At a time when commercial real estate – that is, retail, industrial and multi-residential properties with more than 5 units – is in short supply, why would you want to sell your commercial real estate in 2021? To be a good real estate investor, it’s wise to always review your strategy, and adapt your objectives to the current situation. So it might be a good idea to take advantage of the momemtum and divest yourself of some of your commercial real estate. Let’s explore some of the reasons why you might want to sell.
Sell your commercial real estate at an unhoped-for price
Two factors are currently influencing commercial real estate prices: low interest rates and scarcity. We could even say that the same applies to residential real estate. Firstly, the Bank of Canada has confirmed that it will maintain the key interest rate at its current level until the inflation target of 2% is reached, i.e. until the economy recovers.
In an article published in January 2021, she predicts that this could continue until 2023. Obviously, when rates are low, borrowing values rise. This in turn drives up the value of real estate. The current market therefore benefits sellers, who can afford to sell their commercial real estate at a higher price. What’s more, rates are encouraging investors to increase their real estate inventories. Most are in buyer’s mode… which exacerbates the shortage already present.
We could expect prices to fall after COVID
Because of COVID-19, many owners decide to keep their commercial buildings for various reasons: – They don’t feel comfortable carrying out visits because of the risks (even very minimal) of contamination. – They fear they won’t be able to reinvest in another building because of the shortage. – They assume that the market will continue to rise. But as the economy goes into recession, we predict that there may be more sellers after the pandemic is over. More availability will likely mean lower selling prices for commercial real estate. If you’re thinking of disposing of your properties in the short to medium term, our advice is to sell now to ensure you get the best possible price.
Bringing together commercial properties geographically
If your strategy is to group your properties together in the same geographical area for easier management, sell your commercial real estate now before prices fall. You can then invest this money in the short term while you wait for markets to fall, and then buy back at the right price.
Reinvest in newer commercial properties
If your buildings are starting to look dated or in need of major renovation, perhaps now is the right time to sell those commercial properties and acquire newer ones. We all know that renovating properties can come with many surprises. Ask yourself whether you have the budget, and the courage, to embark on a major renovation to increase the value of your property when you could already be getting a good price for it.
Make sure you’re liquid
Finally, even if investing in real estate is a safe bet, you may want to sell in order to be more liquid, and therefore less exposed to risk. It all depends on your current finances, the effect the crisis has had on your investments, and your long-term strategy. It may be wise to consult your financial advisors for advice.
Get the best price when selling your commercial properties with the Jean-Guy Ayotte team
Our agents know the market well and know how to anticipate buyers’ needs. Make an appointment dès maintenant avec l’un de nos courtiers immobiliers afin d’évaluer la valeur de vente de vos immeubles commerciaux. We’ll work with you to ensure that you get the best possible price in today’s market – a price that’s in your favor, as the seller.