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Coronavirus and the impact to the real estate market

cdr108

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The first to suffer will be the AirBnB crew:


Many are trying to structure semi-long term leases. But with dozens of units coming online in every condo, the competition will be intense. And since it doesn't look like travel will recover for a while, they could be cash flow negative for a while.
15,000 units in Toronto, mostly in the dt core will definitely help ease some of the low LTR vacancy rate.
Depending on when they purchased the units (I think post-2014), AirBnB owners will be cash flow negative if they have to go semi-long term or LT leases.

In addition, I don't think they'll get the usual price premium for furnished units as the competition will be intense also.
 

WislaHD

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There's already been a large shift to open-office no fixed-desk and many companies have already severely reduced the space per employee.

There are a lot of articles talking about "working from home" being the future ... and of course that would have a massive ripple effect on the commercial real-estate market, but I'm not sure I buy it yet ! While some smaller companies are 100% work from home, I just don't think you can build a culture that way ... not sure, just my take ... I think the work from home % will increase for sure, but the vast majority of people still won't (at least not most of the time that is).
Here's my ten cents (I'm also at a company that's been WFH for 5 weeks now)...
  1. The economic fallout from COVID will be significant. If companies reduce their footprint, however, it won't be because everyone will suddenly start working from home.
  2. We've been WFH for 5 weeks and our MGMT team talks constantly about maintaining productivity and culture. WFH is NOT a panacea.
  3. I do think, beyond the economic ramifications (i.e. downsizing) there will be some structural changes to how businesses operate; these will include:
    1. Rethinking travel, especially international
    2. Reduction in flexible working areas (co-working, IMO, is effectively dead)
TL: DR - there may be overall reduced demand for office space in the near term, but that won't have to do because suddenly every TD manager will be ok with their teams working from home, it will be because the overall economy is depressed.
Why would "co-working" die ? While I always thought that pendulum swung too far, I don't think we'll ever go back to dedicated offices with doors ... so there will still be a lot flexible working areas.
My thoughts (again - just my opinion):
  1. Lot of co-working space will not survive an 8 month downtown simply because their finances are so screwed (see WeWork, Knotel, the Wing)
  2. 50% of WeWork's revenue comes from companies with 500+ employees, there was a time when companies like AmEx were leasing entire WeWork's to support innovation labs and lord knows what else; when large companies come back to work - they'll a) want to cost cut - goodbye on-tap kombucha and b) i think there will be more of an emphasis on offices that companies can control (this includes who comes in and out, but distance between desks etc).
  3. Landlords will lower office price in order to secure long-term tenants and I think will be more likely to do that with a blue-chip company rather than an arbitrage player (which essentially is what wework is)
  4. The cultural concept of co-working is somewhat antithetical to what I imagine will be an 18 mo hangover of people not wanting to co-work with people they don't know.
Editing this to add a link to this article: https://www.marketplace.org/2020/04/03/will-covid-19-be-the-death-of-coworking-spaces/
I thought this was an interesting discussion to quote here in this thread. Thanks for the link about the future of co-working spaces.


I agree that co-working spaces will be hard hit by this pandemic, but I also don't think they will completely disappear. There will still be a demand for flexible short-term spaces once the world returns to a new normal.

On a personal note, I am finding myself incompatible with the work-from-home concept. My brain is too hard-wired into differentiating a workplace to a leisure/rest place. If I was an entrepreneur, I would likely be forced to the local Starbucks if there was no more co-working spaces.
 

PinkLucy

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Can you make a space that is work-only? That can help. (I've worked from home for more years than I can remember)
 

AlbertC

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Stalling immigration may add to Canada's COVID-19 economic woes

May 27, 2020

Fewer jobs could crimp consumer spending, but it could also hurt the housing market, which has been growing in recent years to support the demand from new residents.

"Housing, whether it be real estate services, or residential construction, has become a very large part of the Canadian economy, particularly in Ontario and British Columbia," said Royce Mendes, a senior economist at CIBC Capital Markets.

If you take immigration "out of the equation, that softens the outlook for housing, no doubt," Mendes said.

Last week, the chief executive officer of the Canada Mortgage and Housing Corporation said the national housing agency is forecasting a decline in average house prices of as much as 18% in the coming 12 months.
 

WalterVAllen

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Well, I think that soon the real estate will fall in price because people don't have money. The pandemic made people poor. I had a hell of a problem selling my house in Coventry, but I actually did it. Not without a help, of course. I was trying to sell it 2 months, but without a result. Then one of my friends told me that The Property Buying Company can buy my house. I contacted them and they actually bought it. And that was awesome. Of course, they bought it for a lower price, but it was done fast. I needed money badly.
 
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kali

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Canada's housing markets will begin to recover by mid-2021 - CMHC reports

May 27, 2020

I always wonder what "recover" means - return to 15% annual increases? How can anyone with a straight face describe Canadian housing "recovering" to mean resumed growth? A recovery in my opinion would be a controlled slow down so that credit isn't being handed out like candy and prices come down. Yes, we also need to increase supply and crack on speculators+investors.
 

toaster29

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Hopefully we see a total stop on foreign investment. The handing out credit 'like candy' actually worked to help a lot of lower/middle income Canadians become pretty wealthy. But we don't want that, right? We want them to stay poor? Come on. We want that, instead of making these foreign investors making $$$ without living in our communities, paying income taxes to provide services in these communities, etc.
 

kali

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Hopefully we see a total stop on foreign investment. The handing out credit 'like candy' actually worked to help a lot of lower/middle income Canadians become pretty wealthy. But we don't want that, right? We want them to stay poor? Come on. We want that, instead of making these foreign investors making $$$ without living in our communities, paying income taxes to provide services in these communities, etc.
We can walk and chew gum at the same time. I don't know about wealthy - sure, the people who bought back in the day benefit, but it's at the expense of the next generation. How is this fair? Plus over the last few years, anyone trying to get in the market has to live paycheck to paycheck to make payments.

Cheap credit also leads to this kind of untenable situation:

Like I said, we need to crack down on investors and speculators (both foreign and domestic). But there's more to be done beyond that, in my opinion. Not to mention it's deeply immoral to allow asset bubbles to form around necessities like housing.
 
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