As office buildings in Canada are prepared for workers to return, the big question is how much space companies will need in the new reality with COVID-19 impacting revenues, and the potential increase in remote work.
That question is even more significant for the beleaguered Calgary downtown office market which continues to see an elevated vacancy rate due to persistent low oil prices.
Todd Throndson, managing director and principal of commercial real estate firm Avison Young and a member of BOMA Calgary’s board of directors, said change is inevitable, but that isn’t necessarily a bad thing.
“Every organization is re-looking at how they use their office space and most organizations that we have talked to have found that they’ve been able to operate their business with their people at home in a reasonable fashion, if not a good fashion,” he said.
As a result, he expects more people to be able to work from home.
“That doesn’t mean that they’re not going to continue to need space,” he said. “Most organizations will still define that they need most of their people to be able to come into the office. Let’s say two-thirds of an operation will stay structured in a downtown buns-and-seats type of environment.
“A third of the office is going to be a floating group. That could mean they’re permanently off-site working from home or working out of their car or working from hotels.
“Or it could mean an organization is rotating people around to get some connectivity still in their office space for different business lines.”
Office workspaces to be adapted
While there might be fewer employees, he expects companies will adapt their workspaces to allow individuals more space. He also expects more personal work areas to be created.
Another factor to consider is whether business will want to be downtown, because public transportation will become a bigger issue.
At the end of Q1 2020, Calgary’s downtown vacancy rate was 24.7 per cent with an additional 225,000 square feet on the market, according to Avison Young.
Net absorption for the last 12 months is 316,000 square feet, but the five-year average annual absorption for office space in downtown Calgary is -897,000 square feet/year.
There are many questions right now.
How many businesses will survive the pandemic? How will tenants use their space when they return? What will be the impact to vacancy and occupancy costs? What type of market will there be for office lease transactions?
How will landlords approach deals when tenants’ financial covenants are strained due to reduced revenues? What will Calgary’s CRE industry look like in a year’s time?
“It is unlikely we will see much impact from the COVID pandemic on the office market until the third quarter of 2020. Calgary’s unemployment rate increased to 8.6 per cent in March 2020, up from 7.4 per cent just one month prior,” said the Avison Young report. “How high it will reach is anyone’s guess, but the reporting we have so far is just the tip of the iceberg.
“The good news is landlords and building owners are already making changes to their buildings to keep their tenants safe, preparing for the eventual return-to-office timeframe. Cleaning and sanitation schedules will be increased. HVAC systems will be modified or improved.
“Population densities in common areas such as lobbies and elevators will be regulated. Changes to office layouts will be made to accommodate social distancing. In a very short period of time, the experience of going to an office will be much different for the foreseeable future.”
BOMA Canada’s Pathway Back to Work
BOMA Canada recently released its Pathway Back to Work guide to help building owners and property managers provide a safe return for building personnel, visitors, vendors, contractors and others to commercial real estate across Canada.
“No two properties are alike, so we cannot recommend a single one-size-fits-all approach nor can the approach . . . capture every single consideration. Instead, we have prepared a framework which individual property managers can both adapt and adopt,” said the report.
Benjamin Shinewald, president and CEO of BOMA Canada, said the guide’s key message is one of hope.
“There may be ups and downs and there may be timing issues, but we will get back to normal. We will be at a point where COVID is behind us. We are at the earliest stages of that process right now and now is the time to start to prepare for re-entry, staggered or otherwise, into our assets,” said Shinewald.
“We exist for our tenants and they’ve got to be able to enjoy their space, but it’s a weird moment and it’s hard. It’s complicated, but let’s start now with that process.”
Lloyd Suchet, executive director of BOMA Calgary, said the one other characteristic of Calgary’s office market is the extensive Plus-15 walkway network connecting downtown buildings. That will have to be taken into consideration for health and safety protocols during the reopening of towers in the core.
Suchet said the economic downturn caused by COVID and lower oil prices will continue to weigh on the downtown office market in Calgary.
“It was a challenging market prior to COVID and this is only going to make it even more challenging,” he said.
“Real challenges lie ahead and (when) you look at the role commercial real estate plays in our society and in our market in a lot of public pensions, there is significant concern out there.”
BOMA Canada has about 3,500 members spread across 11 regional chapters. It focuses on asset management, property management, building operations and associated vendors, suppliers and partners.
BOMA Canada is an affiliated member of BOMA International, a federation of 93 BOMA U.S. associations and 16 international affiliates.
Real estate sales show signs of 'uptick' – Times Colonist
The province’s phased-in approach to restarting the provincial economy seems to have had an effect on the Victoria real estate market.
Figures released Monday by the Victoria Real Estate Board show sales, inventory and some prices rose in conjunction with the second phase of the provincial restart plan.
Last month, 457 properties changed hands in the region, and while that’s a 46 per cent drop from May of last year, it’s a big jump from the 287 homes sold in April.
“We are still down in terms of sales [year-over-year], but we were up from April, and we saw a real uptick after May 19, when Phase 2 was implemented,” said Sandi-Jo Ayers, president of the board. “We are feeling cautiously optimistic based on the numbers from last month. And our home prices have seen a slight increase from last month as well.”
There were 2,544 active listings for sale at the end of May, up from the 2,305 available at the end of April. That is still well off the more than 3,000 available in May last year.
The benchmark price of a single-family home in the Victoria core last month was $885,400, up from $884,600 in April. Year-over-year, however, the price was down from $863,000. The benchmark condominium price in the core last month was $534,300, up from $533,600 in April, and $516,400 in May 2019.
“I’d say we have seen a trickle of activity, not a tsunami. People are being cautious,” said Ayers, who noted buyers want to ensure they are employed and that they can qualify for the kinds of homes they want.
Indications are Victoria’s real estate market could avoid some of the pain other markets in Canada will face this year, she said. “We believe the way B.C., the Island and the community have responded to the health crisis and our market being local, [real estate] has responded in a healthy way as well here,” she said. “Victoria is such an attractive place to live, it’s safe and the way we responded to this health crisis is catching people’s eye and they may start to think this is a good place to retire or move.
“We firmly believe we are on the radar now.”
The short-term outlook is likely to remain cautious, but Ayers said they expect to see a lot of local movement ahead of the fall school opening, and with local buyers moving up and down in the market.
Dramatic drop in Greater Victoria real estate sales in May – CHEK
There aren’t as many for sale signs up and far fewer properties are selling, as the Greater Victoria real estate market sees the effects of the COVID-19 pandemic.
“Our real estate market is responding to the health crisis,” says Victoria Real Estate Board (VREB) president Sandi-Jo Ayers. “For the month of May, that was a very tough month and April was as well.”
May saw a dramatic drop in the number of sales, down a whopping 46 per cent from last May, with just 457 properties selling.
“It’s surprising it’s only 46 per cent,” says Tony Joe of RE/MAX Camosun. “That sounds strange but when you think about it, we were a 58 per cent reduction in the month of April and I think many people sort of wondered if real estate would go to zero or close to zero.”
Inventory was down 15.7 per cent compared to last May, but that had prices holding steady.
Condo prices only dipped 3.7 per cent, with an average price of just over $453,000.
Single-family home prices were actually up 2.3 per cent to almost $876,000.
“The other surprising thing too is we’re seeing cases of multiple offers or bidding wars out there, which you would never expect in a time like this,” says Joe.
With restrictions easing in the last two weeks, agents say viewing requests are increasing and they’re actually getting lots of interest from Lower Mainland and Toronto buyers.
“We really are trying to be optimistic,” Ayers says. “We see we have a lot of people that want to move here, they want to sell, they want to buy and realtors on the street are talking about how busy they are getting.”
If you’re buying or selling, it will look different in phase three, with more virtual open houses, online tours, and masks and gloves for in-person showings, as well as minimizing the surfaces that are touched as real estate tries to rebound.
RE/MAX | Is the Toronto Real Estate Market in Trouble? – RE/MAX News
Since COVID-related closures and social distancing took effect in Canada, life as we know it has been put on pause within the city of Toronto. As one of the hottest real estate markets within Canada, many have speculated on the impact that the public health crisis will have upon this market. While it is impossible to make a definitive prediction of how Toronto’s real estate market will weather this storm, there exists a great deal of optimism that any COVID-19 impacts are expected to be temporary.
Below, we take a look at the pre-crisis market and current conditions within Toronto, to better understand the basis of the optimism, and why Toronto is poised to make a triumphant return as one of the country’s hottest real estate markets.
A Strong Start to the Year
In the first quarter of 2020, Toronto was gearing up for a spring market like no other. Demand heavily outweighed the supply of homes for sale within the Greater Toronto Area, and the aggregate price of homes was $866,211, a 7.5-per-cent year-over-year increase. These skyrocketing prices were most apparent within the condominium submarket, where values had shot up 8.8 per cent year-over-year.
Toronto Market Reaction to COVID-19
With social distancing measures imposed to prevent the spread of the virus, Realtors across the city, and the country, have been adjusting to a new normal for conducting real estate transactions. While the real estate industry was deemed an essential service and permitted to continue to function by the Government of Ontario, open houses came to a halt. In response, real estate agents have gotten creative, using interactive 360-degree tours, or live-video sessions to showcase homes to prospective buyers. When in-person tours must take place, agents are taking extraordinary measures to ensure the safety of their clients and themselves. It goes without saying, deals are no longer being sealed with a handshake.
The impact of COVID-19’s spread and social distancing measures upon the Toronto real estate market didn’t reveal themselves in the numbers until the second half of March. Going into March, in fact, the Toronto market was still on fire. According to Toronto Regional Real Estate Board (TRREB) statistics, sales volumes had climbed 49 per cent across the GTA compared to the same period in 2019. By the second half of March, the tables turned and home sales dropped 15.9 per cent compared to the same two weeks of 2019.
Home prices, however, remained strong by the end of the month, with the average sales price for March up to $902,680 – an impressive 14.5-per-cent spike over March 2019. RE/MAX brokers in some of Canada’s key housing markets agree that prices are expected to hold steady, at least for the next few months. Despite softening sales activity since the outbreak, those who have listed their homes on the market are well aware of the sales prices in February and early March, and thus are continuing to hold their price and wait out the current crisis, until the wave of demand returns. Panic sales – in which sellers price low to get their home off the market – has yet to be seen within Toronto.
Stable Market Balance
According to Jason Mercer, TRREB’s senior market analyst, the buyer-seller relationship has remained consistent throughout the outbreak, and this factor helps to explain why Toronto’s market may not be in trouble after all. While sales volume has dipped, so have listings. Since the levels have been following the same trajectory, it’s unlikely that the market will flip to resemble a buyer’s market anytime soon. Mercer confirms that there are still a similar proportion of buyers vying for each remaining listing, and as long as this trend continues, there will be little incentive for sellers to budge on their price points.
A Little Less Optimism for Toronto’s Landlords
COVID-19 has dealt a sharp blow to Toronto’s landlords, particularly those operating short-term rentals, who now find themselves over-leveraged and vulnerable. Many real estate investors were reaping the benefits of Airbnb-style short-term rentals, where the profit margin was so much greater than a traditional lease. With the closing of the US/Canada border and the imposed stay at home measures, the demand for short-term rentals disappeared overnight, and now some investors are left scrambling to find tenants for their vacant spaces.
Toronto’s pre-crisis vacancy rate was two per cent, making the process of securing an available unit an incredibly cutthroat process for hopeful renters. Toronto also took the top spot as the most expensive rental market in the country, with a one-bedroom unit averaging $2,213 in rent per month (April 2020 National Rent Rankings from Rentals.ca).
Since the closure of non-essential businesses across the city in late March, many tenants are struggling to make rent payments. This will inevitably put downward pressure on demand for a brief period of time, even after protection measures have been lifted. This extra supply flooding the rental markets, coupled with depressed demand levels, means there is potential for average rental rates to decline within the Greater Toronto Area. This anticipated drop in rent prices and competition may translate to a less stressful home search for new renters, post-crisis.
On the other hand, some experts are warning that we shouldn’t count on this rental price relief; it is possible that following the pandemic, some buyers who had put their purchasing plans on hold may be reluctant to jump back into the housing market, and may elect to rent instead. This may help to balance out any loss in rental demand, preventing any significant drops in average rental price.
So many of these potential outcomes are dependent on how quickly life within the city can return to a level of normalcy. Toronto is already starting to see the re-opening of businesses, and if everything unfolds as public health experts are forecasting, we can hope to see a slow return to activity within the Toronto real estate market by this fall. Once a sizeable portion of those who are temporarily unemployed are able to return back to work, consumer confidence will bounce back and the demand that has fuelled the Toronto housing market for so long, will resurface.
Until then, keep yourself and your loved ones safe, and sane. This too shall pass!
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