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Staying ahead of an evolving real estate customer

Adapting real estate development to shifts in where people want to be and how they use space

“COVID-19 has hit the pause button for urbanization, but this trend will continue as the pandemic fears subside.”

Last year, the key trends were all about adapting to changing customer expectations as real estate becomes a more service-focused industry. Expectations and behaviours have continued to shift, particularly when it comes to where people want to be and how they use space. Understanding and being nimble in the face of these changes will be critical to success in real estate development and investment.

On the residential side, interviewees are seeing rising demand for homes with quiet areas for people to work or study. Developers and landlords are looking at condo amenities with common space for people to work or adding so-called Zoom rooms in homes where people can have more privacy to take calls. Besides better options to work from home, there’s a growing desire for more space across the board, whether to get outdoors or have more distance from other people.

A new chapter for urban real estate development?

There’s also a shift in discussions about where people will want to live, particularly around whether suburbanization will pick up in a world of remote working, affordability concerns and pandemic-related worries about dense environments and taking mass transit. We found no consensus among interviewees. A significant number believe there will be at least some movement away from major cities, even if they remain attractive to many people.

But even with this potential shift, we see evidence of an evolution of trends from before. Many people will still seek urban environments that combine live/work/play elements, even if they’re not living in major city cores. 

Suburban ariel

“Sprawl to suburbs that some are predicting will be a detriment to society and not really the future for us. People need to be near people.”

Key shifts in 2020 and beyond

18-hour cities

We’ve previously included places like Vancouver and Montreal on the list of 18-hour cities in Canada, which are a less intense version of some of the biggest global centres while still maintaining an international character and a vibrant urban core. Recent changes in the real estate market are adding new energy to the phenomenon of 18-hour cities in Canada, with good prospects for accelerated growth of communities with some of the key characteristics.

In Ontario, this would include secondary cities like Kitchener-Waterloo, London and Ottawa—which, according to Statistics Canada were the fastest-growing census metropolitan areas in 2018-19—that are more affordable than Toronto but still have good amenities and urban features. With remote working making it possible for more people to look at moving to these types of communities, we expect the 18-hour trend to pick up across Canada, whether in the Ontario centres mentioned or places like Victoria, Quebec City and Halifax.

Transit-oriented communities

While some downtown residents will likely take advantage of remote working arrangements to move outside of the core, many will choose areas with urban characteristics further afield. This includes suburban areas along transit lines, where the trend of transit-oriented community development is leading to denser, more diverse and walkable mixed-use communities in places that have traditionally looked very different.

Some interviewees are questioning the viability of transit in the COVID-19 era, but there’s a strong feeling among many that ridership will recover as the pandemic subsides and people go back to seeking more affordable transportation options. So far, signals from governments have been positive that they’ll continue with transit investments, which have the potential to play a significant role in stimulating our economic recovery. But a big concern for many interviewees is the slow pace of progress in building transit. “We need the levels of government to come together to execute these projects more quickly,” said one interviewee.

15-minute cities

A concept that has started to become popular around the world, the 15-minute city refers to ensuring urban residents can meet their daily needs, such as a trip to the grocery store or school, within 15 minutes of their home either by walking or cycling. One way to make this happen is through gentle intensification of traditional single-family neighbourhoods outside traditional city cores while encouraging more diverse land uses.

Ottawa has adopted the idea of 15-minute neighbourhoods into its official plan, while cities like Toronto and Vancouver are exploring ways to increase density in traditional single-family areas. These changes won’t be easy to make, but when they do happen, they represent an opportunity for the real estate industry to address the growing desire for vibrant neighbourhoods outside city cores.

Importance of issues for real estate in 2021

The policy imperative

Real estate companies will always be nimble in adapting to these trends, but there’s a role for governments to provide some help through a supportive policy environment. One area the industry feels is especially important right now is immigration, which has been key to urban population growth and driving significant activity in Canada’s housing market.

Already, we’ve seen immigration activity fall during the pandemic. While the decline is undoubtedly temporary, we can expect challenges on the immigration front for the time being. Interviewees emphasized repeatedly how important it will be to find ways to safely restore immigration activity, especially given the need for much faster economic growth to handle massive government debt burdens.

As a key sector of the economy, the real estate industry also has a significant role in supporting Canada’s recovery. Besides ensuring a safe restart for immigration, what else would help on the policy front?

woman signing policy

“Immigration has always been a good catalyst for economic development and for the real estate industry.”


Faster approvals

We know that supply is the key to alleviating housing affordability pressures, which remain elevated in Canada. Interviewees were almost universal in their concern about municipal timelines for development approvals.

Taxes

Interviewees expressed concern that governments will turn to real estate to address their massive deficits. But increasing levies like development charges will only exacerbate the supply gap, worsen affordability and hold back the economy and urban growth. Several interviewees cited the need for tax measures to stimulate the economy and support home construction.

The rise of ESG

Another aspect of changing expectations in Canada’s real estate market is the growing focus on environmental, social and governance (ESG) factors. From health and safety ratings in office buildings to discussions about ways to help struggling tenants, the COVID-19 pandemic has in some ways heightened this focus in 2020.

While some interviewees felt ESG issues aren’t a major priority, many said addressing them makes good business sense and can be key to creating value and attracting capital. And if companies can position themselves as a force for good in society by more effectively working with stakeholders to tailor developments to their needs, they’ll be in a better position to build community and government support for development plans.

To keep pace with this trend, companies need to make sure they’re living up to their ESG claims. This means not only putting appropriate reporting frameworks in place with proper assurance over ESG metrics but also embedding ESG matters into company values and culture.

aerial view of neighbourhood

Contact us

Frank Magliocco

Frank Magliocco

Real Estate Leader, PwC Canada

Tel: +1 416 228 4228

Miriam Gurza

Miriam Gurza

Managing Director, Real Estate Consulting Leader, PwC Canada

Tel: +1 416 687 8143

Fred Cassano

Fred Cassano

Partner, National Real Estate Tax Leader, PwC Canada

Tel: +1 905 418 3469

Wesley Mark

Wesley Mark

Partner, Deals & Valuations, National Real Estate Advisory Leader, PwC Canada

Tel: +1 416 814 5877

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