UPFRONT
COMMERCIAL UPDATE
What’s the future of the office? As Canada’s reopening looms, a key question remains: Will workers return to the office?
interaction between colleagues. That’s a key reason why Darren Neziol of private commercial lender Reciprocal Opportunities Incorporated (ROI) foresees a gradual return to the office in the coming years. “It’s important for people to get into the office, for companies to operate at maximum efficiency and for employees to build relationships with their co-workers,” he says. “That’s tough to do working from home, so I do think that over the next three years, you’ll see a transition back into the office space.”
“As more companies adopt a hybrid model of work, they will reduce their traditional office leasing footprint”
One of the hottest topics in the commercial mortgage space for more than a year has been the future of traditional office space. With most of the Canadian workforce driven into a remote work model by the COVID-19 pandemic, much conjecture has focused on whether things will simply go back to normal when the country reopens. Despite the perks of remote work – the time and money saved by not commuting, better work-life balance – it seems there’s not
NEWS BRIEFS
an overwhelming appetite for workers to stay home all week. In a recent report, Colliers Canada revealed that only 2% of the 156 companies it surveyed were planning to keep their employees working remotely full-time, while 58% indicated they would likely move toward a hybrid model with some time at home and some in the office. Among the reasons for companies’ unwillingness to contemplate a permanent remote work arrangement is the lack of face-to-face
Conditions stabilize in commercial market
Swelling confidence in the economy’s prospects helped conditions in the Canadian commercial property market stabilize, according to Morguard’s 2021 Canadian Economic Outlook and Market Fundamentals Q1 Update. Multi-suite residential rental properties continued to generate strong bids from investors, and industrial investment demand also remained robust across the country, Morguard said. However, investors took a more cautious approach to office and non-essential retail property asset acquisitions.
Still, the study provided further food for thought for commercial mortgage professionals, given its projection that office vacancies could rise over the next few years as a hybrid model between home and the office evolves. “As more companies adopt a hybrid model of work, they will reduce their traditional office leasing footprint,” Colliers predicted. “Alongside the 2.15% increase in vacancy we have seen over the past year, the additional 5.7% increase expected within the next four years will bring the total vacancy impact close to the 8.5% we forecasted in June 2020.”
Commercial deal flow in Canada remains strong
Market liquidity and deal flow in the Canadian commercial mortgage sector remained strong during the first quarter of 2021, in spite of some lingering concerns, according to CMLS Financial. Total outstanding commercial real estate debt stood at $349 billion at the end of 2020, representing a 7% annual upswing, despite a 2% year-over-year decline in origination. CMLS said the market “was buoyed by especially strong lending in the CMHC-insured space, which saw origination volumes increase 45% year-over-year.”
12 www.mortgagebrokernews.ca
12-13_Update Commercial-SUBBED.indd 12
15/06/2021 3:23:27 am
