The 411 on Canada’s Commercial Real Estate Investment Market
Real estate is emerging as one of the key drivers of Canada’s economy. Despite being traditionally smaller than that of the U.S., Europe, and Asia, Canada offers a diverse and mature real estate market, as evident in the investor demographics and how capital itself is managed and invested into some of the country’s key real estate sites.
Apart from the influx of real estate assets and investors alike, the Canadian real estate market has also produced hundreds of thousands of jobs, as well as steady income and subsequent tax revenue.
If you’re a budding investor with a commercial real estate asset management company in Toronto or the GTA, or want to know how to get started in diversifying your portfolio using what used to be regarded as an alternative asset class, it’s important to know the status of the real estate market in the region and in Canada as a whole, as well as its outlook.
Size and State of Canada’s Real Estate Market
In comparison to world standards, the Canadian real estate market is small; however, it offers ample opportunity for investment due to its stellar growth over the past decade and its abundance of up-and-coming areas. That’s why investors enjoy returns through income-generating real estate in Canada that provides generous yields and notable capital appreciation over time.
Coupled with increasing demand for assets is the emergence of commercial real estate investment companies. By investing additional capital that goes into active, but prudent management, investors can gain passive income generated through long-term leases, market value inflation, and capital appreciation.
How Investors Avoid Cyclical Economic Downturns
While maintenance, additional capital investment, and active management are all key factors in driving the value and profitability of commercial real estate assets, investment income may not always be automatically guaranteed.
Canada’s real estate market, just like any other, is also prone to cyclical movements that mirror the economy’s ups and downs. Plus, these cyclical developments can be exacerbated by unique conditions, such as local overbuilding, economic activities in the region like ongoing developments in Toronto and the GTA, significant drop in the local demand, and other issues.
To stabilize investment income in the face of economic downturns, commercial real estate management companies advise investors to diversify their investment portfolio. By investing in different areas or asset classes, decline in the value of one investment can be offset by the stable returns provided by another. This equips investors with enough equity or cash on-hand to ride out the down cycles.
With a penchant for nature, culture, and quality of life, Canada is not only a tourist and immigration hotspot, but it’s also an investment hub, particularly for real estate and other long-term assets. But why – and how – did Canada become attractive to foreign investors?
Commercial real estate management companies note that Canada is an excellent place for investments, and it’s because the country is politically stable at the federal, provincial, and municipal levels. This political stability serves as a backdrop for a healthy and productive economy, a key factor in the growth of investments. It also helps that Canada’s laws encourage growth while enforcing legal guidelines for the development of residential, commercial, and industrial areas.
Canada’s commercial real estate market, despite producing risks that are true of the industry as a whole, yields many opportunities. These include the appreciation of the value of the land following physical improvements, added value through regulatory approvals in the form of increased permitted height and/or density, and upgrading permitted uses of the land to accommodate highly valued uses, like retail or office space.
Finally, opportunities for growing commercial real estate investments in Canada also stem from two other important factors: one, increasing rents or leases to the extent of scarcity in a given location, which is the desired future for up-and-coming areas in Edmonton, Saskatchewan, and Ontario, among others; and two, capital gains due to inflation as properties become more expensive or demand for commercial properties skyrocket.
At ReDev Properties, we offer a wide range of investment opportunities in commercial real estate across the risk-return spectrum. We consistently strive to generate superior investment returns while creating value for our investors.