Commercial Real Estate - investing now?

[mik3]

Is it wise to put the downpayment right now for some retail space in a mall underneath a building in downtown Toronto that is scheduled to be built around 2011? Or is this a bad idea with the current markets?
I am thinking that by the time the building is done the economy might be on its way back up?

Thanks for any help!

[aww1970]

Be careful! Commercial Real Estate is much more volitile than residential. I don't know about Toronto, but here in Calgary it is just coming off its peak.

[grant]

Commercial real estate has nothing to do with residential.

Residential real estate prices are often driven by stupid speculation, only occasionally returning to fundamentals. Commercial real estate is much more constrained by yields, or by expected yields.

Is it "wise" to put a down payment down? It depends how much research you've done. Right now it sounds like basically none...

Look into what rent that unit can fetch today, imagine what that # will change to in the next 2 years, and then you'll have a starting point to make a "wise" decision.

[heavyweight]

I personally believe that is too risky. With Commercial Real Estate, there are many ways to reduce your risk and this is certainly not one of them. Most investors would only purchase a building after they have found a tenant, as this is where the immediate increase in value is created. However, you most likely could not secure a tenant until some time near the completion date. If you are interested in commercial real estate, there are deals waiting to be made right now in this economy. Now, if you had a committed tenant with proper credibility and security for 5 to 10 years, then yes I would definitely consider this property.

This is still not to say it could be a profitable and attractive investment. Its just too risky in my view, and not the best opportunity to create wealth.

[aww1970]

I agree Commercial has nothing to do with residential, but the fact remains that commercial real estate is much more volitile to market swings.

If someone is looking at real estate as an investment owning a small commercial bay or retail storefront would be at the bottom of my list.

However, if you own a business and have built up substantial retained earnings it may be a wise move to purchase your space rather than lease if the situation presents itself.

[BillyParadise]

I agree Commercial has nothing to do with residential, but the fact remains that commercial real estate is much more volitile to market swings.


It all depends on the quality of the tenant.

[mik3]

Thanks a lot for all these replies, thing is the tenant would be my mom who is going to open a hair salon and the way this mini-mall is situated is its connected to a subway station and to the path system (for those not in toronto, its a series of malls/shops/tunnels underground in downtown toronto)
And since people will need their hair cut and styled even in a depression/recession i think there should be some business :)

[mapleflag]

Thanks a lot for all these replies, thing is the tenant would be my mom who is going to open a hair salon and the way this mini-mall is situated is its connected to a subway station and to the path system (for those not in toronto, its a series of malls/shops/tunnels underground in downtown toronto)
And since people will need their hair cut and styled even in a depression/recession i think there should be some business :)

Sounds like a good plan, mik3. Good luck!