There has never been a better time to cash-out of your Saskatchewan industrial and retail commercial real estate.
While there is currently demand from owner occupants for office buildings, that demand however is not the same for multi-tenant office due to typically higher vacancy in that particular asset class.
Abundance of buyers
There is currently an abundance of two categories of prospective purchasers.
Those who are seeking passive income investment opportunities and business owners who have decided to own rather than lease.
There is still a 2 to 3 per cent spread between cap rates and commercial mortgage rates.
That gap may narrow soon. All indications are that interest rates will rise in early 2022.
That is one element of the Canadian financial market that most economists can agree on.
Time to reposition your investment
We are seeing a shift in where tenants want to be.
I believe this represents an opportunity for owners of the functionally obsolescent property to sell, pay the tax and re-invest in an asset that is likely to perform better over the next 15 or 20 years.
Because of the limited number of opportunities for the owner occupant to buy, they will often consider a property that may not be the most current in design.
In the long run they can still be far ahead of the game by paying their own mortgage off rather than having to operate with the uncertainty of rising rental rates.
Why the urgency
With the aforementioned interest rate increase and the fact that the feds are going to be seeking ways to increase tax revenue after the spending spree they’ve been on, there is speculation that an increase in the capital gains inclusion rate is coming soon which could add 12.5 per cent to a seller’s tax bill.
Are you curious about the current market value of your commercial real estate? Give us a call…you might be surprised!
Posted by Barry Stuart