Landlords bracing for rent strikes across Canada as coronavirus kills daily-wage jobs.
The restaurant and retail industries have been hit hard, making rent payment a flashpoint expense for both employers and employees.
TORONTO ā Landlords across Canada should brace for rent strikes in May unless the government steps in with rental subsidies for occupants as the outbreak of new coronavirus decimates wages, industry groups and tenants said on Monday.
Restrictions aimed at curbing the virusās spread have hit the restaurant and retail industries hard, making rent payment a flashpoint expense for both employers and employees.
A rent strike is gathering steam in Ontario, the countryās most populous province. Keep Your Rent Torontoās private Facebook group accrued over 5,000 members in less than two weeks, and its organizers said their platform has been used to send over 100,000 letters to landlords in Toronto, stating that they would not be paying rent.
Renters make up 32 per cent of households in Canada, according to the 2016 census, and many businesses rent their brick-and-mortar locations.
CIBC economist Benjamin Tal estimates that about 70 per cent of rent due in April was collected, based on preliminary information.
āThe focus is now shifting to May and to provincial governments which, with the exception of British Columbia (B.C.), havenāt yet formalized any policy related to renters,ā Tal said in a research note.
Restaurant Canada, the national industry lobby group, estimates that 10 per cent of restaurants have closed permanently across the country, and another 18 per cent will close permanently within a month if current conditions continue.
āItās a carnage, (a) business bloodbath,ā said Daniel Lefebvre, a regional vice president of Restaurants Canada, noting many landlords were willing to negotiate in April, but that the goodwill may not continue. āIf this was to last four or five months, we would need to get into other kinds of measures.ā
Ottawa is offering one-year interest free loans of up to $40,000 (US$28,347) for small businesses but has not yet proposed specific rent measures. Residential evictions in B.C., Alberta and Ontario have been halted, and the premiers of Alberta and Ontario said they expect landlords to be understanding of the situation facing businesses and tenants.
The federal loan isnāt enough for small businesses, said Sammy Piccolo, who owns eight coffee shops in B.C.ās Lower Mainland, noting that taking on more debt is not ideal.
āEverything should just be forgotten,ā Piccolo said. āNobody should owe anybody anything until we get through this crisis.ā
Major landlords RioCan Real Estate Investment Trust and Choice Properties Real Estate Investment Trust, are offering 60 day rent deferrals, some automatic.
Nobody should owe anybody anything until we get through this crisis
RioCan and Choice count grocery retailers like Loblaw Cos and movie chain Cineplex among their tenants.
Canadian Federation of Independent Businesses CEO Dan Kelly said that anything other than provincial and federal breaks on property taxes and rental subsidies will simply delay bankruptcies, not avoid them.
Canadian restaurateur Jen Agg, who owns five restaurants and bars in Toronto, said she would not be paying rent for her businesses.
āWe have culled all unnecessary expenses, but the big one is inescapable: rent,ā she wrote in a Globe and Mail newspaper column. āHow can I pay rent when I have no income?ā
In late February, Singapore Press Holdings announced a $233.9M purchase of six senior housing properties in Canada from Seattleās Columbia Pacific Advisors.
The properties, five of which are located in Ontario, comprised 717 suites, with the average occupancy of the portfolio said to exceed 90% for the last three years.
The properties included Heritage Meadows Gracious Retirement Living in Cambridge, the Bradley Gracious Retirement Living in Kanata, Guelph Lake Commons in Guelph, Woodstockās Cedarview Gracious Living Retirement Living and Rosewood Estates in Cobourg.
Completion of the acquisition was set forĀ 90 days, subject to carrying out due diligence to āconfirm the deal valuation taking into account asset valuation,ā SPH said in announcing the agreement.
Fast-forwardĀ to MarchĀ and a lifetime of bad newsĀ with the coronavirus striking senior homes particularly hard.
SPH announced it and CPA had āmutually agreed not to proceed with the Acquisition and to terminate the Agreement as a matter of prudence in the light of global market instabilities caused by the COVID-19 pandemicā inĀ a short news release several days ago.
None of the properties involved in the deal have been identified in the media as having coronavirus cases. A uniform March 25Ā website updateĀ at all six facilities stated that āwe do not have any known cases of residents or staff diagnosed with COVID-19.ā
However, that was last week. As of now, at least 40Ā deaths of residents in Ontario nursing and retirement homes have been linked to COVID-19, with 11 deaths reported on Wednesday alone, including six in Toronto.
Still, theĀ current atmosphere likely hasn’t dampened an interest in senior housing in the GTA in the near future. Senior housing provider Revera recently purchased nine neighbouring properties near Bayview and Eglinton in a deal involving Lennard Commercial Realty.
One In Ten Canadian Restaurants Have Permanently Closed Already.Ā Canadaās restaurant industry is one of the hardest hit by COVID-19, and a lot of the damage is permanent. The industry estimates over 800,000 restaurant jobs were lost in March. They also estimate 1 in 10 restaurants have permanently shuttered, and almost 2 in 10 more will close if April is the same as March. By the end of this month, nearly two-thirds of all restaurants in the country could be permanently gone, along with the jobs they provided.
Canadian Mortgage Growth Hits Highest Level Since 2018ā¦ After Revisions
Canadian homeowners drove their mortgage debt to a new record high. The balance of mortgage credit reached $1.63 trillion in February, up 5.0% from last year. With Januaryās 5.1% revised lower to 4.9%, this marks the highest 12-month growth in a couple of years. Typically revisions arenāt worth paying much attention to, but this one reverses a trend.
Toronto Real Estate
Over 3,300 People Bought Toronto Real Estate ā After The Lockdown
The global pandemic put a drag on sales in the second half of last month, but thousands of people still bought. TRREB reported 4,643 sales between March 1 and 15, a 49% increase compared to last year. The remainder of the month saw 3,369 sales, down 15% from last year. Considering the board recommended all face-to-face business be halted on March 24, a surprising amount of people still bought a home.
Toronto New Home Sales Doubled, Even With COVID-19 Pandemic Warnings
Warnings of a pandemic didnāt slow down new home buyers in Toronto either. The City of Toronto sawĀ 1,310 sales in February, up 121% from a year before. York Region, now the biggest new home sales region in the GTA, reported 1,336 new home sales, up 667% from last year. The biggest difference between this surge and the one seen in 2017 is inventory ā which reached 17,199 units, up 4% from a year before. To contrast, the surge in sales during 2016 and 2017, were met with some of the lowest levels of inventory in years.
Toronto Commercial Real Estate Break And Enters Jump As COVID-19 Quiets Streets
Torontoās quiet pandemic streets have led to a surge of break and enters (B&E) at commercial properties. January reported 258 B&Es, down 9.79% from last year. February also came in lower with 317 reports of B&Es, down 2.61% from last year. In March, after most essential businesses shut down, we saw the numbers surge. The month saw 317 reports of B&Es, up 32.08% from last year. Commercial B&Es represent 87% of the total increase across all segments, a trend that was falling before the pandemic.
Vancouver Real Estate
Over 930 Greater Vancouver Homes Sold During A State Of Emergency.
Greater Vancouver real estate buyers bought almost a thousand homes during a state of emergency. REBGV reported 2,524 sales in March, up 46.1% from a year before. Last year was unusually slow however, and this past March still came in 19.9% below the average for the month. The most interesting part of these numbers is the last 10 business days of the month. There were 903 sales made during this period, while BC was in a state of emergency. The emergency didnāt even make some buyers pause.
Mayor John Tory has put out a statement calling for commercial landlords in Toronto to cut their tenants some slackĀ during the COVID-19 pandemic.
In aĀ videoĀ uploaded to his YouTube channelĀ Saturday, the mayor called for landlords to “try and make some arrangement”Ā with restaurant- and shop-owners to ease the financial burden of rent during the closure ofĀ all non-essential businesses.
“The idea here is that those shops and restaurants can open again when this nightmare is over, and be back in business with all the jobs they create.”
Tory suggests spreading rent over the rest of the year, to provide “some urgent, short-term relief.”
The Province has also banned residential evictions during this time, however, there are no protections against evictions for commercial tenants.
ResidentialĀ rent strikesĀ were organized on April 1, but there’s been no word from the Ontario government regarding what subsidies or deferrals have been arranged for commercial tenants facing the same financial woes.
Three Yorkville luxury condo projects are in receivership
Three luxury condominium projects in the Yorkville area by Cresford Developments have gone into receivership, it was reported on April 1.
The projects in question include 33 Yorkville Avenue as well as the Halo and the Clover condos representing a total of approximately 2,000 units.
By all reports, the company was in trouble well before the onset of COVID-19. According to aĀ Toronto StarĀ report two investors in the projects, bcIMC Construction Fund Corp. and Otera Capital asked the court for the receivership in early March.
Reportedly, all three projects were sold out, and the receivership is more to do with cost overruns.
PricewaterhouseCoopers (PwC) has been named as a receiver in the case.
āThe Receiver understands that the Cresford Group entered into pre-construction unit purchase contracts with numerous persons in respect of the Clover, Halo and 33 Yorkville projects.Ā No decisions have been made in respect of these contracts,ā read a statement on the PwC website.
As a result of the COVID-19 pandemic, investors, landlords and tenants are assessing impacts, adjusting operations and building and executing contingency plans to support people and their businesses.
The following assesses the impact of COVID-19 on the Construction sector in the Canadian commercial real estate space and how key considerations can help through this changing climate.
Construction
Impact:Ā The risk to construction projects in Canada is low and it appears there will be ample warning of any increase in public health risk.
For most projects, there is no indication of a need for significant change. However, there are project risks that should be addressed, beginning with the highest probability or chance the availability and price of materials may change.
Other risks are: shortages of personal protective equipment that may affect work schedules; project team members being personally impacted by COVID-19; and provincial/municipal officials requiring non-essential workers to stay home.
Key Considerations:Ā Any material delivery delay and cost-escalation impacts should be confirmed, with further steps to be determined based on the degree of impact on the business case.
Itās recommended to also obtain assurances from consultants and trades that they have appropriate internal protocols to contain and prevent their staff from spreading the COVID-19 virus and to ensure continuity of office work.
Changes should be continuously monitored, assessing the public health risk while also developing a response protocol to facilitate rapid response to changes.
As a result of the COVID-19 pandemic, investors, landlords and tenants are assessing impacts, adjusting operations and building and executing contingency plans to support people and their businesses.
The following assesses the impact of COVID-19 on the Hotel sector in the Canadian commercial real estate space and how key considerations can help through this changing climate.
Hotel
Impact:Ā With the Government of Canada banning all non-Canadian citizens from entering Canada, conferences and international meetings are being postponed or canceled, leaving the hotel sector on pause.
The loss in demand from lack of tourism has sharply impacted profitability in this sector.
Key Considerations:Ā The contingency plan for hospitality investors has been to prioritize the health of guests and staff to prevent transmission of this virus and to take actionable steps to minimize losses.
The impact may be prolonged depending on how long the social distancing policies remain in place.
Owners should continue to communicate with their lenders and other stakeholders to ensure they understand the unfortunate financial position their businesses are in, and to work to mitigate losses.
As a result of the COVID-19 pandemic, investors, landlords and tenants are assessing impacts, adjusting operations and building and executing contingency plans to support people and their businesses.
The following assesses the impact of COVID-19 on the Investment sector in the Canadian commercial real estate space and how key considerations can help through this changing climate.
Investment
Impact:Ā Uncertainty surrounding the long-term effects of COVID-19 has paused investment activity as investors are postponing marketing efforts, product launches and plans for expanding their portfolios.
First among the concerns are the short- and long-term impacts the pandemic could have on underlying property fundamentals and returns, including constraints in supply chain, consumer spending, business investment, hospitality and international trade.
Key Considerations:Ā The decline in interest rates instituted to help deal with the crisis (five-year Canada bonds are 0.61 per cent at the time of writing, down more than 100 base points from 2019 year-end) is a significant mitigating factor.
Investors traditionally look to hard assets like real estate in times of uncertainty and the Canadian real estate market represents an attractive opportunity.
As a result of the COVID-19 pandemic, investors, landlords and tenants are assessing impacts, adjusting operations and building and executing contingency plans to support people and their businesses.
The following assesses the impact of COVID-19 on the Retail sector in the Canadian commercial real estate space and how key considerations can help through this changing climate.
Retail
Impact:Ā Many shopping malls and underground pathways have seen a large decrease in shoppers. Assets in a retail node with necessity-based retailers, primary grocery and pharmacy, will find their traffic remains very high.Ā
Depending on the governmental decrees, neighbourhood street-front retailers may find their foot traffic not significantly reduced, as the perception of safety is higher within this subtype.
Retailers may also experience an accelerated shift to online transactions, which we anticipate to cause short-term pressure on brick retailers and medium-term concern with the delivery and distribution channel workforce while COVID-19 measures take hold.Ā
Given the impact to Asian manufacturing sectors, some retailers can expect a delay in receiving new products due to supply chain disruption.
Other retailers will experience a surge in stockpiling from consumers as they provide essential items, from groceries to disinfectants.
Key Considerations:Ā The consumerās perception of safety is crucial to address. Investing in sanitization will make all the difference.
Retail businesses and landlords should communicate to their customer base safety precautions they are taking. Itās recommended there be a heavy emphasis on marketing campaigns so businesses can bounce back once the risk of COVID declines.
As a result of the COVID-19 pandemic, investors, landlords and tenants are assessing impacts, adjusting operations and building and executing contingency plans to support people and their businesses.
The following assesses the impact of COVID-19 on the Industrial/Supply Chain sector in the Canadian commercial real estate space and how key considerations can help through this changing climate.
Industrial/ Supply Chain
Impact:Ā With China being the largest global manufacturer of components, the ripple effect of plant closures in the automotive, electronic and pharmaceutical industries has caused severe disruption.
Plant closures and canceled sailings and flights from China have also resulted in unorganized assets on a global scale. Exporters are struggling to find the appropriate containers and the capacity to handle their goods.
In Canada, this situation has resulted in the Port of Vancouver reporting an 85 per cent decline in the volume of Chinese container shipments with 50 per cent fewer sailings. Logistics companies in Toronto have reported 60 per cent fewer inbound containers.
Approximately 10 per cent of intermediate goods sourced from China are used to make finished products in Canada; the current climate could result in shortages for various sectors depending on how much Canadian businesses rely on global suppliers.Ā
Key Considerations:Ā Industrial companies should assess their risk tolerance to determine inventory levels required to handle different disruption scenarios.
This approach might include increasing inventory levels as a contingency in some cases, but it also might incorporate employing enhanced sourcing strategies, taking into consideration geographic spread and coordinated inventory management with critical vendors.
Companies may be required to restructure their financials to allow for more liquidity and seek larger spaces to accommodate the extra inventory if their model is too lean.
Doing so could be challenging, given the historically low industrial vacancy rates in Canadaās major markets, with 0.4 per cent vacancy in the Greater Toronto Area and 1.2 per cent in the Metro Vancouver Area as of Q4 2019.
Optimization of their current holdings allows businesses to redefine their operations and focus on their plans of action for when the plants reopen. As supply returns to the market, industrial companies should capitalize on the demand opportunities to regain their lost capital.
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