Mintec |
The Ukraine War remains the elephant in the room for commercial real estate investors globally. In some countries like Canada, however, things are playing out in both positive and negative ways, per reports.
What’s happening here?
On one hand, construction has commenced for 1166 West Pender St in Vancouver, the first such downtown office tower since the pandemic.
On the other, inflation levels have rushed up to 6.7%, forcing the Bank of Canada to jack up interest rates to 1%.
Both borrowing and construction are costlier now, automatically making commercial Canadian real estate prohibitively costly, and when deals are struck, a chunk of this increased cost will be inevitably passed onto building tenants.
Who cares, because. . .
1️⃣ Strong job growth is expected to keep stimulating demand for office space.
2️⃣ Investors face higher rates of interest, but rentals are finally outstripping inflation for the first time in several years.
3️⃣ Vancouver’s office market is still showing growth signs.
4️⃣ Tenants are returning while U.S. tech majors and other firms are also choosing newer spaces.
But, but, but...
High interest rates aside, investors will have to face soaring costs of supplies owing to the Ukraine war.
Steel prices have gone up radically with Russian supplies being sanctioned, while glass, engineered white oak flooring and silicon are all costlier.
On the whole, there are both pros and cons. It’s a real estate investment after all.