There are a lot of changes happening in the markets for 2017. The economy, regulations, appetite, and property values are all influx. There are many predictions about what could happen in the Canadian real estate market throughout 2017. One big question on the minds of many investors is whether it is time to buy or sell commercial property assets over the next couple of quarters.
Market Influencing Factors
There are several dynamics that are sure to impact commercial real estate trends this year, including:
- Property prices
- Higher interest rates
- Resurging global and US economy
- High stock market prices
- Demand for value investments
These factors could drive more demand in commercial real estate assets, yet higher interest rates and asset prices encourage some investors to liquidate assets while cap rates are more appealing to the broad pool of buyers requiring financing.
Why One Firm Is Both Buying & Selling Commercial Assets
ReDev Properties Ltd. recently made the news after completing the sale of three notable commercial properties in Edmonton, AB. ReDev’s Founder Richard Crenian also told the press that the company remains bullish on Western Canada, and plans at least four new commercial real estate acquisitions in the region in the first two quarters of 2017.
Why buy and sell? ReDev’s strategy for its recent exits was buying, adding value, and proving performance. Assets were acquired, renovated and had additional retail space added, or secured new tenants and leases. These became highly attractive assets to funds seeking strong, reliable yields. It was a win-win.
Whether investors buy, sell, or do both in a portfolio restructuring this year will depend a lot on their strategy, the point of the cycle their assets are at, which parts of their portfolio they want to work on. For some it may be about locking in solid income streams and yields. For others capital appreciation may have peaked, and there may be new opportunities offering value add opportunities. Others may have aging assets which they’d rather let someone else renovate or reposition rather than making the investment themselves.
This year could prove to be a very active year for commercial real estate in Alberta and British Columbia. There will be those motivated to exit investments, while others seek to add to or reposition their portfolios to be better aligned with their strategy and timeline. How will you engage in the market this year?