COVID-19 (novel coronavirus) hasn’t yet put a major dent in the Canadian commercial real estate or housing markets, but a great deal of uncertainty remains surrounding the potential impact of the global outbreak.
“We are already beginning to see the impact of the virus with international buyers,” Sotheby’s International Realty real estate agent Paul Maranger told RENX.
“Air Canada recently cancelled direct flights between Toronto and Hong Kong. With cancelled flights from Asia, and a possibility of even more to come, foreign buyers aren’t coming to look at properties.”
Sotheby’s agent Christian Vermast told RENX buyers hold back on real estate decisions in times of volatility and purchases are delayed.
“We expect a much more robust summer and fall market in 2020 and perhaps a quieter spring than originally forecasted,” he said.
Compared to such countries as China, South Korea, Iran and Italy, Canada has so far been relatively unscathed by COVID-19. Flu season traditionally ends in May and, assuming the situation stabilizes by then, Maranger is optimistic pent-up demand will burst into the housing market.
“We also have the advantage in terms of a great international reputation,” added Maranger. “Our vast forests, lakes and countryside give the impression of purity and freshness. In this case, those stereotypes can well work in our favour and help us sell more real estate.”
While Sotheby’s specializes in residential real estate, Vermast expects the commercial aspect of the market “will be hit harder and faster.
“People will avoid social gatherings and large groups. Hence businesses, such as restaurants and retailers, looking to expand may put that on the back burner until 2021,” he said.
“Those are pure investment decisions and are the first to suffer, whereas residential real estate decisions, which are more emotional, don’t experience the same shocks.”
Cushman & Wakefield report
It said it’s premature to draw strong inferences about the virus’ impact, but noted the commercial real estate sector is slower moving than the stock market and that leasing fundamentals don’t swing wildly from day to day.
So, it’s less susceptible to shocks such as Monday’s global market downturn – fueled jointly by COVID-19 concerns and a global oil price dispute between Russia and Saudia Arabia-led OPEC nations.
The first quarter of the year is typically the weakest for commercial real estate metrics, so drawing conclusions about the impact of COVID-19 must be done carefully.
The report from the global real estate services firm said the recent lowering of already low interest rates should support consumer activity, which may result in increased momentum across the residential sectors in Canada.
“Demand for owner-occupied industrial product is also likely to accelerate against this backdrop, with any pause in office and/or leasing activity temporary,” the report stated. “As in other global regions, hospitality and retail sectors are dependent on Chinese tourism and/or supply chains, and so are liable to experience near-term disruption.”
The report said the COVID-19 outbreak will likely affect the North American retail supply chain as early as April, mostly due to slowing imports from China.
Retailers with shorter lead-time replenishment models could be among the first to experience supply issues. Dollar stores, consumer electronics, toys and the apparel categories all face potential disruption in the supply chain if the crisis drags on, according to the report.
While the industrial real estate sector is expected to remain largely resilient, certain types of manufacturers disproportionately dependent on Chinese production for inputs and final goods could also be adversely affected by supply chain disruptions.
Precautions being taken
Precautions are being taken in the real estate community to prevent the potential spread of COVID-19 through company guidelines.
“Open houses may be cancelled or curtailed, brokerages will likely introduce policies for hygiene and face-to-face meetings, and group office meetings could be reduced,” said Vermast.
“Fortunately for us, our industry is more mobile and adaptable than many other professions. Many realtors can easily work from home and be equally as productive as they are in the office.”
REALPAC response to COVID-19
REALPAC chief executive officer Michael Brooks issued a statement to members on March 6 that included links to resources and information on COVID-19.
While stressing the Public Health Agency of Canada has assessed the domestic public health risk associated with the virus as low, he said:
“As business and property owners, it is also important that our members are aware of how their organizations should be responding to COVID-19. Organizations will need to consider the possibility of limiting or prohibiting work travel, cancelling events, and allowing employees to work remotely.”
Brooks said REALPAC will continue to monitor the COVID-19 pandemic and keep members informed of new information and resources that become available.
Effect on real estate events
The Vancouver forum will now take place at the Vancouver Convention Centre on Sept. 30. WCAIC will take place in an alternate format, but Informa has yet to release any details.
Informa is also restricting registrations for the two Vancouver conferences, as well as other Canadian Real Estate Forums and Conferences, to residents of North America.
Other regional events are also being impacted, including the Ottawa market outlook event hosted annually by CBRE. It’s been postponed from its original date of March 26.
The commercial real estate services firm cited an “abundance of caution” for the move last week. There’s been no word yet on when it might be rescheduled.
COVID-19 and SARS
At this point in Canada, COVID-19 hasn’t reached the scale of the 2003 SARS outbreak, though health officials across the country are warning the situation could escalate. The number of confirmed COVID-19 cases as of March 9 was 77 in four provinces
There were 438 probable and reported cases and 44 deaths in Canada due to SARS.
Maranger said SARS had a short-lived impact on the real estate market and there was no precipitous drop in sales.