A Colliers International Research Report show a growing demand towards “Office Condos” among business owners in the City of Toronto and Metro Vancouver, as they discover that owning your office space can be more affordable than leasing.
With the rise in investment condominiums continues in Vancouver and Toronto there has been increasing pressure on the leasing market. Availability of commercial property in the two cities continues to dwindle to the point where leasing has become more expensive than ownership. As an example pulled from Collier’s own research an annual lease of $35 for square foot is about $3 more per square foot than a 25-year mortgage on a unit selling for $700 per square foot. This assumes a 3 per cent mortgage with 20 per cent down amortized over 25 years.
While healthy and booming markets in Toronto and Vancouver can enjoy some savings through these means there is also opportunity in our province. Large companies under financial pressure and finding it increasingly difficult to fill leasing vacancies and are turning to divesting themselves of certain spaces.
The benefits to companies are clear “Owning office space offers the advantages of having a fixed and clear cost in the wake of major increases in leasing rates, full control over the design taste and feel of your environment, the prospects of capital gain, and no longer having to worry about the lack of flexibility that is usually coupled with a leasing contract,” says Scott Chandler, Colliers Internationl’s Senior Vice President, Capital Markets. “As lease rates continue to increase and Canadian lending rates remain low, business owners are discovering the advantages and opportunities to own their own office space rather than ease and the market is responding.:
Calgary is also in a position to see a nearly 20 high-rise commercial buildings added to the downtown before the end of 2024. With amounts of real estate slated to hit a currently depressed markets seem likely to rise to those willing to take the risk.
What does this mean to condominium managers? To date, the majority of commercial condominiums in Alberta have been in the form of strip malls, commercial bays and other smaller developments. With commercial developers looking to sell spaces under the condominium property act look to see a very different implementation of the act.
There is also the possibility that instead of going to commercial condos as is apparent in Vancouver and Toronto that Alberta’s commercial real estate developers could title their new developments as strata. There are other interesting possibilities and ACMA will continue to investigate any new developments.