Tired of paying high leasing rates at your current commercial location? Well, what if you knew you could save more in the long term if you opted to buy a building for your business today? Low interest rates, low vacancy rates and a tight supply are creating the perfect purchasing situation for entrepreneurs across the country.
According to Steve Murphy, senior vice-president of commercial and treasury management at BMO, now is a particularly good time to invest in commercial property, both for their own uses and for leasing opportunities. “There is a strong demand for these properties by users, who are often able to lease out part of the property for additional rental income.”
The experts at BMO feel that the overall real estate market remains strong, and will continue along this path as long as low interest rates remain over the medium term.
The market is especially attractive to commercial investors for a variety of reasons. According to Earl Sweet, senior economist and managing director at BMO Capital Markets, the main factors include:
- Limited Supply – vacancy rates are lower than historical norms in many urban centres. Risk-averse operations have further helped developers, construction firms and realtors improve their financial management and better balance their costs. Cautious development and prudent lending practices have played a significant role.
- American Expansion – large American retailers are targeting what they see as “an underserved Canadian market” for expansion.
- Global Turmoil – the still-unresolved European debt crisis and slowing momentum in the U.S. economy continues to weigh heavily on investors minds. Sweet feels that this will eventually cause the market to grow at a more “tempered pace” later in the year, adversely affecting the industry in the short term.
According to Sonya Gulati, an economist with TD Bank, the commercial side of the Canadian market has recorded “quite a comeback” from the loses posted in the early part of the economic recovery. Gulati notes that $21-billion in commercial real estate assets were sold last year, an increase of almost $11-billion from 2009. A short supply of projects, coupled with increased demand caused most regional markets to tighten over the past 18 months.
Commercial Boom in Toronto
The most obvious example of commercial building increases can be found in Toronto. Ontario’s capital is expected to add four million square feet office space over the next three to four years. This number could increase provided the country continues to record steady economic gains and interest rates remain low in order to combat global financial insecurity.
Watch Out for the Wild Card
While the outlook remains rosy, economists are still hesitant when it comes to consumer and business confidence in the face of a risky economic climate. Even though demand remains high, many developers are biding their time waiting to see how things will shake out over the coming months. As such, most property classes, including office, retail and industrial, remain fairly tight.
What You Need to Know About Commercial Mortgages
Are you ready to invest in commercial property? If so, now’s the time to contact a commercial mortgage broker. A commercial mortgage broker can help you locate the best mortgage rate for a wide variety of commercial financing products.
It’s worth noting that commercial mortgages have a higher interest rate than residential mortgages. This is because commercial mortgages carrying a higher level of risk. This risk can be tempered by providing a 25 percent down payment.
Shopping around for a commercial mortgage can be difficult, especially if you’re not sure where to start. For more information on commercial mortgage products, call 1-866-941-6678.