I came home one afternoon last week to find my furnace off. With luck the -25 degree cold spell had broke just the day before. I was wondering how long it would take for my Buckhorn Heating my Hvac contractor to fix it. Their response time was amazing and I had my furnace working in less than 2 hours!
This got me thinking about how long it takes to close a business or property deal. What is the average time for those deals and who is buying businesses and properties?
How long does it take to sell? I looked back at the last 15 deals I had close in the past few months and wanted to share what I have noticed.
Businesses
Typically businesses are taking much longer than commercial properties, this due to the level of sophistication needed by the buyers and the time for due diligence. From the time you receive an offer to the completion of the sale has been around 3-4 months. One recent business sale was 9 months from the time of offer. It had been for sale by me for 6 months previous to that. It seems right now the delay is with the lawyers.
Leases: It seems like with leases from the time of the offer to the occupation of the property the lag has been much shorter. Due in part to the fact that the complexity of the deals is much smaller. You want to lease and the landlord wants to rent and provides a contract. I have had some recent leases transpire in a week or two from the time of viewing. Depending on the property however, sometimes it can take a while for a property to find the right tenant, although I seem to have been lucky lately.
Commercial properties. Depending on the type of property and the size of the deal, the average time required to complete a purchase is from time of offer to possession, with time needed for banking, inspections, legal, has been between 3-5 months after acceptance of an offer.
So who is buying right now and how much are they spending?
Businesses:
According to BizBuySell, 49% of Buyers have reported that they are Corporate Refugees ready to start working for themselves!! A Corporate Refugee is described as someone who has been working in the corporate world but has decided that they no longer want to make someone else rich and want to have a go themselves.
The recent buyers that I have been working with on deals that have closed, seem to be a split between two groups. Local entrepreneurs who own their own businesses and want to purchase another to diversify their risk and portfolio. The second group that is buying businesses is 1st generation Canadians, immigrants who are eager to purchase a business that is profitable in order to create generational wealth. Many of these are not quite corporate refugees, but close, as often they are working another job and buying a business on the side.
Pricing Businesses- Currently I am seeing businesses sell for 2-3x sellers discretionary income on businesses earning up to 300k per year in profit. Those with higher profitability and much higher sales are generating higher returns for the owners. According to BizBuySell, buyers paid higher prices for businesses in 2024, and deals closed faster. The median sale price rose 3% year-over-year to $345,000, and median days on the market dropped 3% to 168 days. Multiples also strengthened, with the average cash flow multiple increasing from 2.49 to 2.57 (up 3%), and the average revenue multiple climbing from 0.63 to 0.67 (up 6%)
Buildings: Banks seem to be tightening up on investor purchases of cash producing investment properties, however that doesn’t seem to have slowed down investors who have been able to buy up and finance buildings in the north with decent cash flows. Some of my most recent cash producing investment properties that I have negotiated on behalf of clients have ranged from 8-10% on cap rates.
Owner occupied properties seem much easier to finance and I have sold and helped purchase several of these recently.
Leases: I have leased several properties lately that have proceeded fairly quickly if they are located in the right area for the tenant. Areas that have visible homeless issues are much harder to sell and lease than those in more affluent areas. However if the properties are priced correctly the leases do happen. While I have seen some high lease rates listed, negotiation of those leases is bringing the rates more in line with what the business owners can afford.
According to the BC Real Estate Association, the leading indicators for commercial activity shows that commercial activity is on a slight decline in 2024 See report here. This could have a lowering effect on both leases and commercial properties pricing
To sum it up, both commercial properties and businesses are selling right now, although investors are becoming more savvy and requiring higher returns to compensate for risk. It is taking extra time for due diligence with bankers becoming more risk adverse and asking for additional skin in the game. Deals are out there for both buyers of commercial real estate and
Here is the Link to the BizBuySell Report
This Blog was NOT AI Generated (perhaps it should have been). Did you know 51% of surveyed business owners leverage AI primarily for marketing (76%), analytics (45%), and customer service (41%).
Comments or Questions about Real Estate in Northern BC?
I would love to chat email me dave@nbccommercial.ca or call 250-617-7467
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