Lately, people have been looking at me with concern and asking “Are you OK?” They know ReDev Properties Canada has a number of properties on the Prairies and are worried the oil slump and current economic downturn has had a negative impact.
They couldn’t be more wrong.
There is a feeling the market is depressed, but in my view the worst has already happened.
In fact, the oil slump is creating opportunities in the commercial real estate market, especially in Calgary where the population continues to grow.
Last year, Calgary’s population grew by 40,000. In the last five years, it has increased by 16 per cent to about 1.2 million.
Oil slump has had an effect
Yes, it is true the oil slump has led to fewer real-estate investors purchasing commercial buildings in Calgary and Edmonton as the demand for office space has decreased.
However, the value of the transactions has not dropped by much. RealNet Canada says the average commercial real-estate sale in Calgary in 2014 was $47 million, compared with $37 million as of September this year.
So while it seems landlords are holding back on listing properties during the current market, eventually they will sell in favour of liquid cash. When that happens, there will be pressure for property pricing to come down.
Demand will be high for outdoor shopping centres
Although the demand for commercial office space is not currently high, the opposite will soon prove true of properties such as outdoor retail shopping centres that provide a good steady cash flow to investors.
This is the kind of investment that particularly appeals to pension funds, some of which have a mandate to invest in the Prairie market. Credit unions, which are abundant in the West, are also making it easier to purchase properties by offering easy, uncomplicated financing options and low interest loans of three per cent.
That’s why ReDev has deployed an army of real estate professionals to look for opportunities with outdoor retail shopping centres, especially ones with excess land we can use to expand the complexes and add value.
The Prairie market has been often undervalued. When I first began to buy properties in the region 15 years ago, my peers couldn’t understand why. Then, five years later, those same peers were following me out to the Prairies to buy up properties of their own.
So when they ask “are you OK?” I answer “never better.” Why? Because I take the long view.