Blog, Market Discussion

CRE Expert Discussion: Market Outlook

With Vicente Gamboa, AACI, MBA – Executive Vice President at Colliers International

Finneo: What challenges did the pandemic bring for Office and Retail Valuations?

Vicente: Since the onset of the COVID-19 pandemic, many challenges have emerged when modeling cashflows and completing office valuations. Traditionally we have seen well performing office assets with tenants on longer term leases (5/10 year) and stable and predictable cash flows from retail tenants or parking income. With the operational uncertainty for office and retail asset classes due to the varying travel, lifestyle and workplace restrictions, instability has arisen.

Finneo: What are the challenges Landlords are experiencing with office and retail asset classes?

Vicente: There have been short-term impacts on core office properties such as rent abatements, tenants vacating, and lease renegotiations. Tenants may be scaling back their office footprint once leases near closer to expiry or once the pandemic nears to an end. This dynamic may not have an immediate impact for many office landlords in core markets, but in the long term, how the work from home trend evolves, will be the biggest driver of values for their portfolios and some may look to reduce their exposure to the asset class.

Retail components of some office assets once were guaranteed a constant stream of consumers due to locations underground or at the base of a key office building, have seen significant interruptions. Many have found temporary ways to pivot, many have been forced to close shop. For some landlords, retail income is a significant portion of value of an office property. Additionally, for landlords, parking income from either office or retail space is typically not secured by long term leases. As traffic has gone down so too has this once stable revenue line which might not recover until 2022.

Finneo: What are your future predictions when it comes to office assets and how they will be valued?

Vicente: As we enter a second year dealing with the COVID-19 pandemic, not much can be said with absolute certainty. As such, when valuing and modeling office properties, best judgement and reasonableness needs to be applied. If the pandemic continues for much longer, we might see a renewed interest in the properties that people embraced spending less time for parts of 2020. COVID fatigue and a desire to spend time with co-workers, clients, and friends might emerge as key themes over the near to medium term.

About Vicente Gamboa:

Real estate professional with Toronto office of Colliers International Valuation and Advisory Services. Highly experienced with valuation of wide range of property types including retail, industrial, office properties and large development sites. Work experience includes appraisal and consulting assignments throughout Canada and Latin America. 

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Blog, Market Discussion

Has there been a Paradigm Shift in CRE Industry?

Listen in to our Founder, Amar Nijjar, moderate the Q1 2021 Commercial Real Estate Lenders Association (CRELA) Webinar and engage in a highly informative discussion on “How the CRE Industry is changing post COVID.”

The property owners/developers gave insights on how the pandemic affected their investment strategies backed by market data and intelligence reports.

Topics Discussed:

  1. Office sector: To be, or not to be? Renovation of Existing and Development of Suburban Spaces  
  2. Multifamily Sector: Development, Rent Collection and Rent Growth
  3. Retail Sector: Experience vs. Convenience? In-Person vs. E-Commerce?
  4. Industrial Sector: How will increasing Land Prices affect Development Returns?

Overall, the industry experts had a positive outlook on the economic recovery of the Commercial Real Estate industry with the office sector expected to make a major comeback in the near future.

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CRELA Webinar 2 - office vacancy analysis
Blog, Market Discussion

Is the CRE Industry Undergoing a Tectonic Shift?

Back in September our team hosted a panel of Senior Executives from the Commerical Real Estate Lending Industry to discuss the shift (if any) in their appetite and underwriting criteria due to the impact of COVID-19 and a pending second wave.

In this webinar, we flip sides to the property owner and property developer perspective to discuss how COVID may be shifting their investment thesis.

Topics Discussed:

  1. Multifamily Sector: Rent Collection, Rent Growth (or decline), and how has the impacted project economics?
  2. Office Sector: CBD Markets have become “Ghost Towns” – is it logical and does it make sense to convert Office into other asset types? Has Suburban Office become more attractive?
  3. Retail Sector: Experience vs. Convenience? In-Person vs. E-Commerce?
  4. Industrial Sector: Given the cost of land has demand for industrial in secondary markets increased? Rental vs. Strata?

Overall the panel members had a very positive outlook on what is expected to come now that the vaccine is more of question of ‘when’ vs. ‘if.’ The two darlings still seem to be the Multifamily and Industrial Asset Classes.

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Blog, Market Discussion

Commercial Mortgage Lender Update

Listen in to our Founder moderate a panel of Senior Executives from the Canadian Commercial Mortgage industry including a market update from Colliers International.

Topics:

  1. Office and Retail Sectors – With the impending Wave 2, how will Lenders respond to extended vacancies?
  2. Hospitality and Retirement Sectors – Will there be opportunistic lending?
  3. How has COVID Impacted your financial institutions underwriting criteria?
  4. Residential Construction – Are you bullish or bearish on exit prices?

Overall, the panel members discuss what is expected to come with a potential second wave of COVID-19 and what type of recovery is expected in the years to come.

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