Commercial investors should take advantage of interest rate drop
The Bank of Canada’s interest rate cut offers ‘a perfect storm’ for commercial real estate investors, according to a new report.
“A growing number of savvy investors are looking to take advantage of a declining interest rate environment that provides them with long-term capital at historically low rates, and strong returns that have outpaced the cost of capital,” said Alexandre Sieber, senior vice president, debt and structured finance at CBRE, in the report.
CBRE’s quarterly report, Canadian Cap Rates & Investment Insights, published yesterday, said that commercial real estate investors should focus on core assets in 2015, serving as a reaction to the growing economic uncertainties in the market.
The report also looked back at 2014 as a year of strong demand and stable pricing, since the vast majority of Canadian commercial real estate transactions were completed before the drop in oil prices.
“A rise in Edmonton Class B cap rates reflects adjustments at the fringe of the market to changing oil prices and increased supply,” added Paul Morassutti, executive vice president, valuation and advisory services at CBRE, in the report.
“The broader impact of the energy price correction will depend mostly on the length of the event.”
Source: Canadian Real Estate Wealth