the doctors as tenants very stable and safe” says Huy lam, a VP with Colliers who specializes in health care real estate. He adds “It doesn’t matter if the economy goes up and down, health care will always be constant”.  As the country gets older we can expect a surge in demand for commercial spaces for these medical services and the buildings.

Looking To Lease?
When considering a commercial property to buy or sell you need to ensure you have a good agent on your side to identify issues that may not be readily apparent by other agents. By providing expertise, advice and ensuring the property meets your goals the agent can save you time, money and aggravation.

Even as the world of residential properties see fluctuation (pricing and interest rates) commercial properties tend to be more stable and offer more protection from rising and falling prices and rates. A good commercial real estate agent will ensure that you are paying market price.

Every property is unique in its own way and there are of variables when looking to lease a commercial unit, such as zoning requirements, environmental impact and any potential legal issues. In commercial real estate, the laws are in favour of the landlord. Having a 3rd a party management team will allow for more objective decision making and can provide a stronger relationship with the tenants.

If you are considering purchasing commercial real estate, now may be the time as interest rates have already started to increase slightly.  Although commercial real estate is not subject to as much pricing volatility as the residential housing market, individuals should take the overall real estate market into consideration when looking at prices of commercial units. Just like the residential market, if there is an opportunity to buy take advantage of it. You don’t want to miss out.

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