Perched on the edge of Ottawa’s downtown core, a few blocks from Parliament Hill and the Rideau Canal, Shopify’s headquarters in a 21-storey office tower casts its long shadow across Elgin Street.
The six floors Shopify leases in 150 Elgin St. have been the physical home to the bustling global tech giant — Ottawa’s top company several years running, now with 1,000 employees — since 2014. And the COVID-19 pandemic has only accelerated the growth of the firm, which provides e-commerce platforms for hundreds of thousands of businesses around the world and has reeled in $2.08 billion in revenue over the past 12 months alone.
Now, the floors Shopify leases are virtually empty, with employees only entering for scheduled drop-ins, according to a former employee familiar with the company’s transition to a nearly all-virtual workplace. And that’s the way it appears likely to stay.
Shopify is one of several tech companies moving to a more permanent work-from-home setup for employees as a response to the COVID-19 pandemic.
“As of today, Shopify is a digital by default company,” CEO Tobi Lutke told the world in May in a tweet that rocked Ottawa’s commercial real estate sector. “We will keep our offices closed until 2021 so that we can rework them for this new reality. And after that, most will permanently work remotely. Office centricity is over.”
In early September, Shopify announced that its 170,000 square feet of office space is on the market.
Shopify is not the only company adopting a “digital by default” workplace strategy. OpenText — a Canadian company that develops and sells enterprise information management —various federal government departments and agencies and countless other public bodies and private companies across North America are re-examining their need to meet in three-dimensional office settings.
If a significant number of government departments and private businesses vacate their offices, the vacuum they leave will reshape downtowns in every city across the country. While real estate agents and government office planners look to an uncertain future, office space owners and managers — along with some tech employees — are hopeful for a return to how things once were.
Shopify, which had gained a sterling reputation for its cutting-edge office culture, has pivoted away from its current workplace culture, according to a former employee familiar with the transition.
The office space Shopify is leaving is much more than desks and cubicles. The space includes a “Yoga studio with daily classes, a gourmet kitchen serving up free daily lunches, a massage room, various games rooms, a ball pit room and more,” according to a 2014 press release.
When Shopify established itself at 150 Elgin St., it had moved from 126 York St. in the Byward Market, a space that it had outgrown. At the time, the Elgin Street office and its luxurious accommodations, including space for exercise, recreation and dining, stood in sharp contrast to the way other companies were shaving workplace costs, the Ottawa Citizen reported in 2014.
“Being in the office was always a great experience that I know I’ll miss, in part,” the Shopify source, who was not authorized to speak to the media, told Capital Current. “But being able to work from home has given me so much extra time and made me probably more productive.”
Though productivity may be on the rise, being at home has certainly changed the experience of working at a company that provided many in-office accommodations.
“Regardless of how the transition can be a positive, it was an awesome place to be able to go into work,” he said. “But I still think Shopify is a great company and is still just as forward-looking as ever.”
Office vacancy rate rises
The company’s departure from the 150 Elgin St. office tower not only adds close to 200,000 square feet of vacancy to the Ottawa commercial real estate market, it signals a potentially worrisome — if not disastrous — trend for an important segment of the capital’s business community.
The city is now facing an office vacancy rate of eight per cent in the third quarter of 2020, according to a commercial real estate report from Coldwell Banker Real Estate. This quarterly report documents a 14-per-cent rise in vacancies compared to the same quarter of 2019.
Ottawa is far from the only affected city as Canadian downtowns face, on average, vacancy rates of 11 per cent across the country. CBRE credits this rate to two factors: an uptick in subleasing and an inability to show properties to potential tenants over the previous quarter because of lockdown restrictions.
Along with Shopify, OpenText is abandoning its downtown office space at 10 Rideau St.
OpenText put 20,000 square feet to the subleasing market, according to CBRE. The two companies combined account for nearly eight per cent of the subletting space returned to market.
The leap in subletting space is what Shawn Hamilton, senior vice-president and managing director at CBRE, describes as a “canary in a coal mine;” a tell-tale sign that the market is undergoing a shift that should be watched with care.
“In times of uncertainty or economic pull-back, the sublease market is an indicator of how the market is set to play out,” said Hamilton. “We saw similar market movement after the (2001-02) tech crash and also after the (2008) global financial crisis.”
What becomes of Shopify’s office space will paint a clearer picture of what the market looks like, according to Hamilton, noting that tech tenants occupy more office space than legal and accounting firms combined in Ottawa’s downtown.
“We could see two things happen — either the space is filled quickly, which is a feather in Ottawa’s cap, or we could see a general rise in vacancy and subleasing space that we’ll have to roll up our sleeves and get to work on finding solutions,” said Hamilton.
Watching with caution
The current stance taken by CBRE is that the situation is being watched with caution and not fear, according to Hamilton.
Commercial landlords also aren’t overly concerned about the current vacancy rates, according to Dean Karakasis of Ottawa Building Owners and Managers Association. BOMA is an association of over 450 people representing 200 companies that own and manage office space in the capital.
“Yes, we are seeing some companies leave their traditional office space like Shopify and Open Text, but these huge cases aren’t the majority,” Karakasis said. “We’re currently looking at this situation cautiously, but we’re not too concerned about any drastic swings to the market.”
Shopify is also not entirely abandoning the world of physical space as it continues to occupy offices at 234 Laurier Ave., according to its website.
Rental prices have not gone down for class-A office space in Ottawa yet, according to CBRE’s latest quarterly report, but they have stagnated at $23.54 per square foot.
Commercial office space is broken down into three classes: A, B and C. Class A real estate refers to the most prestigious space in the area, with the highest cost and the most state-of-the-art features, according to Coldwell Banker Real Estate’s definition. Class B facilities are characterized by their average rent price for standard facilities. Class C office space is cheaper, in less desirable locations, typically with none of the more luxurious features of the other classes.
“Numbers haven’t yet reached what they were from the 2008 and 2009 financial crisis, so our owners and managers aren’t worried quite yet,” said Karakasis.
The 2008 financial crisis saw vacancy rates reach double digits, and that hasn’t yet happened because of COVID-19, noted Karakasis.
Aside from the uncertainty caused by the 2008 global financial crisis, Karakasis says this isn’t the first time Ottawa faces potentially tectonic shifts in the office space arena. Entire sectors looking towards the door were experienced in the post-recession economy of the early 1990s, he said.
“We saw certain office leases end in Ottawa after the recession and everyone seemed quite concerned, but as some left, tech companies jumped right into Ottawa’s downtown offices,” said Karakasis.
In 2014, Shopify led a new tech migration into the downtown core. At the time, there was a draw to downtown rather than the traditional Kanata home for tech companies as some executives believed it would attract more top talent, according to Shopify’s then-chief platform officer Harley Finkelstein in a 2014 interview with the Ottawa Citizen.
Regardless of the amount of available office space, someone new will always enter the market to fill the hole, said Karakasis, citing the Department of National Defence’s purchase of the former Nortel campus in west-end Ottawa. “Someone is always willing to pay for the space they need, and the market will bear those changes.”
While swings characterize some private sector businesses, uncertainty is also being felt in the federal government as it adjusts to flexible, work-from-home directives during the pandemic.
“At our office, it’s still largely work-from-home, unless there is an essential need to stop in to or work at the office, and that seems to be working well so far,” said Stephane Paquette, accommodations and corporate services team leader at Parks Canada. Paquette’s role is to help manage office space and equipment to suit the needs of his department.
Parks Canada’s national office is located in Gatineau and the agency has satellite offices across Canada.
In recent years, the federal government has introduced plans to modernize federal office space by promoting more collaborative workspaces. This plan, known as the activity-based workplace approach, has four main tenets: learning, focusing, collaborating and socializing.
This plan was slowly working its way through departments as they moved away from cubicles and isolated workstations, according to Paquette.
Though close and collaborative workspaces are off the table for now, the need for office space for the federal government is not on the way out, Paquette said. “Coming back to work is going to be tricky, but modifying workspaces to promote changes is something the government can do to make the return to work safer.”
Modified workspaces, being flexible on working remotely, and avoiding “high-density workplaces” will be pivotal to the eventual return to the office, he says. High-density workspaces have workers sitting in bullpen or cubicle-style arrangements that are generally used to save space.
Sam Moussa, broker of record at Re/Max Absolute Sam Moussa Realty, said he isn’t convinced that long-term work-from-home mandates will change the industry. Moussa is responsible for property sales and managing the brokerage as a business.
“You hear a lot of speculation on whether this is going to shake the industry, or it won’t, but it could really go either way,” he said.
Moussa sells commercial and residential real estate and says that the pandemic could have industry-shaping potential. In many ways, it already has, he acknowledged.
“I work with one person who owns a restaurant at the base of one of those next-to-vacant towers that now has a skeleton crew on most days and is really struggling now that the lunch rush is a fraction of what it once was,” Moussa said.
For business owners who rely on the patronage of downtown office employees, the situation appears much more dire than BOMA and CBRE claim. The reduction in customers has been stark and unrelenting, said Shar Davoodi, owner of Fattoush Lady, a lunch spot open in the downtown core.
“The first day we realized the change in business was on March 16, when a bunch of government and corporate offices told their employees to stay home,” Davoodi said. “We did $100 in sales that day and it hasn’t even remotely bounced back.”
For Davoodi, there isn’t a question of whether shifts are happening. The only question for him is how catastrophic this will be for other businesses in the downtown, he said. Over the last few months, his restaurant has seen about 20 per cent of its usual traffic.
“I really don’t think that it’s fair to ask what will happen when the companies leave — they’ve already left,” said Davoodi. “The only real hope so many downtown businesses have is that the government returns eventually, but who knows if that will be enough.”
Struggles outside the core
While large players like Shopify and OpenText are making waves downtown, Moussa says that office space outside the core is also struggling.
“While some giant players like Shopify might move and switch to online and make headlines, it’s small business that may really make waves in the market,” Moussa said. The most noticeable change he predicts will be in B- and C-class real estate outside of downtown.
“Small- to medium-sized businesses that now can get rid of giant rent expenses are going to really be able take advantage of the digital-by-default movement,” said Moussa. “This is going to really force property owners and managers to adapt.”
Companies that specialize in short-term office space leases such as WeWork are unlikely to become the Airbnb of office space, according to Moussa. WeWork provides desk or office space for customizable lengths of time, according to its website.
“It wouldn’t surprise me if smaller companies took short-term leases through companies like WeWork, but big tech companies and multinational corporations need more security than WeWork can offer,” said Moussa.
Office-turned-residential living spaces would not be unprecedented in Ottawa’s downtown. Earlier this year, an 11-storey office building at 473 Albert St. began a conversion to add 153 residential units in place of office space, the Ottawa Business Journal reported.
In the financial end of the real estate industry, real estate investment trusts are also faltering under the weight of the coronavirus — especially office-oriented trusts.
Slate Office Real Estate Investment Trust (TSX: SOT.UN) , a Toronto-based firm, saw its share price plummet around 40 per cent since February and it has stayed low since the beginning of the pandemic. Similarly, Dream Office REIT (TSX: D-UN-T) slid down by more than 56 per cent to a three-year low as the pandemic began, and has not yet shown signs of recovery.
With REITs struggling to regain traction, low trading volume shows how institutional and individual investors remain wary of investing in a currently uncertain sector.
And so a dark, pandemic cloud hangs over Ottawa’s central business district.
More optimistic voices in the commercial real estate market say the industry will weather the storm.
But a tech giant — once the poster company for cool downtown worksites — has drastically reduced its presence there, declaring an end to “office centricity.” The city’s sublease market is on the rise. And financial indicators and worried restaurateurs both signal a potentially tectonic shift taking place in the urban core.
Vancouver real estate: buyer takes $7 million lot next to $13 million Shaughnessy mansion of Huawei's Meng Wanzhou – The Georgia Straight
A buyer has purchased a $7 million property next to the Vancouver mansion of Canada’s most famous detainee.
The lot-only sale happened at 1625 Matthews Avenue in the posh neighbourhood of Shaughnessy.
The property sits adjacent to 1603 Matthews Avenue, where Meng Wanzhou lives under house arrest.
Wanzhou, chief financial officer of Chinese telecom giant Huawei, faces possible extradition to the U.S.
Meng was arrested at the Vancouver International Airport on December 1, 2018 on a U.S. warrant.
Her arrest sparked an international row.
Meng is reportedly scheduled to be back in B.C. Supreme Court on Monday (October 26).
Meng has proclaimed innocence on fraud charges alleged by the U.S. in connection with American sanctions against Iran.
China has taken into custody a number of Canadian citizens following Meng’s arrest.
They include Michael Kovrig, a diplomat on leave, and Michael Spavor, a businessman.
The 2020 assessment of Meng’s luxury property at 1603 Matthews Avenue comes to $13,647,000 for both lot and home.
The home of the U.S. consul general is found on the same street.
Real estate sites fisherly.com and Zealty.ca tracked the October 19, 2020 sale of 1625 Matthews Avenue.
According to the listing by RE/MAX Masters Realty, the property was “priced (lot only) to sell”.
It comes with development and building permits approved by the City of Vancouver for the construction of a new luxury home.
RE/MAX Masters Realty listed the property on September 23 for $7,980,000.
Another agency, Royal Pacific Realty Corp., previously tried to market the lot.
The previous listings by Royal Pacific were as follows: August 21, 2020 for $8,880,000; June 9, 2020,
$10,998,000; April 30, 2019, $12,680,000; and April 29, 2019, $12,380,000
Vancouver journalist Bob Mackin wrote about the $12,380,000 listing for 1625 Matthews Avenue.
On May 9, 2019, Mackin reported that the “existing two-storey, five-bedroom white mansion with an indoor pool” on the lot “is boarded up”.
He also noted a car without licence plates “parked on the unkept lawn”.
“You could always pitch a tent for the time being or build a shelter from a pile of wood,” Mackin suggested.
At the time, the owner was waiting for the approval of a development permit for a new home construction.
“Since May 9, 2016, the example of mid-1970s faux Roman architecture has been in the name of self-described homemaker Jing Zhao,” Mackin wrote.
“A homemaker? Fancy that!” Mackin added.
A sales history compiled by Zealty.ca shows how the property changed hands over a number of years.
It sold for $4,520,000 on March 17, 2010.
The property sold again on February 6, 2016. The purchase price was $9,500,000.
According to B.C. Assessment, the lot of 1625 Matthews Avenue measures 73.5 feet by 223.18 feet.
The lot’s 2020 assessment as of July 1, 2019 totals $6,950,000.
The home on the lot has a value of $614,000.
According to fisherly.com, the home has five bedrooms, seven baths, and two kitchens.
Real estate lobbyists are pushing to cut the land transfer tax – NOW Toronto
Developers want to import a U.S. tax break called “opportunity zones” to Ontario
Real estate lobbyists want the provincial government to roll back the land transfer tax and introduce so-called “opportunity zones” in Ontario, but some politicians are calling the ideas pandemic opportunism.
The Ontario Real Estate Association (OREA) wants Doug Ford’s government to give home buyers a six-month holiday from the Ontario and Toronto Land Transfer Tax (LTT), along with other incentives it argues will stimulate Ontario’s economy during the COVID-19 crisis.
One of those incentives is opportunity zones, which you might have heard mentioned in the last debate between U.S. presidential candidates Donald Trump and Joe Biden. That tax break has been adopted stateside and embraced by Democrats and Republicans alike.
“In the last economic downturn we had it was real estate that helped keep Ontario’s head above water,” OREA CEO Tim Hudak tells NOW. He describes how incentivizing home sales will help Ontario weather the economic impact of COVID-19.
“Our national association estimates that for every home bought, there are about $90,000 in spinoff expenditures. That could include [spending on] new furniture, appliances, renovation projects, moving and the list goes on and on,” he adds.
Parkdale-High Park city councillor Gord Perks isn’t buying it, and calls the proposition a disingenuous cash grab that takes advantage of COVID-19 fears.
“Tim Hudak is paid by a bunch of people who get rich off land speculation,” Perks says. He explains that the OREA’s proposals are meant to help turn a bigger profit for billionaire investment portfolios hovering over real estate in Toronto, the golden horseshoe and areas like Owen Sound or Orillia.
“What he’s doing here is helping rich people get richer by destroying the quality of life for people who live in Ontario.”
The OREA, the Toronto Regional Real Estate Board (TREBB) and others will be meeting with Ontario MPPs to discuss the measures, Hudak says.
In their report, Rebuilding Ontario: A Framework For Recovery, the OREA makes 15 recommendations, including a time-limited municipal grant to fund planning and development staff. The goal is to expedite approval timelines for buildings under construction. And they call on the government to bring back a Home Renovation Tax Credit.
They hope the Ontario government can incorporate the recommendations in the November economic update or the spring budget report.
What a Land Transfer Tax holiday would mean for Toronto
After Ontario empowered city hall with new revenue tools in the City Of Toronto Act in 2007, former Mayor David Miller introduced Toronto’s Land Transfer Tax and the Vehicle Registration tax. Among revenue options that were being researched at the time, Perks says they “emerged as cheap to administer, fair and worth doing.”
On a $1-million home, Toronto buyers pay provincial and municipal LTT of roughly $33,000. That figure comes to a quarter less for first-time home buyers after rebate.
The OREA wants a six-month Ontario and Toronto Land Transfer Tax holiday on a home’s first $600,000. It also recommends the LTT rebate for first-time home buyers be increased from $4,000 to $6,000. According to Altus Consulting Group, these changes would add more than 32,000 homes to the Ontario real estate market supply.
“When more homes are purchased that means that more jobs are created not only in real estate but also in the broader economy,” says Hudak.
The real estate sector considers the Land Transfer Tax prohibitive. They say it discourages homeowners who are looking to upsize or downsize according to their needs. People living in starter homes refrain from trading up to a bigger property, meaning there’s one less affordable house in the market. And empty nesters are discouraged from putting their property on the market.
I wonder whether in the Toronto real estate market, a tax break would only fuel house prices to rise further. Incentives like plunging mortgage rates tend to encourage buyers to spend more, making the Toronto real estate market scalding hot.
“What this does is bring in more housing supply,” Hudak reiterates, getting to the heart of Toronto’s affordability issue.
But the city of Toronto relies on the LTT to partially fund services. At a time when the city is facing a $1.3 billion shortfall this year, Perks says now is not the time to cut the tax.
Lawvin Hadisi, Mayor John Tory’s press secretary, points out in a statement to NOW that the city is also facing a projected $1.5 billion shortfall for next year.
In an email to NOW, Hadisi gives no indication that the city would entertain a municipal LTT holiday, especially since Toronto “cannot raise property taxes beyond the rate of inflation at a time when people are already facing economic hardship.”
“The OREA proposal seems focused on the provincial Land Transfer Tax and that would be a decision for the province,” she adds. “But it is important to note that Toronto and the GTA real estate market has remained strong despite the impact of the pandemic.”
The city was projected to collect $800 million in revenue from the LTT in 2020, Perks notes. Even with the pandemic slowing down transactions, it will bring in roughly $630 million.
“A six-month holiday would cost us $400 million,” says Perks. “It’s a staggering amount of money for the city of Toronto to lose. Everything that people rely on to survive during the pandemic – efforts to house people, run a transit system and provide childcare – would be dramatically impacted.
“Mr. Hudak is trying to make the rich get richer by devastating the ability of government to deliver essential services in the middle of the worst crises we had in a century,” Perks adds.
“Nobody is building faster than Toronto”
Perks believes the OREA is making up a problem that doesn’t exist to facilitate land speculators.
“Guys like Hudak try to convince people that we’re not building enough,” he says, adding that there is more construction in Toronto than anywhere else in the continent. “And the reason we’re not building enough is because there’s all kinds of taxes and fees. He’s wrong on both counts.”
According to Better Dwelling’s Crane index, Toronto had 124 cranes in the sky in Q3 2020, more than any other major city in North America. Seattle came in second with 43.
Perks adds that the only limitation on construction is the price of steel, which is around $700 per net tonne according to Stelco Holdings, Inc. Supplies can’t keep up with the construction in Toronto.
“That’s what sets the ceiling of how much we can build: materials and trained trades people. And we’re always bouncing off that ceiling.”
Opportunity zones in Ontario
The OREA also wants to bring a tax break called opportunity zones to Ontario. The practice involves identifying areas with high rates of poverty or at-risk populations, and then luring investments to those areas.
The idea was proposed in the U.S. by a group of senators, including Cory Booker, and became law in 2017 as part of President Donald Trump’s sweeping changes to the U.S. tax code.
“It’s one of the rare things that Democrats and Republicans both agree on,” says Hudak.
Napster co-founder and former Facebook president Sean Parker is responsible for opportunity zones in the U.S. His lobbying organization, Economic Innovation Group, came up with the tax break.
A New York Times report describes opportunity zones as “a once-in-a-generation bonanza for elite investors.”
The tax break allows investors to delay paying capital gains taxes on stocks and other investments as long as they spend the money on government-certified opportunity zones. They can then avoid paying federal tax on development projects, like luxury apartment buildings and hotels. Critics say the “high-risk” communities see little benefit, while investors see high returns.
In Toronto, an opportunity zone sounds a lot like Regent Park or Villaways, areas that shipped out residents living in public housing to make way for condos serving a new community.
Perks believes that land speculators will have a hand in deciding what areas in Ontario should be classified as opportunity zones.
“[Hudak] will have been advised where ‘there’s gold in them thar hills,’” says Perks. “Go dig it out and who cares what the consequences are for the people who live there.”
He assumes the developments will target locations that are estimated to be valuable in a decade, as if working with a treasure map. If the OREA asks for reduced red tape and funding to expedite approvals, Perks warns the Planning Act could be undermined. The act ensures developers don’t build something completely uninhabitable as fast as possible.
“Nobody wants to live in poverty,” says Hudak, when I question how an opportunity zone would be deployed. “People want job opportunity. And the government through its zoning policies can ensure that the housing that will come along with it can be affordable. You want to have a mix obviously of affordable homes, entry level homes, rentals and social housing.
“This is really a job creation initiative. It’s focused on helping existing businesses there grow and new businesses to invest and put people on payroll. And obviously there’s spinoffs on the housing side. But you need to make sure there’s affordable housing when developing these areas.”
NOW reached out to Ontario Housing Minister Steve Clark’s office for comment. A rep directed us to the government’s More Homes, More Choice action plan, which is very much in line with the OREA’s goal. The plan includes measures like cutting red tape and doing away with rent control to entice more construction.
In a statement to NOW, MPP Sara Singh, the NDP’s housing critic, said the province should emphasize non-profit and co-op housing and strengthening inclusionary zoning regulations.
“I look forward to reviewing OREA’s proposals,” she said. “In the meantime, I’m extremely concerned about the lack of opportunity for young families to get into a home they can afford. We need to look at proposals including funding the construction of non-profit and co-op housing, seed money for co-op bid development and making inclusionary zoning regulations as effective as possible.
“We need to look at options that are proven to support home-ownership like laneway developments,” she adds. “And we need to properly crack down on speculators – including domestic speculation.”
Toronto Real Estate: Rental Prices Continue to Go Down – RE/MAX News
The Toronto real estate market has a reputation for being hot! Jam-packed with amenities, there are so many reasons why homebuyers and renters flock to this dynamic, metropolitan city.
Yet, the COVID-19 pandemic has caused shifts for some parts of the market. For instance, no longer are certain segments eager to rent in the Toronto market, leading to sliding rental prices. Further, precautions to ensure safety during the virus even caused some to reevaluate their current lifestyles, impacting activity within the Toronto rental market as a whole.
RELATED READING: Is Toronto in store for a condo buyer’s market this fall?
Here are some of the trends in the Toronto condo market which could explain why rental prices continue to trend downwards:
Toronto Real Estate Early in the COVID-19 Pandemic
A sharp contrast to the purchasing market which seemed to rebound in a few months and had record-high sales in September, the Q2 rental market in Toronto was clearly affected by the COVID-19 pandemic. This has had prolonged effects on this segment of the market overall. By the end of the second quarter, there were 24.8 per cent fewer apartment rentals on the market compared to Q2 of 2019.
State of Toronto Rental Prices
According to the Toronto Regional Real Estate Board (TRREB), in Q2 the average one-bedroom condominium apartment rent was $2,083, down five per cent from Q2 2019. Meanwhile, the average two-bedroom condominium apartment was renting for $2,713, which is a 5.6-per-cent decrease from the same quarter the previous year.
There are several reasons why rental prices are being pushed down in the Toronto market:
- Condo supply has brought a lot of inventory back to the market.
- Job loss during the pandemic could have reduced financial power for renters, causing many to stop searching.
- Restrictions on showing homes could have also halted renters from searching for an appropriate unit.
- Less migration due to COVID-19 border control has resulted in fewer new immigrants renting in the city.
- Students have been spending less time in the city due to post-secondary school closures or the shift toward online learning models.
Rising Toronto Rental Inventory
As the virus raged on, there was a continuation of rental listings versus rental transactions, leading to growth of the overall market. This has resulted in less competition in the market due to increased inventory and perhaps lowered demand thanks to changing housing preferences.
According to the TRREB, the number of condominium apartments on the market was up by 42 per cent year over year. Now that renters now have more choice, this has led to year-over-year declines in average rents in Q2.
Yet, condo owners are considering either turning their properties into long-term rentals or selling altogether. This could result in further supply in the coming years.
Typically, landlords have had the upper hand in this market, often resulting in bidding wars. Yet, for renters who have the financial means, recent conditions allow them to benefit from a more balanced market.
Shifting Preferences Emerge in Toronto Housing Market
During the early stages of the COVID-19 pandemic, an unprecedented shift took place. Due to social distancing and other public safety protocols, people were forced to spend the majority of their time confined to their condos.
The boundary between home and workplace was quickly blurred when many businesses pivoted to remote working arrangements and schools shut their doors, prompting parents to homeschool.
Many condo and apartment dwellers were uncomfortable with the shared spaces of a multi-unit living environment such as a lobby, elevators and other facilities. The required close proximity to others induced fear and anxiety.
For those who rent condos in Toronto, the time spent cooped up inside led to increased desire for larger floor plans and access to green space. While the benefits (and glamour) of city-living were long sought after, the limitations of a city lifestyle were quickly realized during the pandemic.
This shift is evident in the increased demand in neighbouring suburban areas like Durham region.
Low Interest Rates
The Bank of Canada slashed its benchmark interest rate to 0.25 per cent; great news for those looking to jump into the housing market. Renters who have been sidelined pre-pandemic due to expensive housing, may now be able to borrow money at a reduced rate. These move up buyers can be another factor explaining lower demand for rental units and the resulting downward trend in rental rates.
The Toronto real estate market has historically been a popular, highly competitive place to rent a property. Yet, demand and activity in this segment of the market have declined. While COVID-19 exposed challenges to city living, there are also seismic shifts in the attitudes people have toward their living arrangements. As homebuyers are setting their sights upon properties and communities promising more indoor and outdoor living space, some renters are also following this trend, leading to decreasing rental demand and prices within the city.
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