From the impacts of remote working to potential increased space requirements to accommodate physical distancing, the office category is undergoing a shift.
Office
How will offices evolve as a result of COVID-19?
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At a glance
- COVID-19 is accelerating change across Canada’s real estate market, as the urbanization trend enters a new phase, retail properties face more disruption, remote working tempers the outlook for offices and e-commerce puts a brighter spotlight on industrial real estate.
- The proptech conversation has shifted. Real estate companies have adopted proptech that addresses their operational needs and helps manage costs, but they’re being more careful in their technology investments as the fear of missing out on the latest solution dissipates.
- While the pandemic is creating an environment of caution, real estate companies that adapt their investment and development strategies to stay ahead of changes in where people want to be and how they use space will be best positioned to succeed.
If there was a common theme in our interviews with real estate companies this year, it was uncertainty. We found diverging views on several important issues, ranging from a potential uptick in suburbanization to long-term shifts in office vacancies due to remote working to the outlook for Canada’s recovery from the COVID-19 pandemic. Another theme that was consistent across much of the industry is the accelerated pace of change as pre-existing trends, like deepening struggles for retail property, evolve or gather speed and new patterns emerge in Canada’s real estate market.
Some of this year’s trends are contradictory, and trying to make sense of the change and uncertainty isn’t easy. The coming year will be all about embracing opportunities to be resilient in the face of uncertainty while shifting strategies to anticipate and stay ahead of the emerging, and accelerating, trends.
“Our mission ... is to find potential where no one else even looks. So with COVID-19, we were able to use this time as an opportunity to see how we can pivot our business and emerge stronger.”
Featured - 3 items
Canadian markets to watch in 2021
While the Vancouver and Toronto real estate markets continue to lead Canadian cities in terms of investment and development prospects, every region has its own opportunities and challenges. Explore the 10 markets to watch across Canada.
Property type outlook
From the various areas of commercial real estate to the housing market, the COVID-19 pandemic has accelerated change and shifted the outlook across asset classes.
Commercial real estate
Retail
Struggles for retail properties aren’t new, but the scale of the disruption has picked up significantly.
Industrial
The rapid growth of e-commerce and supply chain disruptions have given a boost to industrial property.
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Housing market
Single-family residential
If remote work becomes a permanent option, some homebuyers might look for more square footage and green space.
Condominium
COVID-19 is shifting the outlook for condos, which are incorporating new features to attract buyers.
Purpose-build rental
Despite some challenges that are dampening demand, long-term trends are positive for rental housing.
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Best bets for 2021
- Warehousing and fulfillment
- Multifamily residential
- Medical office
Warehousing and fulfillment
This category topped the list of both real estate development and investment prospects in our survey this year. The growth of e-commerce is a significant factor, but interviewees also cite supply chain disruptions during the pandemic as a key contributor as some companies respond to these challenges by holding more inventory.
Several interviewees see particularly good prospects for facilities that offer last-mile delivery solutions in urban areas to speed up delivery of products ordered online to customers.
Multifamily residential
Also ranking high in our survey this year were several categories of residential real estate, including moderate income/workforce apartments.
Although some pandemic impacts may put a damper on demand for very dense housing types, interviewees emphasized that shelter remains a core need and noted the stability the multifamily category can offer right now. But demand may shift, with renters and homebuyers looking to live in townhouses and mid-rise buildings rather than larger towers that have been the trend in urban centres in recent years.
Medical office
A third category that ranked near the top of our survey this year is medical office, which can also offer the stability many investors and property owners are looking for right now. With hospitals facing a space crunch, there may be opportunities to move some health-care functions to high-traffic community locations like malls, one interviewee said.
While the pandemic has led to rapid adoption of virtual health services, there will be an ongoing need for physical space for care that can’t be delivered digitally as well as for diagnostic equipment. An aging population will ensure rising demand for health services, although the shift to virtual care could lead to some repurposing of medical office space as practitioners adjust to digital delivery.
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Managing Director, Real Estate Consulting Leader, PwC Canada
Tel: +1 416 687 8143
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