Trends to watch in 2021 –
Real estate: new considerations
From an increased demand for homes in smaller communities to swaths of unoccupied commercial properties, COVID-19 has caused significant disruption throughout Canada’s real estate market. We anticipate that 2021 will be shaped by:
Priorities for homeowners
COVID-19 has impacted urban real estate markets as some city dwellers are reassessing the equation of living space, home value and trade-offs for city conveniences. This has seen a rise in demand for homes in smaller communities and has reinforced the need for affordable housing across the country. The urban condominium market is seeing significant change, as many workers are no longer tethered to a specific location and want additional space for a home office.
Commercial and Retail space
The rapid shift to remote work has been highly disruptive to the commercial real estate market and the businesses that serve office workers. Many office tenants are trying to downsize, and we are seeing this play out primarily in the sublease market—for example, sublease premises in Toronto have quadrupled since the end of 2019. Going forward, we anticipate downward pressure on office rents and stalled development of new office towers. Retail landlords are experiencing significant vacancies through defaults and/or insolvencies of tenants—that lost revenue will take time to replace and is causing retail landlords to re-negotiate terms with their mortgage lenders. On a more positive note, industrial properties are in high demand, especially in logistics centres. As a result, industrial landlords are enjoying opportunities to achieve higher rent rates and stronger pricing of their properties.
Evolving government assistance
Rent relief has been critical for businesses facing financial hardship due to COVID-19. The Canada Emergency Rent Subsidy—which replaced the Canada Emergency Commercial Rent Assistance program—provides subsidies for rent and mortgage interest to Canadian businesses, charities and non-profits suffering pandemic-related financial losses. With the pandemic now in a powerful second wave, we anticipate that government assistance will continue to evolve.