Hold VS Sell Analysis
While some will agree that owning commercial real estate in Vancouver is an ideal position to be in, a more difficult question would be 'Is it a good time to sell commercial real estate in Vancouver?'. This is a very important investment decision frequently encountered in the market. After all, sometimes the best thing to do is nothing at all.
Hold versus Sell analysis is probably one the most complex forms of real estate investment analysis. It involves the impact on the cash flows created by investments and financing made a number of years ago, while simultaneously taking into account the tax consequences of selling the property today. Then it can be compared to holding the property for an additional period. For example, a five-year forecast comparison clearly laying out potential scenarios.
CASE STUDY: TIMING THE MARKET
Timing the market is impossible. The client sought to dispose of a downtown Vancouver stand alone retail building. COVID-19 has had outsized impacts on different retailers and this property was disproportionately affected and left vacant in a soft market. We created a lease campaign and proposed a hybrid percentage rent scaling up to pre-covid triple net rates over the term. After successfully delivering tenants, this property will explore disposition at another time. Perhaps once the Roaring 20s are in full swing. Timing is everything.