Here’s what the post-COVID-19 office will look like

It’s a near certainty that employees will interact with their office environments differently in the post-COVID-19 world, and while it’s too early to know the extent of the transformation, there are some indicators.

“We’re almost going back to what we had in office spaces many decades ago with wider footprints per employee, and I wouldn’t be surprised to see some partitioned spaces,” said Sunny Sharma Commercial Team and co-owner of Century 21 Leading Edge VIP Realty. “Most modern buildings are okay because they have good HVAC systems, but some older buildings may need to be retrofitted because they’re quite similar to older apartment buildings which recirculate air. For example, the filter going through one person’s apartment goes into the neighbouring unit, but more modern buildings have independent air intake exhausts for individual units.”

Sharma also predicts that a majority of businesses will have some of their employees work from home permanently—he estimates about 20% of the workforce—if they don’t need to be in the office.

A recent survey from KPMG showed that 77% of respondents want a hybrid work arrangement in which they split time between their home and office, and that could determine the future of office tower construction. In Kelowna, The Block, a 100,000 sq ft office building in the city’s downtown is incorporating some post-pandemic principles, from enhanced air filtration systems to Zoom rooms, into its design environment.

“New office towers will have the ability to design flexibility into space planning from the start, and there will be more and more breakout spaces, higher amenities that relate to outdoor space, which would be difficult to retrofit into existing office towers, and they will become attractive qualities for office spaces,” said Luke Turri, executive vice president of Mission Group, The Block’s developer. “The Block will have touchless access throughout the office space, from the lobby to the parkade to the facilities. We’re looking at smart glass, which is energy efficient, and to improve some of the HVAC capabilities in the tower.”

The hybrid work model will reduce employees’ footprints through shared workstations as employees alternate which days they come into the office.

The Block will be Kelowna’s first A-class office tower, and while it’s located in the centre of the city, it’s four blocks from Okanagan Lake.

Kelowna’s cost of living relative to nearby Vancouver is attractive to employers and its central location bolsters its appeal, says Turri.

“People are selective with where they want to live, preferring locations where everything is walking distance,” he said. “

2021-05-31 14:25:58

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Why the mortgage stress test is bad news for renters

The B-20 mortgage stress test modification slated to take effect June 1 will adversely affect first-time homebuyers and push them into a rental market that’s already on the precipice, claim a couple of Toronto real estate professionals.

The stress test, implemented by the Office of the Superintendent of Financial Institutions, will raise the floor rate to 5.25% from 4.79% where it is now. Moreover, the stress test could prevent some first-time homebuyers from attaining ownership and keep them in Toronto’s rental market, where demand will return with a vengeance when the country fully reopens to immigrants, international students, permit workers, and when domestic students return to school in the fall.

“The idea of living in a condo wasn’t, from my memory, as fancy a few years ago as it is today, and it’s going to be what we see for rentals going forward,” Bradley Watson, a real estate broker with Sutton Group-Sutton Realty, told CREW. “There’s nothing wrong with renting, but unfortunately the stress test will push people down the property ladder.”

Indeed, there is nothing wrong with renting, but rental prices will invariably skyrocket once full demand returns to the market, and with mass vaccinations underway and other jurisdictions outside of Canada readying to fully reopen this summer, if they haven’t already, it’s only a matter of time before life returns to normal in Toronto. Although many of the city’s renters took advantage of the lull in rental demand during the COVID-19 pandemic, that window appears to be closing.

“If you’re a renter, lock in your rate now because as demand pressure moves from the resale market to the rental market, as is already happening, and with the influx of immigration—immigrants typically rent for the first three years of moving here—and other segments coming in, there will be additional competition,” said Watson.

The stress test is believed to reduce purchasing power by 4-4.5%, and while not as severe as B-20’s previous incarnation, which cut buying power by 22%, first-time homebuyers, already struggling with runaway housing prices, are likely to be more short-shrifted than any other buying cohort—although it will trickle up to move-up buyers who will have fewer people to sell their homes to.

Alex Balikoti, SVP of sales with Balikoti Real Estate Group, believes the June 1 stress test amendment won’t be as aggravating as it was the last time it changed, however, it will worsen an imminently untenable situation in Toronto’s rental market.

“We’re going to get back to the pre-pandemic rental situation, probably by the end of the year given the amount of units on the market right now, which are dropping, and I think prices will keep increasing because the city’s failing to address the fundamental problem, and that’s a lack of housing units,” he said.

The stress test could also hamper investors who provide precious rental units in a city that has long neglected purpose-built rental apartment buildings.

“The stress test won’t just push more people into the rental market, it will drive out some potential investors who were going to buy units and rent them out as secondary units, but now some of them won’t be able to do that,” said Balikoti. “You’ll have more renters vying for fewer rental units.”

2021-05-31 14:33:03

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Inspired by Asia, industrial facilities are evolving

Voracious demand and a dearth of available land have compelled industrial real estate developers in Vancouver to get creative.

Stacked industrial facilities optimize square footage while tightening the reins on construction budgets, and although not very common outside of Asia and parts of Europe, Ilya TIhanenoks, a broker and associate vice president of CBRE Vancouver, noted the region has about 707,056 sq ft of large-format stacked industrial space and over 500,000 sq ft of small-bay stacked industrial and flex space under construction. He says they’re here to stay.

“What we’ve been used to seeing is warehouses with mezzanines you walk up, but now you’re getting full second and third floors accessible by elevators. It’s less traditional industrial but it’s been evolving in Vancouver. We’re very much in the early days of stacked industrial and that’s what it’s going to look like,” TIhanenoks told CREW. “The main driver is land pricing and land availability, so if you’re a developer who doesn’t have hundreds of acres in your land bank for future uses, you have to hit the market with owner-users, land speculators and others, and, in core markets, you end up buying land at a hefty price tag. The only way to maximize what zoning allows is stacked industrial.”

Vancouver’s zoning bylaws are more liberal than surrounding municipalities’, allowing for some creativity, but TIhanenoks suspects it’s only a matter of time before the entirety of Greater Vancouver follows suit. However, Vancouver isn’t the only municipality in the metropolitan that allows stacked industrial facilities. In 2019, Oxford Properties Group launched Canada’s first stacked industrial development in Burnaby, a 7,000 sq ft warehouse with an upper floor accessible to transport trucks.

Additionally, Union Allied is building 1308 Adanac in East Vancouver, and according to the company’s investment and acquisition director, the development’s offerings are consistent with the most common inquiries, which are for dock loading, high ceilings, street exposure and transportation, but most importantly it reflects the industrial sector’s evolving needs.

“The global shift to e-commerce during the pandemic has only increased demand for our supply-constrained city. The city has to undergo a reshuffle where people who have existing amenities, like grade access and dock loading, need to begin asking themselves if they need it given the high cost of these spaces, or if their business is of a lighter industrial use and can survive in a multilevel environment” said Michael Chiang. “Moving forward, the way to adapt is to develop true logistics based on multilevel industrial like those in other parts of the world have limited land, like Hong Kong, Japan, Taiwan.”

2021-05-31 14:37:43

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Pandemic highlights existing supply constraints

Nineteen percent of Ontarians intend on buying a home in the next year, rivalling pre-COVID sentiment in Canada’s largest province, according to new survey results.

But that could prove challenging, given how voracious demand has become relative to available supply.

“In the last year, the desire among buyers for detached homes has grown stronger, but unfortunately, seller intentions for such properties have receded, so inventory is not keeping up with demand, making it tougher for buyers to find a great place to call home,” said David Oikle, president of the Ontario Real Estate Association (OREA), which commissioned the survey conducted by Ipsos.

Sixty-three percent of respondents want more space in the form of a detached home, up from 60% in 2020, while 28% plan on buying a home that’s at least 2,500 sq ft, up from 20% a year ago. Although detached home prices have skyrocketed since March 2020, 75% of the survey’s respondents are banking on existing home equity to help them buy a detached home, an increase of 9% from a year prior.

However, only 62% of sellers will be listing a detached home. That doesn’t surprise Norman Xu, head of the Norman Xu Team at Royal LePage Signature Realty, who says the pandemic reinforced the need for more space.

“Demand for detached homes increased as more people started working from home. There’s such huge demand for detached homes and people want their homes to be more functional, both as a home and as an office,” he said. “A lot of jobs require their own space, especially if there are kids at home. It’s so important for me to have my own space, so I’m assuming there are others with similar needs. Certain jobs cannot be performed in a condo space and people can’t rent commercial spaces today like they could before. Balancing working from home with home life is the key reason demand for detached homes has increased compared to before the pandemic.”

With demand outpacing supply, OREA is calling on the government to implement solutions that will grow the availability of desired housing types—a problem that predates the pandemic.

“The current situation we’re facing in Ontario—increasing prices, demand for more space and larger homes—all during a once-in-a-century pandemic, points to a much larger systemic issue facing Ontario’s homebuyers: a serious lack of housing supply.”

2021-05-28 02:34:47

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Multiple offers underscore concerns about realtor ethics

Canada’s white-hot housing market has revealed blemishes in the real estate industry pertaining to the professionalism of some agents.

Looking at how many real estate agents are registered with the Toronto Regional Real Estate Board (TRREB) alone, Christopher Alexander, chief strategy officer and executive vice president of RE/MAX Ontario-Atlantic, isn’t surprised that the level of professionalism consumers receive could be compromised.

“The explosion of agents in Ontario specifically, and particularly under TRREB, is having an effect on the quality of service people are getting. People get in with good intentions but their motivations don’t always align with providing the best experience for the customer, and the current state of the market has allowed a lot of agents to stay in business who arguably shouldn’t be,” Alexander told CREW.

“A lot of business models have been surviving off of rapid price appreciation and robust demand, and they’re not always providing the experience that a consumer deserves and people are finally starting to notice it.”

Multiple offers have arguably become the biggest pain point for the industry because there’s a dearth of consistency from one agent to the next. It isn’t a stretch to imagine that many disappointed buyers, having gone through the song and dance a few times only to be blindsided by something new every time, have had enough.

“Oftentimes, people have already bid on multiple homes and lost and they end up going through a different experience each time, and that sours a lot of them,” said Alexander. “It seems like each agent has their own way of doing it.”

But Mike Usiri, president of the Mississauga Real Estate Board, says that, while agents follow clients’ instructions, they’re duty bound to extract the best possible sale price from buyers.

“The owner is the principal and they call the shots. Agents only offer certain strategies to extract the highest price because they work for the seller, but sellers sometimes get greedy and the agent has no choice but to take their instruction,” said Usiri, adding that there’s been talk about switching to the auction model, but that could easily backfire.

“There’s talk about the auction—it’s been done in Europe and the U.S.—it’s very much like a car auction where there’s complete transparency and everybody knows what the offers are, but if buyers are already complaining about prices, what will happen is homes will go for even more money. If you bring an open auction, all that will do is put more undue pressure on buyers and make homeownership more unattainable for buyers.”

RE/MAX released a survey this morning detailing consumer confidence in the real estate profession, and 57% of millennials stated that they were more likely to buy or sell a home using real estate technology in lieu of an agent. Ninety-one percent of respondents want their agents to conduct business ethically, exercise patience, actively listen and be empathetic.

Alexander noted that overall consumer sentiment is positive, he believes the industry could always do better and says multiple offer situations have yielded more complaints than ever before.

“There are rules agents bound by, but some people do a closed bidding process where you get one shot and if there’s a tie, there’s a tie breaker. Agents hold off offers and take the bully offer, but then their brokerage remarks say there was no bully offer, or they take an offer well past the deadline. People don’t like to lose but knowing they have a fair shot would do wonders for our industry.”

2021-05-28 02:39:25

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