{"id":4920,"date":"2017-02-16T10:10:53","date_gmt":"2017-02-16T18:10:53","guid":{"rendered":"http:\/\/www.roryc.ca\/blog\/?p=4920"},"modified":"2017-02-10T10:10:11","modified_gmt":"2017-02-10T18:10:11","slug":"the-number-one-risk-to-canadian-commercial-real-estate-in-2017","status":"publish","type":"post","link":"https:\/\/www.roryc.ca\/blog\/2017\/02\/the-number-one-risk-to-canadian-commercial-real-estate-in-2017\/","title":{"rendered":"The Number One Risk to Canadian Commercial Real Estate in 2017"},"content":{"rendered":"

Rising interest rates \u201ccould be the number one risk\u201d to Canada\u2019s commercial real estate segment moving forward, TD Economics says in a new report.<\/p>\n

\u201cDevelopments of the past several weeks have highlighted what could be the number one risk facing Canada\u2019s [commercial real estate] outlook over the coming years \u2014 the possibility of higher interest rates,\u201d the TD Bank\u2019s research department said in its Canadian Commercial Real Estate Outlook, published today.<\/p>\n

TD Economics noted Canadian 10-year bond yields and US Treasuries have been on the upswing since November 2016, when Donald Trump won the US presidential election.<\/p>\n

TD\u2019s economists aren\u2019t the first to suggest higher interest rates may be on the rise due to President Trump\u2019s actions. Late last year, BMO Senior Economist Robert Kavcic said US tax cuts as well as protectionist policies, such as higher tariffs, may cause more rapid inflation stateside, leading to higher interest rates north of the border.<\/p>\n

Commercial property investors\u2019 returns already took a hit from rising interest rates last year as real estate prices soared while rents remained stable. At the time, most commercial segments \u201chad enough cushion to absorb\u201d the effects of rising interest rates.<\/p>\n

But now investors, especially those in Toronto and Vancouver, will feel the impact of trimmer margins if rates continue to push higher. \u201cSpreads in the office sector are now estimated to be below historical averages,\u201d says TD Economics.<\/p>\n

There are other possible headwinds on the horizon. \u201cA housing slowdown will ultimately spill over to demand for office and retail space through reduced employment and household spending,\u201d TD Economics adds.<\/p>\n

\u201cHousing markets are likely to lose steam over the next several quarters on the back of recent increases in borrowing rates and tightening in federal mortgage regulations,\u201d the bank adds.<\/p>\n

So far, however, Canada\u2019s hottest housing markets have bolstered investor interest in commercial real estate assets.<\/p>\n

For instance, real estate jobs in Toronto have contributed to demand for office space there. And BC\u2019s foreign-buyer tax, which applies to residential properties anywhere in Metro Vancouver, compelled non-resident investors to put their money elsewhere.<\/p>\n

Non-residents were responsible for about 30 per cent of all Canadian commercial real estate investment in 2016, far above the 5 per cent historical norm, says TD Economics, citing recent CBRE figures. A third of that foreign investment was Vancouver bound.<\/p>\n

\u201cAnecdotal evidence suggests that the\u2026 tax\u2026 encouraged foreign investors to shift their focus from housing to commercial real estate,\u201d says TD Economics.<\/p>\n

This Might Be The “Number One” Risk to Canadian Commercial Real Estate in 2017<\/a> by Josh Sherman | Buzz Buzz Home<\/p>\n","protected":false},"excerpt":{"rendered":"

Rising interest rates \u201ccould be the number one risk\u201d to Canada\u2019s commercial real estate segment moving forward, TD Economics says in a new report. \u201cDevelopments of the past several weeks … [read more<\/a>]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8],"tags":[],"class_list":["post-4920","post","type-post","status-publish","format-standard","hentry","category-market-updates"],"yoast_head":"\nThe Number One Risk to Canadian Commercial Real Estate in 2017 • Rory C Real Estate | Oakwyn Realty<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.roryc.ca\/blog\/2017\/02\/the-number-one-risk-to-canadian-commercial-real-estate-in-2017\/\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta 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