The timing could be right for small investors to get into the commercial real-estate market, according to some real-estate and investment professionals.
There are still areas in Canada where good buys on small, income-producing properties - such as a store with apartments above - are possible, due to low interest rates and the rough economic climate.
Given that commercial real estate generally lags behind a recovery in the economy, maybe it's time to think about owning the premises for your business. Would it realistically be a good investment?
Dale Sonier considered these questions after the rent on his downtown Toronto premises went up to $20,000 a month. He sells fabrics, feathers, sequins and fab finishings that add flair to sewing. Those with a hand on the needle flock to macFAB, a downtown emporium where everything is available.
Not only does the clientele include the amateur fashionista, Harry Rosen stocks up here too and it's a booming busy place.
But Mr. Sonier felt hemmed in by the high rent. That's why macFAB will be moving next January from Queen Street West to a spot he has purchased on Queen Street East - from one side of downtown Toronto to the other.
Mr. Sonier is delighted with the move and the opportunities it will offer.
"Buying the building will allow me to live and operate the business for about $4,000 a month," he says. "I was able to purchase two storefront properties for a total $915,000. We'll have 3,400 square feet of retail space. I will live upstairs and have my bookkeeping and office built at the back.
"I am so excited because I will be able to put money back into the business and enjoy a fantastic neighbourhood."
Phil Morrison, another investor and property owner in Toronto, owns nine properties and was hoping by the end of business on a recent Thursday to own 10. However, he points out that he has been outbid on several places he's liked. A store at Lansdowne and Dupont in Toronto attracted him at a price of $195,000 but someone else paid $236,000 for it.
Has his enthusiasm for buying been rekindled because the economy might be on the rebound? "I never stopped looking," he says. "I'm always looking for a decent deal - I go strictly by the numbers. A big mistake a lot of buyers make is falling in love with a property. It's also not a good idea to over-renovate. ... There's sort of an art to investing in property. I make a living at it and I enjoy it."
François Brosseau, president of Cityspace Corporate Real Estate Services in Montreal, agrees that it's a good time to scout out income-producing properties.
"If I had put my retirement money into real-estate investments instead of the stock market, I'd be doing back flips now," Mr. Brosseau says.
Pierre Boiron of Coldwell Banker Commercial Terrequity Realty in Thornhill, Ont., points out that the market for small commercial and investment properties in the Greater Toronto Area is very strong now, with ferocious competition.
"A lot of people from other countries see property here as a very good investment," he says.
Case in point: Jonathan Rosemberg, a young entrepreneur originally from Toronto, who has been living in Venezuela, says the property investment climate is calmer in Canada. He's looking to buy property, possibly in Toronto or the GTA, for a group of investors.
"In Venezuela," he says, "the situation is very chaotic. Here, property owners are unlikely to have their investment seized by the government."
However, investors need to balance the desire for a deal with the risk involved in putting money into real estate in communities where jobs have been downsized. Circumstances vary across Canada.
In Vancouver, according to Kelvin Luk, of Macdonald Commercial Real Estate Services, close to 700 residential rental units - duplexes, triplexes and four-plexes - sold in the past 12 months. But new investors in commercial property there could find the banks asking for 60 per cent down - up sharply from the 20 per cent that may be asked for in a residential transaction.
Linda Reader, a self-employed rural community development and marketing consultant in Flesherton, Ont., adds that in places such as Owen Sound and other smaller communities north of Toronto, lots of industrial buildings are for sale, reflecting the unfortunate hollowing out of the manufacturing sector.
