Short Sales News

Unlike in the United States, rents in the Canadian commercial real estate market have remained stable because vacancy rates have been relatively low. The recent increase in office vacancy rates to 6 per cent is considered modest by historical patterns. In some local property markets vacancies have actually continued to decline. In addition, Canadian vacancy rates are way lower than those in some other developed countries, most notably the United States. What is working to the benefit of the Canadian commercial real estate investments, however, is that vacancies are increasing from a low base because, in general, there has been a limited supply of new commercial properties in most local markets. This should keep rent declines small and therefore should offer to foreign investors buying property abroad a rent yield that will be better than that provided by comparable investments in commercial real estate in the United States and similar markets. Stable rental income flows should thus appeal to foreign commercial property investors interested in buying property abroad.

Another benefit of investing in Canadian commercial real estate market is that the current downturn in Canada should be both shorter and milder than in most developed economies abroad. The economic recession in Canada will likely end in the second half of this year. Canada’s recovering economy will start adding employees to the nation’s payrolls much sooner than will other economies in the world, especially that of the United States. As a result, utilization rates for vacant commercial properties in Canada should improve sooner, helping the market stabilize. The only two exceptions to this positive outlook are Toronto and Calgary, which will continue to see rising vacancies and falling rents due to oversupply issues. But, as property prices decline, even the substantial downturns in some local commercial real estate markets in Canada may offer opportunities for international property investors to buy cheap properties with a major earning potential.

Limited supply of new developments also bodes well for a short downturn in commercial real estate market in Canada. Therefore, the market rebound is expected to happen within two years, which is only a half of the time it usually takes for commercial real estate markets to stage a comeback from recession.