What we know about Canada’s real estate industry as we enter 2021 | RENX
If there was one common theme in 2020, it was uncertainty.
From the surge in e-commerce and its impact on commercial space, to the surge in remote workforce impacting vacancy rates and home office investments, this year quickly showed us the importance of accepting uncertainty and to look for opportunities when things get tough.
As we look to the New Year, we have learned that it is important to focus on the information that is available to us and what we can control in order to identify these opportunities and make a difference in the future.
What do we know about commercial real estate?
Traditionally, Canadian commercial real estate has been viewed as a relatively safe, low risk investment.
However, significant economic uncertainty and pandemic-related security measures such as lockdowns, physical distancing regulations and capacity limits have changed the projected evolution of the retail landscape in the short and potentially long term.
On the one hand, in the commercial market, retail stores close their doors due to forced closings. Loss of sales and an increasing shift of consumers to online options are in turn driving demand for industrial real estate.
On the other hand, many companies that have successfully moved to a remote workspace are evaluating future physical office space needs and considering moving to a hybrid or fully remote environment in the future. Still others will wait and see how society adapts to these types of decisions in the coming months.
While there are some government measures in place to help businesses that have seen significant revenue declines in most of these situations, landlords are still not getting complete.
Additionally, most of these measures are short-term only, which means that property owners may be forced to sell or restructure existing debt if the economy isn’t available to them if that option isn’t available to them.
It is not all bad news for the commercial sector, however. Industrial real estate and warehouses will continue to thrive as the e-commerce surge continues, which further increases the need for such spaces.
The same applies to multi-family houses, which have seen an increase in investment activity since the beginning of the pandemic and which are expected to continue to show high demand as immigration increases.
What do we know about residential real estate?
In contrast to the commercial landscape, residential real estate was inherently cyclical and used to a degree of uncertainty and risk. While the pandemic has caused new levels of discomfort and aggravation in the market, the reality is that the fundamentals are not changing.
Major cities, known for their abundant job opportunities, inherited large populations when Canadians tried to make their daily commute easier by living closer to their physical office.
However, the emergence of remote workplaces has opened up new opportunities for Canadians and has resulted in many smaller spaces in urban markets being traded for larger spaces in suburban or rural communities.
If we see interest rates spike in the New Year, it could also result in an influx of buyers racing to enter the market before interest rates rise to avoid higher borrowing costs than the record lows currently seen in the market.
A rise in interest rates can also increase risk, which means that previously low-risk borrowers can now be classified as higher-risk. This creates new barriers for first-time buyers or homeowners looking to refinance their mortgages.
Finding opportunity in the midst of uncertainty
Trying to understand 2020 uncertainty is not easy, but it is important to focus on the things that we can control.
At FCT we have learned this year to prioritize two things: safety and innovation. We remain committed to supporting the health and safety of our customers, partners, and employees, and exploring new ways to use technology to improve and transform the real estate industry as we continue to adapt to our new reality.
As we look forward to 2021, we must continue to embrace the unexpected and seek opportunities in the face of uncertainty.
It will be a year of transformation and real estate professionals who closely monitor the market and change strategies to stay ahead of new and emerging trends will have the advantage