With everything that’s been going on in recent months, is it worth even considering investing in commercial real estate during a pandemic? Or is the industry going to experience a downturn?
While there may be some potential profit opportunities such as restaurant sales in Toronto to buy real estate at an affordable price right now, many economists believe that the negative effect on the commercial real estate market from the increase in remote work will make commercial real estate a lot less popular for investing in the near future.
Let’s talk about investing in real estate during a pandemic and what you should do as an investor in these unpredictable times.
The Impact of Remote Work
The trend of working from home has been on the rise even before COVID thanks to online technologies that enable effective communication anywhere. Social distancing measures have only accelerated the trend, and now Canadians are working from their living rooms and home offices more than ever.
What this means for real estate is that current leases for office spaces may not be renewed in the long-term. Remote work is slowly becoming the norm, and the quarantine is only contributing to the decrease in demand for commercial office spaces.
In Toronto and Montreal, the average square footage of office space per employee fell by almost half. Companies like WeWork, which drive much of the demand for shared office spaces in North America, may be facing significant challenges after COVID.
That being said, the square footage per employee figure may also increase as employees returning to the office will prefer more spacious, socially-distanced workspaces. The real estate market for offices will nonetheless be an unadvisable investment in the coming months.
From Physical Stores to eCommerce
Jeff Olin is the CEO of Vision Capital, a Toronto-based investment manager for the real estate industry. He believes that the market for office spaces and retail locations will struggle with COVID.
Retail stores, in general, have been on the decline as eCommerce rises in popularity. Most consumers realize that the flexibility and convenience of online shopping is preferable to driving to a brick-and-mortar location.
The quarantine has only accelerated the switch. Even grocery stores and shopping malls will be facing problems, though the latter will likely receive a boost in popularity post-COVID as many shoppers may be excited to return to the local mall.
Justin Pierce of The Washington Post claims that his favorite investment nowadays is single-family properties in small towns, and many investors agree with him.
Specifically, the prices in this sector don’t change as heavily as other properties. The rent-to-price ratio is a lot easier to work with as well. Justin has managed to turn a high cash flow from his investments, resulting in better security and solvency when it comes to dealing with an unpredictable market.
Warehouses: A High Point For Investors
Jeff Olin does believe that warehouses are the best opportunities for investing in commercial real estate during the pandemic. Businesses require high amounts of floor space for company storage. To fight against supply chain disruptions, these companies will also store high amounts of inventory in warehouses.
There’s also the new trend of de-globalization. COVID-19 has encouraged many organizations to bring manufacturing back from overseas – think of the recent issue of having to wait for personal protective equipment (PPE) to be imported from another country – which will increase local warehousing needs.
CHI Real Estate: Leverage Our Proven Commercial Real Estate Expertise
It’s clear that real estate investing may become unpredictable and difficult to navigate under the coronavirus. However, it’s certainly possible to benefit from the changes, and the quarantine will arguably help you profit under certain markets.
To help you find the right resources to navigate commercial real estate in the City of Toronto, CHI Real Estate can offer its expertise. Their advisors will connect you with the perfect opportunities so that the pandemic doesn’t interrupt your venture into commercial real estate.
Whether you want to find new restaurant locations or are interested in the hospitality industry, CHI has a service for you.
You might be interested in reading, “Five Real Estate Mistakes That Buyers Are Making“.