Warehouses, multi-family residences and medical office space are the best bets, report says

Pandemic hastens pace of change and throws up new opportunities in the real estate industry

A report on emerging trends in North America’s real estate industry has identified warehousing, multi-family residential and medical office space as the best bets going into 2021.

According to the report by PwC Canada and the Urban Land Institute released on October 15, the ongoing pandemic has exacerbated the general climate of uncertainty and hastened the pace of change. But it has also thrown up new opportunities that stakeholders can keep a close eye on to reposition their real estate portfolios.

“The coming year will be all about embracing opportunities to be resilient in the face of uncertainty while shifting strategies in anticipation of market headwinds,” says Frank Magliocco, national real estate leader with PwC Canada.

Commercial Real Estate

Warehousing and fulfillment centres have moved to the top spot as the go-to real estate asset class, driven by the explosive growth of e-commerce because of the Covid-19 crisis.

The report says malls with excess lands need to be re-imagined into residential or mixed-use properties, and possibly use some of that space for warehousing, distribution or fulfillment — including last-mile delivery — to satisfy the growing demand for online shopping. Grocery-anchored strip malls will fare best as grocers have seen record sales during the pandemic.

Transforming and unearthing value in retail properties will require rezoning the land and a complete rethink on how to make the best use of retail space. Moving healthcare functions to high-traffic community locations like malls is one way to breathe new life into retail properties. “The lens through which creative landlords look at their assets has to change,” the report states.

The pandemic’s disruption to the real estate industry also presents investment opportunities, notes Andrew Cimerman, founder and CEO of HomeLife Realty Services Inc. in Toronto.

“Finding an agent with the required expertise, experience and understanding of the forces shaping the real estate market will be a big asset in helping consumers navigate through the complex process of buying a home or investing in properties during this one in a hundred years challenge,” says Cimerman.

HomeLife’s certified sales representatives who have completed the FIVE STAR Higher Standards Service Certification course are equipped with the industry knowledge to act in the client’s best interest, he adds.

The use of office space is also evolving, given the cloud of uncertainty looming over the return-to-office process. “We are hearing different points of view on office space. Companies that have the digital capabilities to have a remote workforce are now re-evaluating their real estate portfolio needs,” Magliocco said.

According to PwC Canada’s Workforce of The Future Survey published in September, 34% of employees said they prefer to work mostly or entirely remotely, 37% want to be in the office most or all of the time and the remaining 29% are looking for an even split between the two options.

As the use of workspaces continues to morph, some office tenants are exploring short-term leases as an option, the report adds.

Residential Real Estate

Another emerging trend is the blurring of lines in how residential space is being used as many people continue to work remotely, giving rise to stronger demand for environments that cater to their professional, personal and recreational needs.

For example, developers and landlords are looking at condominium amenities with common space for people to work or adding “Zoom rooms” in homes to offer privacy for conference calls.

Remote work is also driving Canadians to look for more affordable housing in suburban areas. A report by the Ontario Real Estate Association released in July revealed that 61% of respondents think that living in the suburbs is more appealing now than before the pandemic.

Data from the Conference Board of Canada also reflect the growing movement out of major urban centers, with Toronto and Montreal showing a gradual rise in the number of people moving elsewhere in their respective provinces from 2020 to 2024, even as international migration keeps their populations growing.

The trend of 18-hour cities will continue to pick up across Canada, driven by recent changes in the real estate market, the report says. 18-hour cities are mid-size cities with attractive amenities, higher-than-average population growth and a lower cost of living and doing business than the biggest urban areas.

In Ontario, 18-hour cities include Kitchener-Waterloo, London, and Ottawa — the fastest-growing census metropolitan areas from 2018 to 2019, according to Statistics Canada. Examples of 18-hour cities in other provinces include Victoria, Quebec City and Halifax.

Jean Lian is Head of Communications and Brand Marketing with HomeLife Realty Services Inc. in Toronto. Contact Jean at marketinghomelife@gmail.com