- Uneven economic recovery across Canadian provinces expected to begin in the second half of 2020.
- Measures taken by the Bank of Canada helped stem the tide and lay the foundation for recovery.
Morguard Canadian Economic Outlook & Market Fundamentals Second Quarter Update 2020
MISSISSAUGA, ON, Aug. 27, 2020 /CNW/ – During the second quarter of 2020, some segments of the Canadian commercial real estate industry remained resilient. While the office leasing market softened between April and June, the industrial and multi-suite residential segments performed at healthy levels. In the interim, the retail property segment continued to struggle as restrictions imposed due to the COVID-19 pandemic forced non-essential retailers to close. Investors will continue to be selective when acquiring Canadian commercial investment properties over the near term, according to the latest Canadian Economic Outlook and Market Fundamentals Report issued by Morguard Corporation (“Morguard”) (TSX: MRC).
“The economic slowdown resulting from the pandemic impacted the commercial real estate sector and investor decisions during the second quarter of 2020,” said Keith Reading, Director, Research at Morguard. “Canada’s economic recovery from the downturn is expected to unfold with a large degree of unevenness in the second half of 2020 as local governments take a phased approach to reopening with caution.”
Commercial Real Estate
In the office segment, leasing supply fundamentals softened during the second quarter of 2020, driven in part by restrictions implemented as a result of the pandemic. The national vacancy rate remained at a healthy 10.8 per cent for the office segment, however, downtown cores in major cities experienced an increase in sublease availability.
As physical distancing measures were reinforced during the second quarter to reduce the spread of COVID-19, a significant number of retailers were forced to close their stores temporarily. Others adjusted their service model to supplement their income by offering curbside pickup or online ordering, such as what some food outlets implemented. In addition to reduced revenue, retailers and landlords incurred additional costs to adapt their businesses for reopening, including reinforcing safety and cleaning measures as well as investing in signage and protective equipment to safeguard employees and customers in their return to brick-and-mortar stores.
The health of Canada’s industrial leasing market was sustained during the second quarter as leasing demand remained relatively healthy and stable. E-commerce and related logistics companies continued to drive demand with an increased volume of online shopping and distribution for both essential and non-essential consumer goods. During the second quarter of 2020, 6.9 million square feet of new supply of industrial space was added to Canada’s building inventory, bringing the year-to-date total to 9.5 million square feet.
The multi-suite residential segment continues to be a solid investment during this period. While providing much needed rental housing to Canadians, the segment provides a steady income derived from rent collection. In the midst of the pandemic the percentage of rent payments remained stable which may have been impacted by the federal government’s Canada Emergency Response Benefit (CERB) that helped many Canadians directly affected by COVID-19 to gain financial support.
The measures implemented by the Bank of Canada, including maintaining its policy interest rate at 0.25 per cent, supported consumers and businesses in meeting their more immediate debt obligations and kept credit flowing to ease the impacts of COVID-19. These measures were effective in mitigating some of the impact to the Canadian economy during the period.
In the latter half of the second quarter, Canada’s job market came back to life following an unprecedented decline as a result of the pandemic. At the end of June, total unemployment rested 1.8 million below the February levels but, despite the shortfall, June’s spike was stronger than expected.
During the same period, Canadian spending patterns improved as several regions across the country adopted a phased approach in reopening their economies, including non-essential stores.
“Consumer spending has been a major driver of Canada’s economic growth for some time,” added Reading. “We expect the economy to begin to recover in the second half of 2020. An important contributor to the recovery will be the role businesses play in strengthening consumer confidence by putting safety first in order to facilitate a return to brick and mortar shopping and entertainment. In an ideal scenario, the spending habits of Canadians will return to pre-pandemic levels, in support of the recovery of jobs, especially in the services industry.”
Lower oil prices and global demand will hamper economic progress in Alberta, Saskatchewan and Newfoundland and Labrador. Conversely, British Columbia, Manitoba and New Brunswick are forecasted to recover more quickly given relatively lower levels of exposure to COVID-19 and earlier economic re-openings.
The second quarter update of the 2020 Economic Outlook and Market Fundamentals Research Report, released today by Morguard, provides a detailed analysis of the 2020 real estate investment trends to watch in Canada. The full report is available at morguard.com/research.
About Morguard Corporation
Morguard Corporation is a major North American real estate and property management company. It has extensive retail, office, industrial, hotel and residential holdings owned directly and through its investment in Morguard Real Estate Investment Trust and Morguard North American Residential REIT. Morguard also provides real estate management services to institutional and other investors. Morguard’s owned and managed portfolio of assets is valued at $20.1 billion. Please visit http://www.morguard.com or follow us on LinkedIn.
Forward Looking Statement Disclaimer
Statements contained herein that are not based on historical or current fact, including without limitation statements containing the words “anticipates,” “believes,” “may,” “continue,” “estimate,” “expects” and “will” and words of similar expression, constitute “forward-looking statements.” Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, events or developments to be materially different from any future results, events or developments expressed or implied by such forward-looking statements. Such factors include, among others, the following: general economic and business conditions, both nationally and regionally; changes in business strategy; financing risk; existing governmental regulations and changes in, or the failure to comply with, governmental regulations; liability and other claims asserted; and other factors. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. The Publisher does not assume the obligation to update or revise any forward-looking statements.
SOURCE Morguard Corporation
For further information: K. Rai Sahi, Chief Executive Officer, T 905-281-3800; Keith Reading, Director of Research, T 905-281-3800; or email [email protected]
Vancouver real estate: early September numbers show steep drop in sales from August highs – The Georgia Straight
Home sales in the city of Vancouver are dropping big time.
This is based on tracking by real-estate site fisherly.com as of late morning Friday (September 25).
Compared to record highs in August, early numbers for September show a steep decline in transactions.
In August, a total of 490 condo units sold in Vancouver.
As of this posting September 25, fisherly.com recorded 202 condo sales so far this month.
Last month, 212 detached homes changed owners.
September sales so far show 114 freestanding houses sold in the city.
As for townhouses, 99 sold in August.
As of September 25, only 49 townhouses have been purchased.
Vancouver home sales peaked in August, following a steady recovery that started in May.
Transactions crashed in April during the height of the COVID-19 lockdowns.
RBC Economics previously issued a report noting that pent-up demand for homes drove real estate sales in the country this summer.
However, according to the bank’s report, this demand is largely spent, and that the market’s momentum is expected to decelerate in the fall.
The Canadian Real Estate Association has forecast that after its highs and lows, 2020 may likely end up as a “fairly middling year overall”.
It remains to be seen whether the Vancouver market will stage a late September rally to boost numbers.
Real Estate Roundup 9.25.20 – Real Estate Daily Beat
Real Estate Roundup
- SL Green and Jacob Chetrit have resolved their dispute over the broken contract for the Daily News Building. (TRD)
- Global pricing and demand for office space will take almost five years to recover from the damage wrought by the pandemic, according to a report by Cushman. Vacancies worldwide are expected to peak at 15.6% in 2022, with about 95.8 million SF of space emptying over the next two years. That’s more than during the 2008 financial crisis, when tenants abandoned 85 million square feet of offices. (Bloomberg)
- Barclays is set to ramp up staff numbers in New York next month, asking a fresh contingent of employees to be “primarily office-based”, as the UK lender prepares to U-turn on its plans to bring more people to its Canary Wharf headquarters. (FinancialNews)
- Mizuho Financial Group plans to trim office space in New York and London in anticipation that some staff will keep working from home even when the coronavirus pandemic is over. (Bloomberg)
- When Everybody’s Working At Home And The Magic Is Gone. (NPR)
- Brookfield Properties and Namdar Realty are separately requesting they be allowed to give up their J.C. Penney-anchored malls to special servicers to avoid loan foreclosure. The action is known as a “deed-in-lieu.” Mall owners most likely to default are those with CMBS debt. Such loans are difficult to restructure because of covenants bondholders have with servicers. (TRD)
- Spring Education Group has signed a 20-year lease for 34,500 SF at Albanese Development’s 556 West 22nd Street. The group’s BASIS Independent Schools will occupy the entire three-story building to serve students in grades 6 through 12. (TRD)
- Although Zillow has long denied it wants to become a real estate brokerage, the changes to its iBuying program mean it is doing just that. Previously, Zillow worked with local real estate agents to complete both ends of the transaction, but now it will instead use its own employees who are licensed real estate agents. (MotleyFool)
- Co-living firm Common has raised $50 million in new venture capital this month. Earlier this summer, competitor Juno Residential launched with $11 million in venture funding. (WSJ)
- New York Community Bank and Signature were among the top five most-active lenders in New York in the first half of the year, and almost all of their portfolios are tied to the area. With retail and apartment vacancies rising and rents falling, and with the prospect of employers cutting their office space looming, the question is whether the hundreds of millions of dollars the banks have set aside for commercial-property loan losses will be enough. (Bloomberg)
- Blackstone’s China Real Estate Head Tim Wang leaves after 10 years. (Bloomberg)
- Blackstone Group closed on the largest real-estate debt fund ever. The private equity firm began raising money for the fund in the spring of 2019, and ultimately took in $8 billion. Fundraising got a boost after Covid-19, partly because interest rates fell, increasing the appeal of relatively high-yielding real estate debt. (WSJ)
National Real Estate Deal Roundup 9.25.20 – Real Estate Daily Beat
National Acquisitions Roundup
- Amazon has acquired 550 Army Navy Drive in Pentagon City, Virginia from the Blackstone Group for $148.5 million. The tech giant plans to demolish the existing Marriott hotel and utilize the 1.5 acres of land as part of its second headquarters. With the deal, Amazon now owns the entire 11.6-acre PenPlace. The site was always part of the company’s HQ2 plans, but the hotel remained the last holdout, and it appeared the company would just build around it. (CO)
- A consortium of South Korea’s Hana Alternative Asset Management has signed a contract to acquire a 38-story office tower in downtown Seattle for around $686 million. Skanska USA’s newly-constructed Qualtrics Tower spans 701,000 SF. Tenants include Qualtrics, Indeed, Dropbox, and co-working firm Spaces. (KI)
- Invictus Real Estate Partners has purchased the remaining 90 percent stake in The Waypointe at 515 West Avenue in Norwalk, Connecticut from Carmel Partners. The two-building complex, which includes 56,000 SF of ground floor retail and restaurant space, opened in 2015. Its apartments are currently 93 percent occupied, while the retail space is 74 percent leased. The deal valued the asset at $157 million. (TRD)
- As part of its ongoing industrial real estate expansion, PGIM Real Estate has acquired a 40 percent interest in a 5.4 million-square-foot, 12-complex industrial portfolio valued at $700.5 million. PGIM acquired the stake in the portfolio through a recapitalization of the interest in a JV with partner IAC Properties and a subsidiary of Perlmutter Investment Company. At that valuation, the deal works out to a 4.7 percent cap rate. The portfolio includes 30 industrial properties spread throughout the 12 complexes, which altogether are 97 percent leased. (CO)
- July Residential and Firm Capital Apartment REIT have acquired North Pointe at 5735 29th Avenue in Hyattsville, Maryland from FCP for $37.5 million. The 19-building apartment community contains 234 units. (CO)
National Leasing Roundup
- Netflix has signed a 171,000-square-foot office lease in Burbank near major competitors like Warner Brothers and Walt Disney. Netflix’s new space is at 2300 West Empire Avenue near the 5 Freeway in Los Angeles County. Earlier this month, CEO Reed Hastings told WSJ that he expects employees back in the office once a coronavirus vaccine is available. (CO)
- Logistics and storage firm Mega Lion has signed a 132,423-square-foot lease at 13021 Leffingwell Road in the Mid-Cities submarket of Los Angeles County. Golden Springs Development owns the property. Asking rent on the five year lease was reportedly $0.90 per SF, triple net. (CO)
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