The COVID-19 pandemic has complicated investing in real estate, but not as much as one might think.

Investment in Canada’s industrial sector last quarter hardly declined from the prior-year period, demonstrating that the pandemic hasn’t disrupted all areas of the real estate market.

“National investment volume in the first three quarters of 2020 dropped by 22% compared to the same time last year, with 5,106 transactions totalling $22.8 billion in volume,” said a new report from Altus Group’s Erika Siegert, senior analyst of national research insights. “The industrial sector continued its strong momentum, with 994 transactions making up nearly a quarter of year-to-date transaction totals at $6.5 billion, a drop of only 1% compared to year-to-date volumes last year.”

According to Altus Group’s Ray Wong, vice president of data operations and data solutions, the industrial sector’s availability rate is 1.9% in Toronto, 2.3% in Vancouver, and 3.1% in Montreal, signifying robust demand.

“Industrial is my favourite sector—[it] continues to track very well, with the availability rate at about 3.1% on a national basis,” he said. “A combination of low availability and e-commerce growth this year has fuelled demand for warehouse distribution, which had been steadily increasing for 10-15 years, but this year it’s been very strong. You’re dealing with investors who like this asset because it’s one of few assets that increased rents this year (3-5%).”

The industrial sector was scorching before the pandemic struck in March, thanks to the explosion of e-commerce in recent years, which has come at the expense of the retail sector. Given that rotating lockdowns throughout the country this year delivered additional blows to fragile brick-and-mortar retail outlets, more Canadians have opted to shop for goods online. Online shopping has become so ubiquitous that new residential towers count delivery areas among the amenities they offer.

“Unsurprisingly, the office and retail sectors have seen decreasing activity year-over-year, with volume over the first three quarters dropping 53% and 22%, respectively,” said the Altus report.

But Wong noted that major cities’ office sectors are buoyed by a growing number of sublets. Tenants and landlords have also begun renegotiating leases, with the latter lowering rents in exchange for extended lease durations.

“In Vancouver’s downtown, sublets of available space went from 20.1% in Q3-2019 to 38.6% in Q3-2020,” he said. “Toronto went from 23.7% to 34.6%, meaning there are more sublets this year because there are some companies that don’t need as much office space, or any office space at all.”

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