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As an unforgettable 2020 draws to a close, most of us will be happy to move forward to better days. With that in mind, we’re speaking with CBRE’s market leaders to find out what commercial real estate trends they’ll be watching for in their cities in 2021.
Ted Overbaugh, CBRE’s Southwestern Ontario Managing Director, sees a long winter ahead for the office and retail sectors, continuing momentum in the industrial and multifamily segments, and opportunities abounding for self-storage providers.
We haven’t seen the amount of office space come back to the market like there’s been in the GTA. Our market has been more or less frozen, with no real movement. And we’ll continue to see that in the months ahead. My prediction is that it will be a fairly tough winter, slow, with few deals happening. But as the vaccine rolls out and people start returning to work, we’ll likely see a very active spring and that will continue to build through summer and into the fall. So I don’t think the market has bottomed out yet, but we’ll probably see signs of life around April, building momentum in the back half of the year for office.
Everyone’s favourite asset class right now. It’s been a strong 2020 and that will continue into 2021. There have been so many big investments in the manufacturing and auto, food and beverage and cold storage sectors. Concerns we had in early 2020 about auto manufacturers pulling out, suddenly they’ve done the opposite. Instead of winding down Oshawa, they’re re-investing in it. Same thing with Ford in Oakville and Toyota here in Cambridge — reinvesting. Signing new labour contracts, which is a good long term signal to the market. And we’re seeing a busy food & beverage and cold storage market and I don’t see that slowing down anytime soon. But 2021 is also going to be a year of supply constraints; there’s a bottle neck in demand for available space in Waterloo Region and even London, which will continue to push rents up. That may be the big challenge, finding available space here and being able to grow your business.
There will be winners and losers. It will be a tough winter for many retailers, especially those that rely on a strong Christmas to get through the year. This will cause further stress and pressure on an already weak market and we’ll see some fallout from that in the next quarter or two. As the vaccine rolls out, those that make it will be fine and probably be in a good position coming out of the pandemic. I’ve heard the term revenge retail — what you don’t spend now you double down on and spend when you can. So there will probably be some of that which will benefit the retail market next year.
It will continue to be a very aggressive market. Very low cap rates, a strong buyer pool and a safe asset class. It seems to be this asset class and industrial are what everyone is trying to get in on. It’s safe, you can underwrite it and forecast on it. You can truly understand what you’re buying and getting, and interest rates are ridiculously low, so it’s all driving that market in a positive way.
Self storage — it may come as surprised but we are under-serviced here in that regard. London and Kitchener-Waterloo are two of the country’s fastest-growing regions, so with the population boom we’re experiencing here, self storage should be able to thrive and keep expanding. That’s one I’d keep my eye on.