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OPINION: Sell your industrial and retail real estate right now

Veteran Saskatchewan broker says this is the time to cash out of industrial and commercial retail assets
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This 110,120-square-foot industrial complex in Saskatoon sold in September 2021 for $12 million. | Colliers

There has never been a better time to cash-out of your Saskatchewan industrial and retail commercial real estate.

While there is currently demand from owner occupants for office buildings, that demand however is not the same for multi-tenant office due to typically higher vacancy in that particular asset class.

Abundance of buyers

There is currently 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 2 per cent to 3 per cent spread between capitalization rates and commercial mortgage rates.

That gap may narrow soon. All indications are that interest rates will rise in early 2022.

That is one element of the Canadian financial market that most economists can agree on.

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 re-invest 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, he will often consider a property that may not be the most current in design.

In the long run he can still be far ahead of the game by paying his own mortgage off rather than having to operate with the uncertainty of rising rental rates.

Why the urgency?

With the potential and probable interest rate increase 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 that an increase in the capital gains inclusion rate is coming soon which could add 12.5 per cent to a seller’s tax bill.


Barry Stuart is a managing partner and senior broker at ICR Commercial, with offices in Saskatoon and Regina.