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PLANNING AHEAD IN UNCHARTED TERRITORY
Paul Mouchakkaa Managing Partner & Head of Canadian Investment Management BentallGreenOak
As investors prepare their real estate portfolios for 2021, Paul Mouchakkaa, Managing Partner and Head of Canadian Investment Management, BentallGreenOak, says three questions are top-of-mind: “What are the cyclical versus secular shifts that are either new or that have been accelerated by the pandemic? Are you an absolute return investor (with perhaps a shorter time horizon) or a relative return investor (longer-term, beta driven)? Are you pursuing a diversified strategy, or is your portfolio highly concentrated because retail and office are perhaps more challenged looking forward? Given these considerations, how might your investment strategy shift?” Because the pandemic is still ongoing, Mouchakkaa says it’s a challenge to try and predict which parts of the industry will come roaring back with a healthy economy and which parts may be 24
“So much of the difficulty is economic, just purely cyclical, but there are some secular changes and behaviours that are going to continue post-COVID.”
permanently impaired. “So much of the difficulty is economic, just purely cyclical, but there are some secular changes and behaviour that are going to continue post-COVID,” he says. “More online shopping, more remote work, and an overall focus on health and wellness will have lasting effects on all aspects of commercial real estate.”
City centres have certainly felt the impact of COVID-19 with a large part of the population working from home. Mouchakkaa says that whereas investors tilted more toward the core, recently there may have been a shift in the other direction, toward well-located suburban properties. This doesn’t worry him, however: “I think it’s a type of softness that you could invest through.”
Asked about opportunities in the coming months, Mouchakkaa says there hasn’t been much distress to date. Some of the underlying challenges in the economy may have been papered over with the unprecedented monetary and fiscal support packages. So long as there is an effective vaccine on the horizon and interest rates remain low, he doesn’t foresee Canada having of the type of distress that Canada and the US experienced in the early 1990s. Beyond the industrial and multifamily sectors, which are universally considered more resilient investment areas today, he points to what has truly succeeded in this pandemic and seems poised for continued success: real estate that is tied to technology and sciences.
His colleague is also optimistic. Phil Stone Principal, Head of Canadian Research at BentallGreenOak, says that prior to the pandemic, Canada’s top metropolitan areas saw significant outflow of people into the suburban bedroom communities “but international immigration more than backfilled that void left by people moving out of the city. You had extremely strong population growth in Canada, but the immigration tap is now only on about a quarter turn whereas it was full blast before.” Stone expects immigration to eventually come back to pre-COVID levels. “Urban core markets will still be able to attract from abroad,” he says. ■ Michelle Morra Canadian Real Estate Forums / WINTER 2020