Forecast: Commercial real estate fundamentals are strong

Clients looking for yield would do well to consider options in commercial real-estate investing – everything from REITs to private ventures that produce income streams from a portfolio of tenanted buildings.

So says a forecast from BMO Economics. “After a severe and protracted market downturn in the 1990s, the commercial real-estate industry in Canada has been characterized by cautious development and prudent lending practices,” said Earl Sweet, senior economist and managing director, BMO Capital Markets.

Among factors Sweet says make this a smart play:

• Limited supply and vacancy rates below historical norms;
• Strong balance sheets for all industry players (developers, builders and leasing real estate agents);
• Disciplined lending, which keeps the pool of loans viable; and
• Continued low interest rates, which improve returns.

Problems in Europe and the U.S. will temper investor risk appetite and keep the sector’s growth moderate over the short term, says Sweet.

Here is a selection of recent stories examining real estate investment options to help you delve into the topic, and to share with clients:

Seeking yield? Think real estate

Real estate: Gimme (inflation) shelter

Real estate smoothes portfolio volatility

How to position real estate in the portfolio

The real estate talk

Legal structure vital in real estate investing

REITs make a comeback

The REIT choice

Maximizing the REIT tax advantage

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.