Commercial land sales remained solid in the first quarter of 2023, despite higher interest rates and construction costs, according to the RE/MAX 2023 Commercial Real Estate Report. RE/MAX examined 12 commercial real estate markets from coast to coast, and found acreage-zoned industrial, multi-family and retail were the most sought-after in major Canadian centres.
Having approvals already in place has been a critical component in bringing commercial land deals to fruition, given the lengthy approval process that exists in most markets. Red tape and development fees have been a barrier in all types of new construction.
Vendor take-back mortgages have also re-emerged in several markets as sellers work with buyers to close the deal. In an analysis of closed transactions in the Greater Toronto Area in Q1 2023, for example, the number of vendor take-back mortgages (VTBs) as a percentage of total sales over $2 million rose substantially over year-ago levels, climbing to 9.55 per cent, up from 5.82 per cent in Q1 2022, with VTBs now representing almost one in 10 transactions, according to RealTrack data.
In Western Canada, investors took advantage of attractive financing for construction of purpose-built rentals through Canada Mortgage and Housing Corp. (CMHC), while those interested in existing buildings cut deals that allowed for the assumption of CMHC mortgage financing at lower interest rates.