commercial real estate
Could Target’s Exodus Significantly Effect Commercial Real Estate Lease Rates?
It was all over the news in January. Big chain American retailer, Target, announced its plan to exit out of Canada. That means the close of 133 stores, the loss of 17,600 jobs and the anticipation of approximately 20 million sq ft of commercial real estate across Canada becoming vacant. The question remains: Will Target’s mass exodus affect commercial real estate lease rates in the Canada?
Well, let’s look at the possibilities.
Other commercial or retail companies may jump at the chance to expand their businesses into some or all of those vacant spaces, paying the same lease rate Target currently pays. News has it that some large stores like Walmart, Sobeys, Loblaw’s and Metro are considering taking over approximately 55 spots accumulatively of the 133 soon-to-be vacant locations. Fitness companies like Good Life Fitness and possibly some other large fitness clubs may consider expanding into some spots as well. If all those Target locations are filled with other commercial players, then lease rates would be minimally effected if at all.
However, Target locations are, in general, large and currently only attractive to larger commercial or retail companies that may be interested in expanding into locations that best fit their “target” markets and budgets. Since not all locations may fit their criteria, there is the possibility of many of the 133 Target locations being left vacant.
Commercial Real Estate Investments companies have taken the above into consideration and have posed a possible solution. Those that own the Target locations may consider reconstructing the sites into several smaller retail units in order to make the commercial site more attractive for smaller retail companies. This would give an opportunity for commercial real estate companies to lease the smaller units at higher leasing rates.
The commercial real estate companies that have not considered the above as an option may find themselves with a fight on their hands. Co-tenants of some Target locations, particularly in malls and plazas, could take this opportunity to re-negotiate their leases knowing that the current lease rate for the Target spaces are at least 50% cheaper than those of other spaces. This could drive commercial space lease rates downwards.
So, what will happen with commercial lease rates after Target leaves Canada? Only time, tenant and commercial real estate activity will tell.
REIT’s and Real Estate Developers Strategy for 2015
According to the Emerging Trends in Real Estate 2015 Report issued this past December, one significant trend we should expect to see in Canada’s real estate markets include increased mixed-use development in the cores of downtown city areas.
Here’s why.
Two-thousand-and-fourteen (2014) saw a steady influx of people moving into cities across Canada in efforts to have easier access to work and play. Realizing this flow, businesses in various industries decided to follow. With all this activity, the demand for commercial and residential real estate in city cores has steadily increased.
Real estate developers and REITS see the demands and are responding. Fuelled by an increase in investment funding from both domestic and foreign investors, developers such as Bentall Kennedy LP, Kingsett Capital and Allied Properties REIT are looking into core areas of robust cities across Canada to acquire properties and turn them into mixed-used developments. This creative solution not only meets commercial and residential real estate demands simultaneously, but also increases the value and attractiveness of the properties to existing and potential tenants.
But not every REIT is following the mixed-use development plan. With a focus on credit quality, True North Commercial REIT, for example, has put its focus on acquiring office buildings housing government and other rated tenants with long term leases and has no intention of adding a residential area to those buildings. Its residential component, True North Apartment REIT, will continue to focus on acquiring apartment housing in both Canada and the United States with the strategy of promoting them as affordable housing options.
The real estate developers following the mixed-use development plan will need to design or redesign their properties to appeal to both the residential tenants looking for convenience in every area of the lifestyle they seek, and the commercial tenants trying to attract them.
Will One of Blackberry’s Commercial Properties Be the Site of Your Next Corporate Expansion?
Considering moving your business to a new commercial facility? Well, if you had your sights on the Mississauga, Waterloo or Ottawa regions, one of Blackberry’s commercial properties might just be right for your business.
Last week, Blackberry announced that it is planning to sell off their 19 Canadian commercial properties totalling over 3-million square feet of commercial space. What does that mean for other Canadian businesses?
Well it may change competition in the marketplace as businesses, both domestic and foreign, will now have the opportunity to increase their presence in the Canadian market place.
Companies that , at one time or other, wanted to move into the Waterloo, Mississauga or Ottawa commercial properties that Blackberry originally purchased will now have their chance to claim those properties for their own corporate expansions.
But who is going to jump at the chance? Will other educational institutions follow the example of the University of Waterloo, which bought four of the 19 commercial properties to expand their campus? Will property management companies purchase the buildings and lease the space out to small or medium-sized companies. Will other Canadian companies band together to purchase these commercial properties? Will foreign investors jump at the chance to own some of the property holdings?
Regardless of the mix of potential buyers, one thing is certain – Blackberry remains committed to maintaining its Canadian presence.
Though Blackberry is selling off their commercial properties, the company plans to lease back some of the space needed for their corporate operations. They are already leasing back space in two of the buildings that the University of Waterloo has purchased.
CBRE is handling the sale and leasing of the properties. Transactions are expected to happen between now and the spring 2014.
So, with all this in mind, I ask: Looking for a new location to expand your business?
Corporate Space Planning & Relocation Advice 