Covid’s Lingering Effects on Commercial Real Estate

The pandemic has changed the way people work, and many Canadian companies are finding it difficult to get their employees back to the office. After over a year of remote work, people have grown accustomed to the flexibility of working from home, and many are hesitant to return to the traditional office environment. This is causing some major headaches for companies who are trying to navigate the new normal, and the effects are being felt across the commercial real estate industry.

In many Canadian cities, office vacancy rates are at all-time highs. According to a report by CBRE, Canada’s office vacancy rate hit 17.1% in the first quarter of 2023, the highest it has been in over a decade. These high vacancy rates are a direct result of the difficulty companies are having in getting their employees back to the office. With so many people still working from home, there is simply no need for as much office space as there once was.

This trend is not limited to Canada, either. Cities all over the world are experiencing similar issues. In the United States, for example, office vacancy rates in major cities like New York and San Francisco are also at all-time highs. As more and more companies struggle to get their employees back to the office, the demand for commercial real estate is plummeting.

The long-term effects of this trend on the commercial real estate industry are unclear, but they could be significant. As more and more companies downsize their office space or move to remote work, the demand for commercial real estate will continue to fall. This could lead to a surplus of available office space, driving down prices and causing some property owners to take losses. Furthermore, it is unclear how long this trend will last. While many companies are struggling to get employees back to the office, others are eager to return to a more traditional work environment. As the pandemic subsides and people become more comfortable with the idea of returning to the office, it is possible that demand for commercial real estate could rebound. However, there is no guarantee that this will happen, and many experts believe that the shift to remote work is here to stay.

In the short term, the high vacancy rates are causing headaches for property owners and investors. With so much available office space, landlords are struggling to find tenants, and many are being forced to offer discounts and other incentives to attract new tenants. This is putting pressure on rents and driving down property values.

Overall, the shift to remote work is having a major impact on the commercial real estate industry in Canada and around the world. As more and more companies struggle to get their employees back to the office, the demand for office space is falling, and vacancy rates are reaching all-time highs. While the long-term effects of this trend are unclear, it is clear that the commercial real estate industry will need to adapt to this new reality if it hopes to survive and thrive in the years to come.