I came across a quote by Donald T. Iannone that reminded me to be ready and open to seeing something new every day. Iannone said, “Today is an opportunity to see something new or see something in a new way.” This quote is a great reminder that as real estate investors, we need to view today as a new opportunity, and to see something new or to see things in a new way. How many of you have looked at commercial real estate as an opportunity? I have four different commercial opportunities that I think are absolute winners. In some cases, these deals may be more challenging to close, but in others, these deals may be easier than the typical residential investment deal.
I do not think I need to remind you that we have had one of the hottest residential real estate markets across all of North America in the last 12-14 months, which is why many of us have focused our investor eyes and attention to the residential market. At the same time, much has been said about the challenges that the commercial, office, and industrial markets have faced and will continue to face because of COVID. All this being said, I see some amazing opportunities in the commercial, office, and industrial markets. These are the four opportunities that I see remarkable potential in: commercial BRRRR, last mile distribution warehousing, owner-occupied joint venture office/retail, and multifamily conversions. Let us take a look at each of these opportunities in detail.
1. Commercial BRRRR
The BRRRR concept (Buy, Rehab, Rent, Refinance, and Repeat) is nothing new, but in our post-COVID market, there will be some fantastic deals on commercial, office, and retail space. Then, simply apply the BRRRR method of investing and adding value. This tactic will work best on “B” and “C” class buildings that are located in hyper-local neighbourhoods. Warning: stay away from class “A” buildings or large corporate company hotspots. The large corporations are encouraging their employees to work remotely, while small companies that are part of a neighbourhood and are hyper-local are working in office or have neighborhood retail opportunities.
2. Last Mile Distribution Warehousing
Last mile distribution warehousing is a no brainer! COVID has turned up the heat with online shopping. So much so that we have come to expect 24–48-hour deliveries for our online orders. This is only possible with a distribution network that is literally within miles of the destination. As this trend continues, last mile distribution will continue to be more and more in need.
3. Owner-Occupied Joint Venture Office/Retail
Owner-occupied joint venture office or retail space could be one of the best options that I am sharing about. Many professionals like doctors, lawyers, accountants, and veterinarians, as well as anyone that has a significant degree that is specific to an industry with a stable and generous income, has a much easier process with fewer requirements for financing an office space or building that they will occupy for their business. However, many of these professionals do not buy and they would rather lease. The opportunity as an investor is to be in a joint venture partnership with one of these professionals. In fact, in some cases, you may provide little or no money to the partnership; rather, you may provide the real estate expertise and management, and in return, receive a portion of the ownership.
4. Multifamily Conversions
Multifamily conversions are one of my favourite commercial opportunities. This is where an investor buys a purpose-built multifamily building or development and then sells off each unit individually. This move is like buying a whole pie, cutting it up into small pieces, and then selling off those small pieces individually to create a financial profit. This can be an awesome opportunity with the current residential market surging across the country. And with the cost of developing and building new owner-occupied buildings skyrocketing, this makes for an easy win. The challenge is finding these buildings and properties that are already strata titled; they are rare, and often, the current owners have plans to create this win for themselves in the future. The other option is to find non-strata buildings or properties and go through the process of stratifying it. Warning: not all cities, municipalities, and regions are keen to strata-title these buildings and developments since it often takes units out of the rental pool of the area and displaces tenants.
Real estate is such an interesting and amazing investment vehicle. Like a motor vehicle, they come in many shapes and sizes, and they have many different purposes and uses. I encourage you to take Iannone’s quote from earlier to heart and to look at commercial real estate as a new opportunity.
July has come and gone. The weather was hot and sunny with no rain, which was great for enjoying the beach, but horrible for our forests. This sums up our market through July. The market continued to be active and hot for most property types and locations, yet the buyers were still on the outside looking for more inventory and homes to view and buy. The Fraser Valley prices continue to hold or in some cases move higher depending on the property type and location. As an example, Abbotsford single-family home prices year over year increased a blistering 30%. Enjoy the balance of summer and reach out if you have any questions about all things real estate.