How the Pandemic Has Crushed Commercial Real Estate

The recent COVID-19 pandemic has been one of ups and downs, of apocalyptic narratives alongside ones of blind denial for 6 months now and still no one has a clue as to when it is all going to end. The pandemic has now claimed nearly 750,000 lives worldwide as well as almost 9000 here domestically in Canada. It seems like it will take quite some time before the numbers become significantly better and in the meantime we are left wondering when life will ever be back to normal. One sector that the pandemic has rocked to its core has been commercial real estate.

Commercial real estate has long been one of Canada’s big selling points with huge investment dollars being poured into the metropolises of Toronto and Vancouver from both domestic and international investors. In fact, in 2015, the head of the world’s largest asset manager stated that Vancouver’s condos are a better source of wealth than gold! For so long, people assumed that prices would continue to increase disregarding small bumps along the way since as population increases, housing demand will increase and equally infrastructure to support those people in the way of commercial property such as stores. The coronavirus had however shown up and was assumed to be the greatest challenge of this narrative.

What do the Numbers Say?

Despite what many forecasters predicted in the beginning of the lockdowns in early April, the trend has actually been in favour of real estate brokers. Real estate prices across the nation have actually been spiking these past few months leaving some brokers “jumping in with both feet” and calling the current state of the market “hot” and “fantastic” in BC. The same narrative has also been echoed across the nation. Montreal, for instance according to the Quebec Professional Association of Real Estate Brokers, broke a real estate record in July with sales totalling at 46% higher compared to July of the previous year. In Toronto, the story was much the same with average home prices jumping up 16.9% from a year ago and home sales increasing by 29.5% compared to July 2019.

Some have stated that this increase may simply be due to a bounce back after the economic plunge brought on by COVID-19 in the months of March to May while others have argued that with international travel heavily restricted, people that in other years would have gone off to summer vacation are now more focused than ever on their real estate portfolios and thus, the 2 things that fuel a market: buying and selling.

A Bit Too Much to Believe

As with all things, it’s better to be skeptical than gullible and factcheck whenever possible. For instance, the head of Canada Mortgage and Housing Corporation, Evan Sidall, told Canadians to be wary of propaganda in marketing. It may just be that this is a sudden spike after a fall in housing prices that will only continue after this brief spike burns itself out after people shore up their investments. Several banks predicted a 9 to 10% reduction in housing prices over the course of next year or possibly more because of lingering unemployment due to COVID-19, growing household debt and people becoming unable to pay their bills. Nobody really knows for sure and only time will tell.

What Is the Impact?

For one, selling of properties until recently has been incredibly difficult due to COVID-19 physical distancing regulations and it’s only been until very recently that places such as downtown Toronto have entered Stage 3 of reopening post COVID-19 which has allowed for greater freedom in regard to gatherings and indoor spaces. Prior to this, realtors were forced to resort to virtual open houses which in theory could show you the entire home but still leaves people feeling unconvinced. The “I won’t believe it until I’ve seen it with my own eyes.” mindset has been a constant road mine for realtors when it comes to selling properties to potential buyers.

For one, real estate prices in metropolitan Toronto and Vancouver have been going through the roof making the prospect of a first-time home, office, or business estate purchase unattainable for many young would-be buyers. This is compounded by COVID-19 severely limiting the earnings of more than 2 out of 5 Canadian households. That is in turn coupled with the tourism sector being utterly destroyed and the number of immigrants to Canada being cut in half this year.

What Alternatives Are There?

This current pandemic has fundamentally shafted people’s mindsets away from the traditional driving to work everyday to work in an office space for 8-12 hours before coming back home again. However, ever since COVID-19 forced employers to send employees home, many have discovered that working from home may result in the same or even better productivity as compared to working from the office. For one, this advancement greatly boosts worker morale as it allows them to choose their work environment and it also benefits employers who can: 1) Not have as great expenses when it comes to maintaining the office facility, 2) Allows employers to hire remote workers (i.e. from abroad).

This still leaves a problem, how will invoices, customer service and business meetings be properly dealt with without a centralized office space? Allow me to introduce you to virtual office spaces.

The Solution

Virtual offices offer all the services a regular office space would for your potential clients and/or business partners. For one, they offer virtual assistants which take care of the menial secretarial duties of the office so that the more important stuff can be left to you and your partners. These virtual assistants also have the added benefit of once again not needing infrastructure and can be hired from a half a world away for half the price and still be just as effective at doing what they do. These virtual offices can also give you the advantage of a real office location in the downtown of Toronto, New York, London, Hong Kong, or Singapore without the drawbacks of all the expenses. If you want to learn more about virtual office spaces, visit Agile offices today and learn how you can give your business a head start in these troubling times.

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