The Riz Team Blog

Stan Vyriotes and his business partner David Wedemire have been scouring downtown Toronto streets for the last two years, looking for the perfect pension plan — a storefront topped by a couple of apartments that they hope will keep them going in retirement.

The small businessmen — they are both realtors — are far from alone, according to a new ReMax report.

While residential sales may be sagging across the GTA, commercial real estate is in high demand as even amateur investors look for income-generating real estate to compensate for decimated pensions or slumping stock market holdings.

“People see commercial real estate as a tangible item that you can feel, you can touch, that you have some control over, unlike the stock market,” says Vyriotes who has been looking for storefronts within easy transit distance of Toronto’s burgeoning downtown core.

“We see a big shift happening with the Manhattanization of Toronto,” adds Wedemire. “The core is getting bigger, it’s getting busier, it’s becoming a 24-hour city. We want to be part of that.”

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Right across Canada the commercial real estate sector is booming back from the 2008 recession. Major office towers are under construction in many downtown centres and American retailers are jostling for space from coast to coast, creating “a flurry of activity that is changing the Canadian real estate landscape,” says the ReMax Commercial Investor Report released Wednesday.

While many investors such as pension plans and real estate income trusts have dominated the commercial sector for some time, “smaller investors are making the foray into the commercial world,” the report notes.

“The presence of doctors, dentists, small business owners, and teachers, for example, is an emerging trend and a sign of the times, given cutbacks to many pensions and the often slow-growth of self-directed models,” says Gurinder Sandhu, executive vice president and Ontario-Atlantic regional director for ReMax.

“The desire to build a nest egg has some considering mainstream alternatives like commercial real estate.”

The push to purchase small storefronts, duplexes and smaller apartment complexes, generally no bigger than six units, has been going on for some time, but has become especially pronounced because of low interest rates and returns on investments for rental properties now averaging three to six per cent, says Derek Lobo, CEO of apartment brokerage Rock Advisors Inc.

“Apartments really are the domain of mom and pop,” says Lobo, “it’s just that there’s more competition for them now. People are saying, ‘I’m getting a quarter per cent interest in the bank. I hate the stock markets, but I understand real estate.’

“In 25 years the building will be paid off and then you still have the monthly income.”

But finding the perfect property is getting tough, especially in Toronto where the condo boom has added tens of thousands of new residents to the downtown core and, with them, demand for restaurants and “concept stores”: smaller, multi-level urban models of the old sprawling big-box stores.

That growing demand from investors for prime storefronts topped by apartments has created what Wedemire likes to call “the Jed Clampett seller”: owners of over-priced, aging storefronts “who think they are sitting on oil.”

Which is why his search for the perfect pension plan continues.

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