While the demand for industrial space is increasing, it might be necessary to repurpose other kinds of commercial space.While challenges exist for office and retail space, e-commerce will continue to drive industrial real estate development in Canada this year.Scott says offices' functions are being rethought for the benefit of employees and business owners who may be pondering what the future of offices holds.
Industrial Rreal Estate Is Boosted By E-commerce.
Scott points out that Canadians welcomed e-commerce in 2020, particularly during the first lockdown last spring, when e-commerce transactions almost doubled year over year.
E-commerce expansion is causing a rise in the demand for industrial space, such as warehouses and distribution centers, to store, sort, and transport goods to customers who place online orders.
In addition to overwhelmingly supporting store curbside pickup, which has almost doubled compared to pre-coronavirus levels, Canadians have also accepted "buy online, pickup in-store," which has increased by almost 50%, he claims. This is because of social isolation and lockdowns.
According to Scott, who also serves as the regional head of Cushman & Wakefield's Americas Valuation and Advisory Services, industrial is currently one of the best-performing asset groups in commercial real estate.
"Our markets for industrial and business real estate were already well-positioned prior to the pandemic, and this only fueled that sector's expansion across all of Canada. That will continue through 2021 and the near future. Industrial vacancy is very low, which will encourage new growth and capital market investment.
Major Shift Is Coming To Offices
"What we are observing is that the disruption caused by the pandemic has sped up research into how the office integrates into the larger ecosystem of the workplace. Its goal is being rethought, not abandoned, according to Toronto-based Scott.
For the fourth quarter of 2020, the overall vacancy rate for workplaces was 12.2%.
The Cushman & Wakefield Many of the Canadian office markets are projected to have a slow 2021, but through 2030, net office demand is predicted to increase by 5 million square meters (53.9 million square feet) in Canada, despite the rise of the work-from-home trend.
"The work-from-home impact" basically means that each new job won't generate as much interest in office space as it did prior to the crisis.
According to Scott, maintaining a balance between social proximity and density while having fewer workers in the office will probably not have an impact on the current office size. However, offices will prosper in new ways.
"Going forward, the office's goal will be to offer motivating locations that promote creativity, cooperation, and innovation as well as cultural connection and learning.
Shopping In Stores Won't Be The Only Form Of Retail.
According to Scott, retail space that houses pharmacies and grocery shops has fared better than other retail space during the pandemic.
In the future, he claims, retail establishments and malls will have "alternative uses," like gyms, indoor dog parks, museums, concert venues, and banquet rooms. For fulfillment, which entails preparing and filling client e-commerce orders, some retail locations will be utilized.
"To establish hubs for daily living, mall owners and developers will reimagine the conventional concept. This means that in addition to serving as a location for shopping and fulfilling online orders, the mall will serve as a community meeting place, a hub for recreation and discovery, dining, and entertainment.
Scott does not believe that store space will be turned into warehouse space, among other things because of zoning regulations.
"Successful retailers and retail developers have always needed vision and innovation to succeed in retail,"
Hotels Facing Insecurity Without Customers
According to Chakib Taous, Director of Corporate Financing at BDC, the urban hotel market has collapsed. He notes that due to the pandemic's travel limitations, the occupancy rate in downtown Montreal is only 5% to 10% at most.
Additionally, conferences and business trips are no longer necessary because of remote work.
It will definitely take longer than two years for hotels to recover, according to Taous.
"Some of them run the danger of going bankrupt. Some of them are currently for sale. Some of them are considering rezoning," he claims.
"To support the decline in tourism and their fixed expenses, they must be realistic. They'll undoubtedly need to come up with a Plan B. Do they have the resources to endure it? It's not a pretty picture.
Hotels that stay open might experience a decline in visitors and conventions. In order to compete with downtown condominiums for customers, hotels could convert their zoning from commercial to residential.
Identifying An Opportunity
"The market is filled with money. You should seize a chance if you see one, he advises.
It will be fascinating and thrilling to see what creative investors and developers can do with outdated office or obsolete industrial stock in many of our cities, as well as the opportunities that present themselves to enhance our urban environments.
According to him, owners of business real estate across all asset classes are taking advantage of this disruption to reconsider and repurpose their investments.
According to Scott, some real estate will undoubtedly be forever repurposed, including properties like industrial and multi-family homes that can be converted into high-demand properties with ease.