With 2020 in the rearview mirror, Canadian CRE investors and business leaders are looking forward to a possibly brighter future in 2021. The COVID-19 pandemic had an immeasurable impact on the global economies, affecting people and businesses of all types and narrowing profit margins for all.
However, with the introduction of the vaccine, we’re looking at CRE market stabilization and a slow return to normal. Lets take a look at the expert 2021 forecast by Avison Young of what this year may bring to the multi-family, office, industrial, and retail sectors and what this means for Canadian CRE investors.
Multi-Family Property Types Favored by Investors
Canadian investors have long favored multi-family properties as they involve low risk and high reward. Despite the pandemic and the accompanying uncertainty associated with employment and the economy, multi-family property types have remained in good standing.
The demand for these properties remains high throughout Canada, and the expectations of this trend is expected to remain high well into 2021. With the support of the Bank of Canada and the imposed decision to keep interest rates at 0.23% by 2023, investments in multi-family properties are on the rise.
Offices Under a Question Mark
The office sector was severely affected by the imposed measures to contain the COVID-19 pandemic. There was an increase in work-from-home (WFH) orders, and businesses with office expansion plans had to put them on hold.
Avison Young analysts forecast that we could see fewer employees choosing to return to office (RTO) everyday, even after the pandemic’s been dealt with. The idea that traditional workplace models returning is not likely for many businesses, as WFH has proven to bring unique benefits.
Furthermore, even with office supply being high right now, demand remains low. There are some tech companies making large space commitments in major hubs (Vancouver, Ottawa, Montreal and Toronto), while simultaneous issuing indefinite WFH plans and putting space up for sublease.
As of third quarter of 2020, the national vacancy for office was 10.9% and it is forecasted that that will rise in 2021 to 12.0% by year-end. The unknown continues to be if tenants will RTO or WFH post-COVID.
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