The data does not lie. The great real estate contraction is upon us.
Wherever you look on the planet, companies are shedding their real estate square footage. There is irrefutable proof that the pandemic is shifting the way of work right before our eyes.
Not only are downtown centers currently mimicking more of a ghost town than a bustling hive of entrepreneurialism, but they also won’t look anything like what they did pre-pandemic once the virus has been adequately neutralized.
We may never go back to the way it was. If that is the case, senior leaders should be preparing for dramatically different workplace practices post-pandemic.
Cast your eyes to Asia, and you’ll find a similar pattern to that of North America. In Ho Chi Minh City (HCMC), grade A office buildings’ vacancy rate increased to over 18 percent by the end of 2020 from 4 percent pre-pandemic. Worse, rents have plummeted by roughly 50 percent in terms of the per square meter per month cost. According to reports, the Metro Manila office vacancy is forecast to increase to 14 percent this year.
In the US, epicentres of high-tech are feeling the real estate pinch. The Greater Boston region has witnessed sublease space nearly double since the onset of the pandemic. More than 3.5 million square feet of prime office space has been put back on the market. Like Manila and Ho Chi Minh, the regional vacancy rate has also risen, from 12.3 percent to 15 percent across Boston. San Francisco—the hub of high-tech—is no better. That city’s office vacancy rate reached 16.7 percent by the end of 2020, with no signs of it letting up in 2021.
Cities across the US are feeling the hit, even if they’re not known for high-tech. In Phoenix, the vacancy rate has risen to 13 percent. In Salt Lake City, it’s 15.7 percent. And Manhattan? It’s somewhat nerve-wracking to know that the vacancy rate increased from 10 percent in 2019 to 14.2 percent in 2020, a 420-basis point surge.
My home country of Canada has both bright spots and outright horror shows. Vancouver is in somewhat good shape with a modest vacancy rate increase to now sit at 5.7 percent. Toronto has seen its availability shift from 3 percent in 2018 to 4.7 percent in September, 2020 to 7.2 percent by the end of the year.
But the real horror is in Alberta, where Calgary saw its vacancy rate balloon to 29.5 percent and the capital city of Edmonton to 20.1 percent. Across the country, Canada’s downtown average office vacancy increased to 13 percent in 2020, compared to 9.8 percent a year earlier.
There are at least two rather apparent reasons companies are shedding their square footage footprint. The first is depressingly sad; some firms let go of employees due to economic issues, so the space is no longer required in the short or long-term.
Second, CFOs have taken the opportunity of the pandemic to sharpen their pencils and find significant cost savings from their real estate portfolios. If employees can work from home productively, many finance leaders are using it—and the fortuities of the pandemic—to trim millions off of existing leases. Some companies are even seeking to sell the buildings they own.
What to make of it all?
I see no reason for the real estate office space collapse to discontinue in 2021. I reckon that by the end of the year, the majority of big cities will witness vacancy rates in the high teens through the high 20’s.
That’s not the problem. Savings are a good thing for CFOs to commandeer off of their real estate portfolios.
The challenge that I’m concerned about, however, is not about square footage, rather a) what that square footage looks like post-pandemic, b) how the real estate footprint is used in a ‘new hybrid way of working,’ and c) how organizations are preparing now for a post-pandemic world of work.
Too many leaders are simply trying to survive. But what has to be happening in parallel is an all hands on deck approach to re-engineering how work will be performed once offices are once again safe to work from.
The culture is going to change. The way people collaborate is going to change. The manner in which we think, create, converse, meet, action, respond, and deliver will change.
The real estate footprint point from above is a harbinger; it’s the canary in the coalmine.
My next few columns will tackle what organizations and leaders should be doing now to get ahead of the coming workplace and work-operations calamity.
My 4th book, “Lead. Care. Win. How to Become a Leader Who Matters” recently published. Amy. C. Edmondson of Harvard Business School calls it “an invaluable roadmap.” 16+ hour, self-paced online leadership development program is also available.
Toronto real estate trends point to pandemic's unequal impact: CMHC – NOW Toronto
Demand for expensive homes in Toronto real estate is the result of the pandemic’s economic impact
The record prices in the Toronto real estate market over the past year is just another example of how the COVID-19 pandemic further exacerbates issues rooted in social inequality, according to the Canada Mortgage and Housing Corporation (CMHC).
The crown agency’s 2021 Housing Market Report says the growth in real estate markets like Toronto and Vancouver reflect the uneven distribution of the pandemic’s economic impact.
While higher-income households could quickly adjust to lockdowns and maintain income while also benefitting from historic low mortgage rates, low-income workers like restaurant staff were often left with fewer employment options. The impact on the real estate markets such as Toronto is that demand for rentals and other less-expensive housing options declined, while prices for townhomes and semi-detached and detached houses are higher than ever.
When the pandemic took hold last spring, the CMHC’s housing market reports predicted a nine-to- 18 per cent decline in house prices before Canadian real estate began its recovery in 2022. A follow-up report doubled down on the estimation, estimating that the average home price in Toronto could dip as low as $825,000 in Fall 2020, before falling somewhere in the range between $739,000 and $840,000 by Fall 2021.
The average selling price for a home in the Greater Toronto real estate market in January 2021 was $967,885. The CMHC chalks up the unexpected results to pent-up demand and less spending during the pandemic that pushed up household saving. The extra household cash combined with the expectation that low mortgage rates would sustain during the pandemic drove Toronto real estate prices up.
“The fact that the most severe economic consequences of the pandemic were felt more by lower-income households helps us to understand the dynamics of the housing market over the same time period,” says the report.
CMHC points out that the financial burden of the pandemic hit younger people and people who work in the accommodation and food services industry the hardest. There is significant overlap among the two. The pandemic also halted immigration.
“These three groups – the young, lower-income earners and new immigrants – tend to support demand for less expensive housing, including more affordable homeownership options as well as rental accommodation,” the report adds.
The CMHC explains that these factors contributed to shifts in Toronto, Vancouver, Ottawa and Montreal, where sales from March to October 2020 trended towards more expensive properties.
Jane and Finch, Malvern and Rexdale condos outpace downtown by 20 percent
While demand during dropped for less expensive housing across the city, some Toronto neighbourhoods bucked the trend.
The CMHC housing market report arrived a day after real estate site Strata.ca revealed that Jane and Finch, Rexdale and Malvern had the highest appreciation rates in Toronto.
According to Strata, the city’s average condo appreciation rate is two per cent year-over-year. But prices in Malvern and Jane and Finch went up 14 per cent and 11 per cent respectively, while downtown condos depreciated six per cent.
According to Strata.ca broker Robert Van Rhijn, immigrant populations are driving the appreciation in these traditionally-overlooked neighbourhoods.
He adds: “As prices rise, we’ll undoubtedly see the typical signs of gentrification occur.”
Open House: How to survive B.C.'s red hot real-estate market | Watch News Videos Online – Globalnews.ca
Latest Mile End Real Estate Listing Reignites Discussions of Gentrification – Eater Montreal
An “à louer” (for rent) sign from notorious Montreal real estate firm Shiller Lavy spotted in the window of beloved second-hand bookshop S.W. Welch on St-Viateur Street has reinvigorated concerns about the impact of gentrification on the Mile End neighbourhood and its dining scene.
Well-documented — and massive — rent hikes have over the past several years brought on the exodus of places like queer café and performance space Le Cagibi (now in Little Italy) and patisserie Chez de Gaulle (now in Saint-Jean-sur-Richelieu), both at the hands of Shiller Lavy.
Reacting to the news that the same may happen to an institution like S.W. Welch, former Montreal Gazette food critic Lesley Chesterman took to Twitter to share her insight into what a future overrun by Shiller Lavy ownership might look like: “Their idea of a great business is Five Guys. I know that because Lavy told me as much,” she posted yesterday. Meanwhile, Montreal community page @FNoMTL reminded followers of the 55 percent rent hike that squeezed the aforementioned Chez Gaulle into vacating its St-Viateur location.
While Shiller Lavy is by no means the sole real estate developer scooping up lots on St-Viateur and elsewhere in the neighbourhood, its purple signs etched in yellow font have become somewhat of a harbinger of more loss — and more retail chains like yoga-pant brand Lululemon and fancy soap dispenser Aesop. (For the record, other popular St-Viateur restaurants, such as Falafel Yoni and Bishop and Bagg, also rent from Shiller Lavy.) Below is a list of some of the major restaurant-related real estate controversies the neighbourhood has seen since May 2015:
Missing any big ones? Feel free to send us a tip at firstname.lastname@example.org
October 2020: The St-Laurent location that once housed celebrated restaurant Hôtel Herman — is taken over by a shop called Sugar Mamie, which sells make-your-own cake pop kits. It had sat empty, clad in graffiti, for over three years.
September 2020: Old Montreal Mexican restaurant La Catrina opens its second location in what was once home to revered café and performance space Le Cagibi. The prime-time location on the corner of St-Viateur and St-Laurent sat empty for nearly two years, presumably until a tenant with deeper pockets came around.
September 2019: Korean-Japanese lunch spot Sushi Jinjin at 29 St-Viateur West closes after taking over the space that previously belonged to Boulangerie Clarke. The space now houses sustainable clothing apparel store Kotn.
July 2019: St-Viateur Street patisserie Chez de Gaulle calls it quits after 13 years. Shiller Lavy had hit it with a monthly rent hike of about 55 percent, from $4,200 per month to $6,500.
November 2018: Le Cagibi closes its doors after new building owners — Jeremy Kornbluth and Brandon Shiller, son of Stephen Shiller, of Shiller Lavy realtors (which now own the property) — raised the coffee shop’s rent by more than 100 percent, from about $3,400 to $7,500 a month.
August 2015: Thirty-five-year-old Mile End landmark Boulangerie Clarke closes due in part to a rent hike from landlords Shiller Lavy. Sushi restaurant Jinjin took over the space a couple months later, in November 2015. (Frank Servedio, son of Clarke’s founders, revived the name in June 2018 with a café in Pointe St-Charles.)
May 2015: Colombian restaurant Gracias Corazón closes shortly after Danny Lavy and Stephen Shiller purchase the St-Viateur building in 2014. It passes hands a couple times, and is now home to Portuguese chicken restaurant Emilia.
While commercial vacancies have become increasingly ubiquitous in the area for some time, the pandemic has undoubtedly exacerbated the issue (cue this compilation of vacant Mile End storefronts posted by @FNoMTL onto Instagram yesterday). By the looks of it, however, “something is brewing” to stave off the wave of gentrification: Anonymous Montreal eviction satire Twitter account Shitter La Vie — whose name is an obvious gibe at the contentious realtors — is planning a campaign to push back against rent hikes with the help of others who were saddened by the news that another Mile End institution has been “given a death sentence.”
Canada will not be pressured to release Meng Wanzhou, Trudeau says – Global News
Canadiens @ Jets: Game thread, rosters, lines, and how to watch – Habs Eyes on the Prize
’We need this’: Getting COVID-19 vaccine to remote and urban Indigenous populations – Vanderhoof Omineca Express
Silver investment demand jumped 12% in 2019
Iran anticipates renewed protests amid social media shutdown
Galaxy M31 July 2020 security update brings Glance, a content-driven lockscreen wallpaper service
Health24 hours ago
Canada approves AstraZeneca’s COVID-19 shot, 500,000 doses to arrive next week
Economy24 hours ago
Canadian dollar falls by most since October as risk appetite frays
Sports5 hours ago
Auston Matthews won't face Oilers, Alex Galchenyuk demoted – Toronto Sun
Sports23 hours ago
Jim Benning followed in the footsteps of his mentor, Peter Chiarelli, and built the Edmonton Oilers – Vancouver Is Awesome
Health7 hours ago
Tanzania COVID U-turn ‘a good move’ – but is it good enough? – Al Jazeera English
News24 hours ago
Canadian firm develops biodegradable mask that's ready for production – CTV News
Tech24 hours ago
New development offers luxury living in downtown Langley – The Tri-City News
Media24 hours ago
New initiative will rate social media platforms based on how safe they are for LGBTQ2S+ users – CTV News