According to the latest figures, global real estate investments have grown by over 17 per cent to almost $790 billion, and this figure is expected to continue to increase in 2015.
In addition, sources are leading us to believe we’ve only seen the tip of the iceberg in investment portfolio restructuring. With London’s looming new capital gain tax on the horizon, it’s set to create a substantial shift in the market, sending significant amounts of capital flowing into new investments and new markets.
Some of the world’s largest real estate funds are also exiting their earlier investments and re-allocating them into new investments and industries.
Profits made in emerging markets like Africa and India by local entrepreneurs are also being reallocated and placed into more secure markets or for diversification.
Regardless of where international real estate trends are heading, we’re sure Canada will be part of it.
How to Start Investing in Commercial Real Estate Many Canadians are already investing in real estate via their own homes. However, investing in commercial real estate can diversify an investor’s portfolio and bring other valuable advantages residential real estate can’t, such as ongoing passive income or multiple tax benefits.
In the past, commercial real estate has been thought of as more challenging than residential investing. And for new investors, the whole process can be overwhelming and scary.
While there are differences between the two and different procedures are needed, investing in commercial real estate doesn’t have to be intimidating. Today, there are many options investors can choose to help ease them through their investments. From commercial financing, third party partnerships and syndication structures, expert management is always accessible.
Before investing, here are five strategies that can lead you to successful commercial real estate investing:
- Define your investment goals
- Clarify how much you want or have to invest and know your limits
- Layout timelines for when you want to start and how long you want your investment to carry on for
- Research which investment types are best suited to you
- Decide who can help, and what options are available
News headlines have been buzzing with alerts about the latest stock market plunge. While this may be a temporary slump in the stock market, analysts have been predicting as much as a 60 per cent dive in stock prices for some time. It’s difficult to estimate a precise moment, but the current fundamentals of the stock market suggest that a steep sell-off is inevitable.
Money markets have already been reacting to the mayhem with mortgage interest rates reportedly edging even further down. This creates significant opportunities for Canadian investors to expand in commercial property acquisitions with low rate financing, which will enhance the property’s cash flow and NOI.
Existing commercial property owners can find lower rates ideal for restructuring debt leverage to improve investment property performance. Individual investors can also find it to be an ideal moment for refinancing their homes and even accessing additional capital to invest.
Many Canadian retailers are fighting for space in Canada’s top markets like Edmonton. Some commercial centers, such as the West Edmonton Mall and Calgary’s Chinook Centre have even been reportedly combating each other for brand name tenants.
Attempting to draw big name tenants and offering exclusivity has long been common practice in retail property investment and management, but this may not be the most profitable strategy going forward.
Historically, lower demand for retail space used to dictate that retailers could demand exclusivity in their domain within a shopping centre and landlords would oblige. However, this is quickly changing, especially in markets such as Alberta where retailers are competing with each other to secure floor space.
Big names are desirable, but they can also present issues. For example, well-known retailers may already have an extensive e-commerce presence. This can become a disadvantage, as it can reduce in-store sale performances and additional traffic to the shopping centre.
Furthermore, popular retailers are not always the most profitable tenants due to their negotiating power and prestige. Competing for these tenants gives the larger retailers more negotiating power, thus decreasing the landlord’s profit even further.
In order to combat this, landlords should diversify their tenants. Local and boutique tenants, especially stores revolving around services and food, can prove to be just as profitable as big name tenants.
According to Benjamin Tal and a new CIBC World Markets report, Alberta remains the “most favourable place for small business to flourish.” A recent infographic via Medium, documents a dramatic and exponential rise in new business startups and investment activity in Edmonton, flowing through 2014. Popular pitching and funding platform AngelList listed 87 startups and almost 4,000 angel investors in Edmonton.
However, while tech and startups are hot, there are many good reasons for angel investors and entrepreneurs to be prioritizing commercial real estate investments right now too.
For a start, these small businesses need to secure and maintain affordable office spaces going forward. Whether they remain boutique-sized, work in co-working office spaces or plan to expand into retail storefronts, one of the best ways for them to ensure survival in this rapidly appreciating commercial real estate market is to own a slice of it.
Many might not be able to afford or justify acquiring a whole office building, office condo, or shopping plaza, but they could utilize partnerships to own part of a building without having all the obligations. This will also provide them the benefit of sharing the wealth created from the lift in values.
For many it can be a strategy to pull in additional income, depending if they sublet part of the building or invest close to home.
Canadian home sales fell for the first time in nine months. However, despite this drop in price, combined with the prospect of higher interest rates and assertions that Canada’s housing boom is too dependent upon large markets, the strong Canadian housing market is driving a prospering retail property investment sector.
Sears Canada Downsizing
For years, Sears Canada’s struggle for profitability was underpinned by the failure to capitalize on their flagship location in Toronto’s Eaton Centre, which was opened in 2000 after buying assets from then-failing department store chain Eaton’s. Since June & October 2013, they have raised almost $600 million by closing the following six locations and arranging a sale of their leases to their landlords:
- Yorkdale Shopping Centre in Toronto, ON
- Square One Shopping Centre in Mississauga, ON
- Sherway Gardens in Toronto, ON
- London-Masonville Place in London, ON
- Markville Shopping Centre in Markham, ON
- Richmond Centre in Richmond, BC
U.S. Retailers Look North Click here to read more.. »
A new report shows that almost 80 per cent of Canadians are now using smartphones to shop and make their purchases.
Furthermore, coverage of the latest surveys by the Edmonton Journal shows that 79 per cent of Canadians between the ages of 18 and 29 years old and as many as 77 per cent of those aged 25 to 54 are using mobile devices in conjunction with shopping in Canadian retail stores.
While 10 per cent of the surveyed Canadians have used mobile payments, less than a quarter of shoppers say they feel comfortable using their smartphones to make payments, rather prefer to use credit cards and cash in stores. Click here to read more.. »
There have been no better time than now to capitalize on the opportunities in Canada’s commercial real estate market. Values and demand are both trending up and interest rates remain low.
Here are some ideas to look at when analyzing gow to fund new investments in the current market.
Many Canadians are currently flush with cash or have cashed out other types of investments to help restructure and optimize their portfolios. Cash can be a great asset to have when capitalizing on attractive investment opportunities, as it enables investors to negotiate from a position of strength and achieve above average returns – all while retaining the benefits of a solid equity position.
It’s always wise to keep some cash on hand to retain liquidity and ensure diversification across your portfolio.
Commercial Mortgage Loans in Canada Click here to read more.. »
What can Canadian retail property investors do to elevate their returns now?
Commercial property returns in Alberta and specifically Edmonton are already very healthy. However, it always pays to get ahead of the curve and maximize margins while the opportunity to get ahead is there.
Here are nine ways retail property investors in Canada can improve on their annual and lifetime returns;
1. Curb Appeal
Improving a shopping plaza’s curb appeal, including signage can go a long way to attracting new tenants, earning loyalty from existing tenants and boosting traffic.
2. Parking Spaces Click here to read more.. »
The end of the year is coming fast. The moves Canadian property investors make now can make all the difference in maximizing 2014 portfolio performance and setting themselves up for a great 2015. Here are some steps that can help end 2014 strongly.
1. Capitalize on Seasonal Acquisition Opportunities
This time of year traditionally yields many attractive real estate acquisition opportunities. Asset prices may rise significantly as we move deeper into the fourth quarter. So take another look at what’s on the market and act accordingly.
2. Take Advantage of Improving Retail Performance
Retailers are headed for a significant boost as we approach the holidays, carrying them into the new year on positive results.
Increased sales mean more revenues and better rental income for retail property landlords. So look out of retail property investment opportunities and opportunities to increase rent or execute performance based lease provisions.
3. Position Properties for Better Dispositions Click here to read more.. »