Month: May 2020

The coronavirus pandemic has hit the commercial sector especially hard, with around 21% of Canadian commercial tenants requesting rent relief in April, according to Colliers Canada.

Covering 7,100 respondents in the retail, industrial, and office sectors, the Colliers survey also found that nearly half of these tenants would not be able to afford their rent payments.

“Now more than ever, tenants and property owners need to openly communicate and maintain strong working relationships to keep businesses on both sides operating,” said John Duda, president of real estate management services with Colliers Canada. “Property owners should do all they can to enable tenants to remain open or reopen safely, and they should actively participate in government and industry back-to-work committees to ensure that this transition occurs safely and efficiently.”

However, while ventures of all sizes have flocked to the Canada Emergency Commercial Rent Assistance (CECRA) program, some observers said that this would not be sufficient to address the problem.

The Colliers poll found that small -business tenants were 2.7 times more likely to request rent relief than regional, national, or international tenants.

Also, tenants whose businesses were completely shut down were 3.4 times more likely to request rent relief than tenants who remained open, whether fully, partially, or remotely.

“Landlords and tenants are facing pending rent deadlines with some uncertainty, as there are landlords who have indicated that they are still waiting for more program details before deciding to apply for CECRA,” Duda said. “More information is needed in a number of important areas, including how the program will treat landlords who have agreed to revised rental payment terms for April or May with their tenants, when the loan funds will be available, and how this program will be rolled out for each province.”

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Should COVID-19’s impact be moderated and the Albertan economy restarts in the next few quarters, the Calgary and Edmonton housing markets might see recovery sooner than expected.

“All major metropolitan economies are forecast to contract in 2020,” The Conference Board of Canada said in its latest economic forecast.

Calgary’s real GDP will likely shrink by 5.5%, while Edmonton will likely see a 5.6% decline, CTV News reported.

“However, assuming the virus’ spread is contained, and firms can return to normal operations over the summer months, a recovery should begin in the second half of the year, leading to sharp rebounds coast-to-coast in 2021,” the board said.

The organization is predicting GDP increases of 6% (Calgary) and 6.2% (Edmonton) by next year, which should bode well for the province’s long-burdened housing market.

According to figures from the Alberta Real Estate Association (AREA), the region’s average home price stood at $371,022 as of March, falling by 2.64% year over year. Sales activity weakened by 8.5% during the same time frame.

The number of new listings shrank by 14.54%, while the stock of homes available in the province declined by 5.76%.

“This is an unprecedented time with a significant amount of uncertainty. It is not a surprise to see these concerns also weigh on the housing market,” said Ann-Marie Lurie, AREA chief economist.

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First-time homebuyers might actually find post-pandemic Toronto considerably more welcoming, according to market observers.

Royal LePage CEO Phil Soper said that any such bargains – with plenty of listings running for 2% to 5% lower than their March prices – would almost certainly be short-lived, however.

“The longer you wait, the less an opportunity there will be for a cheaper purchase,” Soper told The Toronto Star. “In any market correction, buyers are the earliest to react to a potential downturn and adjust their expectations lower as far as price goes. Sellers are the last in and the first out.”

Soper said that would-be buyers should remain wary of market volatility, which will likely prevail until at least next year.

“There is a risk premium for trading in any financial crisis, and frankly it’s justified because there are so many unknowns,” Soper said.

Some sectors might still find it difficult to take advantage of these lower prices, nevertheless. Chief among these high-risk cohorts are young adults 25 to 35 years old, according to David Macdonald of the Canadian Centre for Policy Alternatives.

“If you were in that age category and a third of your friends lost their jobs, you might be pretty reticent to take on a big mortgage because you might be next,” Macdonald said. “You’ve got to be lucky enough to keep your job, and we need to see big declines in house prices, which itself would be devastating to the economy because people would feel a lot poorer as a result of their houses being worth much less.”

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