What's the future of real estate? – Toronto Sun

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‘Crystal ball is quite murky right now,’ says forecast

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Wondering how the real estate industry will emerge from the pandemic? So does everyone else.

Even a highly-respected industry forecast has decided “the crystal ball is quite murky right now” thanks to disruptive forces that have created both opportunities and challenges.

Emerging Trends in Real Estate 2022, an annual report undertaken jointly by PwC and the Urban Land Institute (ULI), says housing affordability is a key issue running through many trends, the most significant of which are the impacts of a changing world of work.

“Environmental, social and governance, digital accelerations and workforce shifts are all mega-trends that will continue to have a transformative impact on the industry,” says ULI executive director Richard Joy. “Working together to find creative solutions to these challenges will enable real estate leaders to shape the future and uncover new opportunities.”

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CHANGING WORLD OF WORK

There’s little doubt the workplace will emerge from the pandemic almost unrecognizable. “Most employees continue to be hesitant to return to the office, indicating a preferred hybrid-arrangement even in a post-pandemic world,” says Frank Magliocco, PwC Canada’s national real estate leader.

“When PwC Canada asked Canadian workers about their ideal work arrangement, the most popular option, selected by 36 per cent of respondents, was to have an even split between face-to-face and remote working, while just 10 per cent chose a traditional in-person environment,” he says.

As that shift takes hold, property owners must address the purposes a physical workplace will serve and make their spaces more attractive for workers. Though Canada still has some of the tightest office markets in North America, plenty of uncertainty remains.

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Some property owners are hedging their bets by incorporating residential components into office developments to create mixed-use sites, according to the report. Some employers are upgrading their spaces while others are reconfiguring their offices to create spaces like ‘huddle areas’ to allow for collaboration and team meetings.

MIXED-USE COMMUNITIES

The changing world of work is also having major impacts on the housing market. As has been widely documented, remote working created opportunities for many Canadians to move out of major city downtown centres where offices have typically been located in favour of the suburbs or even another province.

The implications of a changing world of work are hardly just about where people choose to live but the types of communities that they want to call home. If more employees want jobs that let them either work from home or have shorter commute times, real estate players must pay even greater attention to the trend toward building mixed-use communities with retail services and offices nearby.

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That goes beyond transit-oriented communities, which are being embraced by municipalities across Canada and typically include mixed-use considerations from the start. Those considerations must also be applied to single-family neighbourhoods in major urban centres, suburban communities and secondary cities that have typically incorporated less diverse uses.

The concern about housing affordability across the country, meanwhile, continues to grow and not just in larger cities like Toronto and Vancouver but smaller centres too.

NEW APPROACHES

The time is ripe for new approaches to the housing market. Changing the rules to allow for more than one unit or kitchen in a single-family rental home or permitting smaller lot sizes could improve affordability.

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Medium-density housing options like mid-rise buildings and townhouses on major urban boulevards – widely described as the ’missing middle’ – could also offer more affordable options, according to the report.

Industry players are calling on various levels of government to work together to come up with solutions. On the one hand, the federal government is helping boost housing demand by increasing immigration.

On the other hand, provincial and municipal policies hinder the construction of new homes. Industry players also want to see better incentives for developers to set aside more low-cost units.

Single-family rental housing is being bandied about with no clear consensus on whether this trend from south of the border could take off in Canada. Some believe land costs here are just too high to make the numbers work, while others think it’s an option in some regions to address the desire for more living space while offering more affordable alternatives to buying a single-family home – particularly when those rental homes incorporate more than one unit.

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And what about condominiums in a post-pandemic world? Initial fears that people would avoid the condo market as a result of the impact of the pandemic appear unfounded, as the market continues to grow in Canada. Though some developers are unsure about whether to start new projects, multifamily housing is widely recognized as a strong category within the industry.

How will shopping change?

The retail sector may never be the same, the Emerging Trends in Real Estate 2022 report predicts. Temporary outdoor dining will become a permanent feature.

People will continue picking up groceries and other items they purchase online, so retail centres need to be refigured to provide more space for pickup.

Some retail landlords are ramping up efforts to bring in different types of tenants, from fitness centres and health-care clinics to seasonal pop-up stores, as well as events and entertainment.

In a bid to further increase foot traffic for retailers, some are even seeking zoning changes to incorporate other uses into the mix, such as condominiums instead of parking lots.

Best bets in the Canadian real estate market include warehousing and fulfillment, rental housing, and uses related to health care and life sciences.