Costs & Capital Availability in the Canadian CRE Industry
2 min read
The Canadian commercial real estate industry has experienced significant growth, with a considerable increase in demand for office, retail, and industrial spaces. However, costs and capital availability have been significant challenges for developers and investors.
Land acquisition is one of the most significant costs in the commercial real estate industry. Land cost has risen significantly recently, making it difficult for developers to acquire prime locations. Additionally, construction materials, labour, and fees have also increased, contributing to higher development costs.
Financing is crucial to the commercial real estate industry, and access to capital is essential for developers and investors. Commercial banks, mortgage brokers, and private lenders are common sources of financing. However, obtaining financing for commercial properties can be challenging, as lenders often require higher down payments and stricter lending criteria.
Another challenge for developers and investors is finding equity partners to fund their projects. The cost of commercial properties can be significantly high, making it difficult for developers to finance projects independently. Thus, they seek equity partners to contribute a portion of the required capital. However, finding the right equity partner can be challenging, and negotiating the terms of the agreement can be complex.
In Canada, several government incentive programs are available to help offset some of the costs associated with commercial real estate development. For example, the Business Development Bank of Canada (BDC) provides loans and investment capital to small and medium-sized businesses. The Canada Small Business Financing Program (CSBFP) is another program that provides financing for businesses to purchase or improve their commercial property.
Costs and capital availability are significant challenges in the Canadian commercial real estate industry. Developers and investors must find innovative ways to finance their projects, and the government has a role in supporting the industry through incentives and financing programs. However, despite these challenges, the commercial real estate industry continues to grow, providing opportunities for investors and developers.
References
Hayes, A. (2023, January 11). Cost of capital: What it is, why it matters, formula, and example. Investopedia. Retrieved February 14, 2023, from https://www.investopedia.com/terms/c/costofcapital.asp
Simoneau, A. (2023, January 5). What to expect in canadian commercial real estate in 2023. LoopNet. Retrieved February 14, 2023, from https://www.loopnet.com/learn/what-to-expect-in-canadian-commercial-real-estate-in-2023/1725921854/
About Royal LePage Commercial Westhaven Toronto
Our commercial real estate industry and segment expertise coupled with Royal LePage’s national platform and integrated systems provides best-in-class real estate strategies and a competitive advantage that can’t be beat.
We help businesses identify opportunities and maximize their return on investment with actionable goals, centralized support services and a strong commitment to customer success. Our national partnerships help us establish, guide and execute successful business investments.
We offer commercial real estate agents a professional environment, focused 100% on commercial real estate. Agents can expect unlimited market boundaries to build their business without the interference of a heavy corporate structure. In addition, agents will be able to access Royal LePage’s national referral network of over 18,000 agents to develop more business in their target markets with incoming leads generated daily. The brokerage provides agents a suite of services including marketing, promotional, networking and professional development needs.
Innovation and service excellence have developed and propelled the Royal LePage brand since 1913. When you join Royal LePage Commercial Toronto brokerage, you have the backing of one of the most powerful commercial real estate services company in Canada—Bridgemarq Real Estate Services Inc. (formally Brookfield Real Estate Services Inc.). Bridgemarq is a leading provider of services to real estate brokers and agents. They are an affiliate of Brookfield Business Partners, a business services and industrials company focused on owning and operating high-quality businesses and is listed on the New York and Toronto stock exchanges.