What’s the Most Important Property Type For Real Estate Investors?

Nov 17 - What is the Best Property

What is potentially the most profitable property type for Canadian real estate investors?

What matters most when evaluating the best real estate investments, and what should be factored into this decision?

Decoding the Best Type of Property

To hone in on the best type of property for investors today requires looking at which elements are most important to those investing. So what are they? Security is often the biggest one. Sophisticated Canadian property investors want to invest in bricks and mortar that will preserve their capital. Second to safety is which properties are most likely to perform consistently.

To determine this, investors will want to hone in on which types of properties are most critical and needed in the current market. For example, new sports arenas and museums might be valuable, and they may certainly help anchor a locale and increase interest, but most would reasonably argue they are not necessities.

Industrial Property

Some may pose that industrial real estate is the most important, especially in provinces such as Alberta. After all agriculture, manufacturing and energy are all crucial backbones of sustainable economies and provide real wealth building and job creation. However, industrial property can be a virtual minefield for most Canadian investors. This type of property can be tricky to develop, manage and sell for those not intimately familiar with the market. On top of this, industrial properties can have a much smaller user and buyer base than other types of properties. With energy production, regulations and technology constantly changing, it can be difficult to determine where performance for this property type is headed.

Office Buildings

After industrial, office property may be assumed to be a significant indicator of local economic strength, job creation potential and financial stability. Strong office markets used to suggest strong broader real estate markets but this is no longer the case. With 60% of the population on the way to working remotely, there has been a drastic change in the demand for working space, resulting in serious uncertainties regarding the future of the office property sector.

Residential Property

Most individuals would instinctively point to residential properties, as the most “needed” type of property. Whether it’s single family homes, multi-family apartment buildings or hospitality venues such as hotels, everyone needs somewhere to live and stay.

In destinations such as Edmonton, there are clear shortages in housing, which suggests that future growth is on the horizon. From purely an investment standpoint, multi-tenant properties have significant advantages in value, cash flow performance, efficiency in management and reliability. However, even when things are at their worst, homeowners and renters will skip their housing payments before they stop shopping for essential products and services, such as food and household items.

Retail Investment Property

It is hard to refute the fact that retail, specifically local shopping plazas, are the most important property type for the current market. As a result, they are likely to perform consistently and hold their value over time, while producing consistent cash flow in the interim. Retail can also pose far less liability when compared to residential landlord-tenant lawsuits.