Commercial Real Estate – is it for you?

If you live in Vancouver or you plan to, you likely follow the real estate market very closely, checking to see how much the prices of condominiums, townhomes and bungalows are increasing.

A growing number of Vancouver residents are checking more than the residential market. Commercial real estate – real estate used for commerce or as an investment - is a growing market.

If you’re interested in commercial real estate, you likely fall into one of three groups.

1. Home based business owners

As many as one-in-five of us own our own home-based business. If your business is expanding, you may want to buy space for it to expand into.

2. Friends and family investing together

If you bought your home a decade or more ago and have paid down your mortgage, you may be thinking of joining forces with friends or family to buy a small apartment building or a postage-sized strip mall as an investment.

3. You already own commercial property

You’re part of a syndicate and already own or invest in rental apartment buildings, retail stores, strip malls, larger shopping malls, office complexes, commercial warehouses, industrial parks, and even large farms.

Commercial property is popular because it can potentially offer very good investment opportunities.

For a few basics - commercial property is ranked according to its location, appearance, and cost.

Class A is the best with a superb location (think Yaletown), superior construction and building management, and high paying tenants. Class B has a good location (West Broadway), good construction and good tenants. Class C is often an older, modest building, in good repair (anywhere from downtown to Fraser Street).

If you’re thinking you might be interested in investing in commercial property, start by getting as much information as possible. Do your homework so you know exactly what you’re getting into.

The easiest way is to start reading. Go to a bookstore or to the library and read about commercial real estate investing. Visit www.clslink.ca the website for commercial listings in BC, and have a look listings.

Talk to commercial REALTORS® and then work with them. Whether you plan to buy a fixer-upper apartment building or a small heritage office building with long-term tenants, a commercial REALTOR® can give you valuable information about the market and neighbourhoods.

For an idea of the range of commercial properties available, take a walk around your neighbourhood.

Begin to look at commercial properties through the eyes of an investor. Your local coffee bar, small corner cafe, medical and dental building, rental apartment buildings, auto repair shops, art galleries, and spas – are all commercial properties owned by real estate investors like you, who lease them to tenants.

Take your time and learn as much as you can. While a combination of low interest rates, flexible down payment options and rising price appreciation makes owning commercial property easier, it is a big investment.

If you’re serious, consult with a lawyer and an accountant since there are important tax consequences and you will want to protect yourself.

What is the commercial market doing?

In the third quarter of 2007, (July-September) spending on commercial buildings hit a record high in the third quarter at $629.2 million, up 7.8% from the second quarter. Commercial building permits have increased 34% so far this year.

What is the outlook?

Commercial building permits have increased 34% so far this year and lease rate rates are climbing – both good signs. For more information, be sure to follow the Important Commercial Statistics as well as our Market News & Statistics page.

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