Target recently announced its set to close all 133 Canadian locations. Shoppers interviewed by the media say they are sad to see them go, but it is clear that Wal-Mart stores have been far busier.
The Canadian arm of the giant retailer reportedly racked up $2 billion of losses in less than 24 months. While some might argue that the store just wasn’t competitive enough, others would debate the company just moved to fast.
Many landlords say they made sure Target’s main US headquarters guaranteed leases, so do not expect to take losses on leases which were expected to last an average of another 12 years. There will be some disparity in how these spaces fill up, but there is still no shortage of demand for retail space in booming hubs like Edmonton. If it isn’t Wal-Mart absorbing the space, it could be their competitors such as Loblaws, smaller luxury retailers, innovative discount stores or local startups that are now spreading their wings.
Together with the recent Sony closures and the pull back of Google Glass, Target’s story is a reminder for investors to seek out a good mix of retail tenants and leverage strong partnerships in investment properties. In order to be safe and to command top yields, investors need to look to ideal locations, tenants and leases before getting into the commercial retail market.
Calgary and Edmonton have been going head to head for the position of best real estate market in Canada for a number of years. Calgary has consistently generated consistent commercial real estate returns, even as property prices have risen dramatically and luxury home prices have shattered record after record.
On the other hand, Edmonton has offered better value for years. It was expected that last year Edmonton would officially seize the crown. Most data published showed that both Alberta cities are still neck and neck. However, some expect the recent oil price plunge to decidedly tip conditions in Edmonton’s favor.
Many reports proclaim Calgary’s reliance on energy. According to Statistics Canada and a senior economist at the Bank of Montreal pointed out the decline in building permit value and a dramatic 42 per cent rise in Calgary’s property inventory shows that recent concerns over oil prices are already taking their toll.
It can sometimes be difficult to peg the real differences between the two markets but Edmonton saw a 40 per cent rise in sales, while Calgary just piled properties onto the market. Double digit single-family home price increases in at least five Edmonton neighborhoods also beat out Calgary’s average of less than 10 per cent. Still the big deciding factor for Canadian real estate investors is going to be sustainability in growth and velocity.
Edmonton also has another advantage, contagious optimism. The current building and development boom in Edmonton has created an environment and vibe that has a lot of unquenchable energy. Right now, it seems no matter which direction oil prices, foreign economies and other Canadian real estate markets head in the months ahead; Edmonton will only continue to grow.
Whether it is individuals looking for a smart investment in a home, companies looking for the right location or Canadian commercial real estate investors seeking attractive and sustainable returns, Edmonton is proving to be a stable and steady choice.
The rapid plunge in oil prices has certainly been a shock to many and has fueled the media with lots of speculative talk. But there is a good chance it could be all overblown. While one Saudi prince has predicted we’ll never again see $100per barrel oil, Moody’s has predicted it could return to close to that by the end of 2015.
Still, in the short term the media tends to fuel frenzy. Panic can set in and investors and individuals that aren’t looking at the big picture can make rash moves. This certainly could mean that some in the luxury housing market may hold off on buying and may be motivated to sell instead.
Certain destinations will definitely benefit more from these trends and movements than others, especially those which are more affordable like Edmonton, Alberta. No matter which direction oil prices go later this year and beyond, it appears there is very attractive window for Canadian investors to acquire in other property investments right now.
Given all the warnings about the stock market, global unrest, fears about the security of the technology sector, many are turning towards alternative investment opportunities such as real estate.
In fact, real estate, especially in Edmonton is showing great promise of increasing in value and delivering above-average returns.
Edmonton is only starting to reinvent itself as one of the most buzz worthy cities on the map. This means growth, as the demand for these properties increases and yields continue to grow.
For the bullish Canadian investor, the availability of leverage great opportunities to scale while the sector is still ripe. Whether it is mortgage leverage or partnerships, this means being able to catapult growth at the perfect moment where value turns into gains.
It’s true that commercial real estate is a big sector, but there are obvious niches which stand out for both novice and professionals such as retail.
So whether you are extremely optimistic about the global economy, or just learning about it, it’s worth taking a look at commercial real estate investment opportunities in Alberta.
Once you’ve decided to invest in commercial real estate, the next big question follows: do you go for the large and famous malls or try out local shopping plazas?
Large and famous malls have the obvious appeals of being well-known and having favourable tenants. However, most of Canada’s largest commercial properties are tied up by super-sized funds and are restricted by availability.
Small retail centres on the other hand tend to draw in more local tenants, allowing them to follow shopping trends quickly. And while they require less financial commitment than mega malls, they still have strong equity growth potential, yield growth and long-term performance.
In the end, Canadian real estate investors should feel extremely confident in their retail acquisitions, regardless of their decision. Both mega malls and local shopping centres are sound, secure options.
Millennials are loving commercial real estate investment in Canada. Although, their reasons may be very different from their parents and grandparents, Alberta’s new vision for Edmonton is drawing many young investors to this asset class.
Not Just Millennials
Generation X and boomers are also both returning to the commercial real estate market in big ways. While they have different motivations, for Gen X and those approaching retirement, commercial real estate remains a stronghold for wealth protection and reducing tax liabilities. It’s a top pick for those that can’t afford to gamble with their financial future, while at the same time providing ongoing income.
CRE is in for Gen Y
Edmonton’s rapidly transforming skyline has a lot to offer Millennials. Many young entrepreneurs are pioneering a new revolution back towards bricks and mortar opportunities, such as local shopping centers. While freedom of lifestyle may still be among their top priorities, surveys show they care about their communities and are more emotionally invested in them than their previous generation.
Although Gen-Y may not be big on owning their own homes, they appreciate real estate. In fact, many are as bullish on real estate as Generation X was at the beginning of the 2000s. This makes commercial investment property the perfect investment pick, as the passive income it produces also fuels more freedom to pursue other passions and provides investors the ability to travel, explore and live.
This surge in interest in Canadian commercial property is only going to help drive values and yields higher, making it an increasingly profitable sector for years to come. So whether you are on the threshold of retirement or just months out of school, it’s worth looking at what commercial real estate can do for you.
Commercial real estate has been demanding the lion’s share of the attention among experienced investors recently. Canada’s leading cities Calgary and Edmonton have been competing for globe topping commercial property investment returns for several years and while Edmonton is expected to continue to edge ahead, the outlook remains bright for all Alberta investors for the foreseeable future.
Alberta’s commercial property market is quite sizable and everyone wants to know which property type is the absolute best. To help us assess that, we can look at factors currently taking place.
The current energy predicament isn’t likely to last, which will minimize losses in industrial properties. Concerns about overbuilding in the office sector will likely be negated as more head offices and start-ups move in. Lastly, retail will remain a strong front-runner as more luxury stores continue to expand into Canada.
Despite the media’s coverage of the current issues concerning retailers, such as e-commerce, the sector isn’t slowing down. There are large bidding wars over Edmonton’s retail space, which is driving up rent, property values and investment returns.