After a turbulent few years, real estate agents on Prince Edward Island say the commercial real estate market is starting to show signs of stabilizing, but supply challenges continue.
Over the past two to three years, commercial real estate prices on P.E.I. saw a jump, said Kevin Quinn, a realtor with Remax Charlottetown.
“We had a pretty good demand for product, but yet we just didn’t have the inventory to handle that,” said Quinn.
Now, he said prices are showing signs of cooling. But limited supply remains an issue, especially in certain parts of the Island, like Charlottetown.
There are currently 73 commercial properties available on P.E.I., which Quinn said is about average. But the majority of those listings are located on P.E.I.’s north and south shore, or in the eastern part of the province.
“People looking in the Charlottetown area are having to struggle to find something,” he said.
A ‘very tough’ search
Nguyen Tuan knows first-hand how challenging it can be to find a commercial property in Charlottetown. He’s been looking for more than four months without any luck.
“It’s very tough now,” said Tuan of his search so far.
Tuan said he’s looking for a building that’s 800 to 1,000 square feet to open a Vietnamese restaurant, but so far buildings are either between 300 to 500 square feet or larger properties more than 2,000 square feet.
Along with a lack of options, rent is also expensive. Tuan said he’s trying to find a place that’s under $2,000 a month, but prices in the few available properties have been two or three times higher.
“We see one or two locations in Charlottetown with space of about 1,000 square feet, the rent [was] about $4,000 something,” he said, adding he was surprised to see such high prices.
Now, Tuan said he’s started looking in Stratford instead and is hoping to find a property better suited for his needs sometime soon.
Shortage of Charlottetown properties
Quinn said he’s heard from prospective buyers and renters that finding certain commercial places is especially difficult. People wanting to find smaller properties that are less than 1,000 square feet, for example, might face added challenges.
“There is a demand there and the volume is not overly high right now, especially in the Charlottetown area,” he said.
Newly built commercial properties are being snatched up quickly, “sometimes even before a shovel went in the ground,” Quinn said.
Older properties will likely stay on the market longer before selling, he added. Quinn said there is still reluctance from buyers, especially over the past year which saw rising interest rates.
“Prices don’t usually skyrocket on P.E.I. The last few years, I think, has been a bit of an anomaly,” he said, adding he expects prices to stay roughly the same moving forward.
Higher interest rates
As Canada’s interest rates continue to rise, realtor Clifford Lee said it’s a reality buyers should be preparing for.
Lee said people have become used to seeing interest rates less than two and three per cent for a few years, but that won’t be likely to return anytime soon.
“I really think it’s a matter of us getting used to the new normal interest rates of what we anticipate they’re going to be,” he said.
The Bank of Canada raised its benchmark interest rate to 4.5 per cent in January. It was the eighth time in less than a year the bank has raised rates, in an effort to stem record-high inflation across the country.
People are concerned about entering the commercial market right now, Lee said, but for the most part, prices in P.E.I. are reasonable. It’s a stark contrast to other national trends.
We didn’t have the big boom, and we’re not going to experience a big bust.– Clifford Lee, realtor
Lee said over the past few years, commercial real estate prices skyrocketed in bigger centres like Toronto and Vancouver. Prices on P.E.I. also saw a bump, but not to the same extent as in larger cities, he added.
“We didn’t have the big boom, and we’re not going to experience a big bust,” he said.
While prices aren’t expected to drop anytime soon, Lee said they likely won’t increase either.
“I think the prices now have certainly stabilized,” he said on what the market will look like in the coming months.