When not to buy commercial real estate

There are times when it is not wise to invest in commercial real estate.

Alternatively, many potential investors don’t take the plunge out of fear of the unknown and years later regret it.

Let’s look at some examples of when you’d be advised not to purchase.

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Another retail bricks & mortar obituary

Entrepreneurs Louis and Shaol Pozez could not anticipate 63 years ago that the demise of their discount shoe business would be taken down by a network of computers

This isn’t a story from the rejected piles of Terminator franchise spinoffs; this is a reality.

The Pozez’ conception that grew into Payless ShoeSource brick and mortar stores across the U.S. and Canada are officially shuttering.

Their disregard for advancing online sales, in addition to highly leveraged assets, proved fatal.

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Does Saskatoon want or need Farmers’ Market six days a week?

The City of Saskatoon has officially put out a tender to lease the Farmers’ Market building in Riversdale.

At current, the facility is leased to and operated by the Saskatoon Farmers’ Market Co-operative Ltd.

In their original agreement to lease the property, they outlined their plans to expand the market hours over time.

That vision has only grown to three advertised full market days. The City is ready to let someone else take a run at it.

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Saskatchewan cities enjoy lowest commercial to residential tax ratio

There is lots of chatter on the street with the recently released preliminary budget from the City of Saskatoon which proposes a 4.5 per cent property tax hike in 2019.

That chatter is incomplete without stepping back and looking at a couple of key issues.

Those two issues are residential and commercial tax ratios and the ongoing cost of city infrastructure growth.

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Saskatoon industrial vacancy drops

Our quarterly market reports have just been released and we’re pleased to report that the overall industrial vacancy rate is heading in the right direction!

The increase in absorption over the last quarter has resulted in just over a 50-basis point decrease in vacancy from 7.5 per cent to 6.9 per cent.

We have, however, seen the average asking net rental rate decrease from $10.61 PSF to $10.20 PSF.

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What is the Relationship Between Cap Rates & Interest Rates?

Earlier this week, I forwarded a client some historical data on Saskatoon commercial real estate capitalization rates. He came back to me with the comment, “Would be interesting how it (cap rate information) trends with interest rates.”

Sophisticated investors absorb data to make informed investment decisions. I asked our Market Analyst to gather the information. Here’s my observations because of that research.

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What’s ideal amount to invest in Commercial Real Estate?

For the purpose of this conversation, let’s assume you are sitting on cash or liquid asset(s) and have decided to invest a portion of your available capital into commercial real estate.

What factors need to be considered to make a prudent investment decision?

I wrote about the advantages of partnerships, but let’s say the idea of a partnership does not interest you.

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1,000 lease changes later

Receiving that first response from a Tenant we’ve not encountered before, after waiting for their review of a lease, it is always interesting.

We represent both Tenants and Landlords; this article has been written from the perspective that I am representing the Landlord.

At times the Tenant is prepared to execute the document “as is” and at times they will request hundreds or more of changes. We have seen request that number exceed 1,000 changes.

We know all commercial real estate leases are written with a bias towards the Landlord, but what are the main reasons that Tenants object to the document?

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Prime retail space elusive in Saskatoon

One of my biggest challenges is being unable to find the right fit for tenants. In a commercial landscape that remains under-serviced for retail it’s not exactly my fault.

We did see some new construction of retail in 2018, so it’s probably time to revaluate where the inventory levels sit versus vacancy, midway to the end of the third quarter of 2018.

Looking at the numbers by area, who do you ask: landlords or tenants?

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