There has never been a better time to cash out of your Saskatchewan industrial and retail real estate.
While there is currently also demand from owner occupants for office buildings, that demand is not the same for multi-tenant offices due to typically higher vacancy in that particular asset class.
However, there is 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 two to three per cent spread between cap rates and commercial mortgage rates.
That gap might narrow soon. All indications are that interest rates will rise in early 2022. It is one element of the Canadian financial market 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 reinvest 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 off their own mortgage rather than having to operate with the uncertainty of rising rental rates.
Why the urgency
With the aforementioned interest rate increase looming, 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 an increase in the capital gains inclusion rate is coming soon.
That 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?
Make a call . . . you might be surprised!