June 24, 2015 Neil warshafsky

Which Sector of Commercial Real Estate To Invest in the Greater Toronto market 2015

“We have never seen the capital markets so deep, with domestic and global capital pursuing commercial property across Canada.”Peter Senst, CBRE Canadian Capital Markets President

Senst’s statement is evident of the fact that Canadian economy is prospering and with every passing day, the national and international investment in Canada is increasing in 2015. The Canadian commercial real estate industry is as diverse as it can be, especially in the Greater Toronto Area; therefore, the investors have to carefully weigh all the sectors with regards to their profitability, before making an investment decision.

Research statistics show that over 5.8 million sq. feet of office space is being built as a part of 2013-2017 constructions, and the office space leasing activity will remain strong throughout the year 2015. Although the number of office space being constructed is slightly lower compared to 2014, yet the market offers great potential for the investors. The baby boomers have taken over the millennials as workforce, and their expectations from a workplace, especially in terms of sustainability have increased and this demand will shape the office space demand in 2015. The way the demands of baby boomers will change and the respond of constructors to it is a question that remains unanswered for office space investors in 2015.

“The industrial market is very prudent and is capable of quick adjustments since new constructions usually take less than 12 months to complete.”Andrew Wright, CBRE’s Industrial Practice Leader Canada

Contrary to the slight confusion in the future prospects of office real estate, the industrial market is reliable and has a brighter future in terms of return on investment. The foreign investment complemented with industries being established onshore will support the increasing demand of industrial space in GTA in 2015. Industrial market is more demand and less confusion compared to office space real estate market.

As far as the residential commercial real estate (multi-family apartments) is concerned, this sector of commercial real estate will hold its demand if not experience growth in it. “Rents haven’t decreased despite significant new construction, but we’re starting to see deal structures that are slightly more favorable for tenants.”John O’TooleExecutive Managing Director, CBRE, Toronto. This statement goes on to show that as far as the productivity of this sector in terms of investment is concerned, even if the rental rates become favorable for the tenants, it will result in an increase in the demand of the residential units, thus investment in this sector will be safe in 2015.

On contrary to those investors who analyze everything in detail, there is another kind of investors that can benefit from commercial real estate of GTA region. The GTA commercial real estate market has a sector that can work for the benefit of investors who have a vision and who plan on taking bold steps. “In an environment of change, the bold and the visionaries will benefit most. Many will pause and assess changes on the retail front in 2015, but those who seize opportunities will win big because Canada remains a relatively strong market and the long-term outlook for the retail sector is solid.”Tom BalkosDirector CBRE’s Retailer Service Group.

With Target and Sears investing heavily in GTA, the demand of retail sector will also increase in future; however, this investment is not for those who make decision upon analysis of previous data, rather, the retail commercial real estate investment in 2015 is for investors with vision and guts to take risk.

Among the different sectors of GTA commercial real estate, the industrial sector at this point of time seems the most reliable and shows great promise in terms of its increased profitability in 2015. For rest of the commercial real estate sectors, the future is steady in terms of profitability and growth.