What’s next for main street and office real estate in Toronto?

As we settle into self isolation at home, the crisis didn’t really take hold in Canada until mid March. That’s when we shut our offices down and most followed shortly thereafter. By that time most of the first quarter had been put in the books. Sales levels are in line with past quarters. The number of high dollar sales are lower, other than in the industrial sector, this quarter. This writer does not think that there was something afoot in this past quarter to suggest that market participants had pulled back. But rather, it was more likely due to limited offerings in the upper ranges.

When you scan the results, we note 54 transactions in the Office sector over $1 million. Yet only 8 of those trades were in excess of $10 million. In Q4, 2019, 21 properties exceeded $10 million while Q3, 2019 saw 14 high dollar sales. Only one property traded over $100 million but it was the non-arms length sale of Bloor Islington Place for $392,500,000. We drop down to just over $90 million for the first market sale.

The retail sector produced 145 deals over $1 million this quarter, a slight decrease from the 163 recorded in the 4th quarter 2019 but close to the 148 sales we noted in Q3, 2019. Where we saw 15 transactions over $10 million in Q4, 2019, we cut that down to only 10 for Q1. The high dollar sale was $30,500,000 for an 80,292 square foot centre in Brampton. The previous quarter’s high was slightly over $42 million.

The industrial sector posted 130 sales with 30 transactions over $10 million although 8 of those sales were non-arms length transactions submitted by Orlando Corporation. The previous quarter saw 24 high dollar sales. The high dollar sale in Q4, 2019 was $223 million. The best we could do this quarter was one of Orlando’s non-arms length sales at 5855 Terry Fox Drive in Mississauga for at just over $61 million. If you don’t count non-arms length transactions, the high sale was just over $45 million for Cochrane Business Park in Markham.

The high-rise sector yielded 46 sales over $1 million, about average for this sector although quite a bit lower than Q4, 2019’s 61 sales. We witnessed 16 properties changing ownership in excess of $10 million. We surpassed the high sale of $80 million from Q4, 2019 with $102 million being paid for 5.4 acres of land at 175 Wynford Drive. Similar to Q4, 2019, we see the same outcome in Q1 with very few sales being recorded in the Yorkville/Entertainment District nodes. We won’t call this a trend unless Q2’s results reflect the same, but all bets are off while we work through this pandemic.

Office Sales

We noted earlier that the high dollar sale in this quarter goes to Starlight Investments (Bloor Islington Place Ltd.) acquisition in a non-arms length transaction with the former registered owner IMH 3250 & 3300 Bloor Ltd, controlled by Starlight and PSP Investments. The selling price was $392,500,000 or $458 per square foot based on 856,774 square feet spread across three buildings which include 3300, 3250 and 3280 Bloor Street West. The buildings were 97 per cent leased at the time of sale. The property was acquired in 2013 for $215 million when the occupancy levels were 93.2 per cent.

3300 Bloor Street W

Redbourne Group disposed of Erindale Corporate Centre, located at 1270, 1290 and 1300 Central Parkway West in Mississauga for $90,600,000 or $264 per square foot. The purchaser was Montez Corporation and Adgar Investments and Development Inc. with each party taking a 50 per cent interest. The buildings contain 342,606 square feet of space and were 93 per cent leased at closing. At this level of occupancy, the buildings were producing a net income of $6,073,571 for a 6.7 per cent cap rate.

2345 Yonge Street

RioCan REIT and Streamliner Properties acquired 2345 Yonge Street from Stockton and Bush for $70 million. This 140,000 square foot office building produces a value of $500 per square foot. Although we find this report in the office sector, one most wonder if this sale should be placed in the High-Rise Land sector as the purchaser has also acquired neighbouring properties 2329 and 2323 Yonge Street over the past year. Stay tuned.

The Registered Nurses’ Association of Ontario took the pulse of the market and landed the acquisition of 4211 Yonge Street from Slate Asset Management and their partner Wafra Inc. for $63 million or $359 per square foot. The Nurses occupied the 5th floor of the building at the time of sale and will remain in occupancy within the building.

889 Brock Road

A private investor purchased 889 Brock Road in Pickering from Canada Mortgage and Housing Corporation and Fiera Real Estate for $26,700,000. This 177,500 square foot building is fully leased to Ontario Power Generation who will remain in the building until 2024. The selling price provides for a value of $150 per square foot.

4576 Yonge Street

A North York office sale is next in line with H&R Development selling 4576 Yonge Street to Davpart Inc. for $24 million or $247 per square foot given a building area of 97,237 square feet. This sale might be viewed as a non-arms length transaction given the family relationship between the principals of the buyer and seller. H&R purchased the property under power of sale in 1997 and the building became home to Davpart soon after the sale and they remain there today.

Magil Laurentienne sold 115-135 Matheson Boulevard West to a private investor for $15,500,000. The two buildings provided 72,764 square feet of building area, offering a value of $213 per square foot. The buildings suffered from vacancy issues, selling with an occupancy level of 72 per cent, providing good potential for upside with an active leasing campaign.

Our last high dollar sale occurs in Vaughan at 400 Bradwick Drive for $14 million or $404 per square foot. The vendor, GSP Realty Corp., sold the 43,600 square foot building vacant to Thornhill Dermatology Centre who will occupy all or part of the building.

Given the limited number of high dollar sales in this sector, it will allow some time to look at other transactions of interest. As such, this writer thought looking at the high and the low in the first quarter. On the high side, we often discuss the office condominium market and the often attractive dollar values obtained in this sub-sector. We note the acquisition by Tricon Capital of additional space within 7 St. Thomas Street. The units comprise suites 802 and 803 and were sold by 3Gen Development Group for $6,044,750 or $2,254 square foot based upon 2,395 square feet of area. Tricon now owns 27,504 square feet of units within this development with a total spend of $32,429,250. 3Gen acquired the units in 2017 for $2,162,329 or $903 per square foot.

7 St. Thomas Street

The low dollar sale is located in Brampton for a property sold by Metrolinx to the City of Brampton for $5,525,000 or $133 per square foot. The property in question is 20 Nelson Street and 37 George Street North which has a combined measurement of 41,621 square feet within two buildings. The buildings were vacant and boarded up prior to sale. The city of Brampton became frustrated with the boarded up buildings in the downtown core of Brampton and negotiated the acquisition. The City intends to repurpose the buildings.

Retail Sales

We continue to see good sales results from this sector, but the dollar value of the sales continues to lag. We only report on 10 high dollar sales with a high of $30,500,000 for the sale of 261 & 263 Queen Street East in Brampton. The vendors consisted of two numbered companies that sold this 80,292 square foot centre to Soneil Investments for a value of $380 per square foot. The centre had a weighted average lease term of 3.2 years and was occupied by such tenants as Tim Hortons, The Salvation Army Thrift Store and Play It Again Sports. The centre was 98 per cent leased at the time of sale and offered a net income of $1,480,000 for a 4.85 per cent cap rate.

261 Queen Street East

The next high dollar sale sees Weitzes Toyota sell 7080 Dufferin Street in Vaughan to Weins Canada for $26,613,535. This is a sale/ leaseback of a 42,850 square foot dealership on 5.631 acres of land for a price of $621 per square foot.

54 The Esplanade

Allied REIT purchased 54 The Esplanade from a private owner for $25 million or $2,632 per square foot based upon 9,500 square feet. The site is improved with a single storey building occupied by the Old Spaghetti Factory, a landmark restaurant in this city. One might see this as a strategic acquisition by Allied given their assembly, over the years, of many of the surrounding properties on
the block.

7501 Woodbine Avenue

A private, numbered company sold their holding at 7501 Woodbine Avenue in Markham to another private investor for $19 million or $825 per square foot. This 23,040 square foot facility was leased to a number of restaurant tenants that include Gold Mark Chinese Cuisine and Diana’s Oyster Bar and Grill. Also in residence was Omescape Escape Rooms and Q Water Sauna.

The Ontario Government sold their holding at 700 Gordon Street in Whitby to the current occupant, the Ontario Shores Centre for Mental Health Sciences for $15,615,000 or the bargain price of $30 per square foot. The facility measures 514,450 square feet.

2329 Yonge Street

We mentioned in the office section the sale of 2345 Yonge Street to RioCan and Streamliner Properties Inc. and indicated that these partners have been assembling properties in this area. The following sale was another one of those properties making up the assembly and is located at 2329 Yonge Street. The vendor, Jason Chow Group Ltd. sold this 5,000 square foot, single storey commercial building for $15,100,000 or a rather healthy $3,020 per square foot. Compare that price to 700 Gordon Street above! The property is currently occupied by Solutions, a home organization store. The site measures 0.131 acres.

454, 458 Yonge Street

Candarel sold 6,638 square feet of ground floor commercial space in their condominium located at 454, 458 Yonge and 5 Grenville Street to a private investor for $11 million or $1,657 per square foot. Tenants included Hoops Sports Bar and Grill, Meridian Credit Union and a dentist. The reported net income was $573,000, providing a 5.2 per cent return.

KPM Kingsway Property Management acquired 3232 Steeles Avenue West in Vaughan from a private company for $10,753,500 or $359 per square foot. This 29,988 square foot centre was fully leased at the time of sale. Tenants include Best Man Appliances, Skyline Auto and HomeBase Bar and Grill. The cap rate on the deal was 4 per cent given a net income of $430,140.

625 Queen Street West

A private owner sold their property at 623 and 625 Queen Street West for $10,200,000 or $826 per square foot. The buyer was a private company that intends to use the third floor of this 12,250 square foot building for its own office purposes. At the time of sale, Trek bicycles and Optical Thirty8 occupied the ground floor.

Our last high dollar transaction sees another Queen Street West property trade hands. Northam Realty Advisors sold 326 Queen Street West to Brandy Melville, the sole tenant in the building. The building measures 5,340 square feet and sold for $10 million or $1,873 per square foot.

326 Queen Street West

Although no one knows where our real estate market is heading once this “pause” is over, this writer thought it might be nice to walk down memory lane and glance at property sales in excess of $1,000 per square foot from this past quarter. In no specific order, 1818 Eglinton Avenue West sold for $8 million or $1,702 per square foot for 4,700 square feet. Although a corner property on the northeast corner of Dufferin, this is not, yet, a high rent neighbourhood.

At 2156 Yonge, south of Eglinton, this 2,700 square foot, single storey building sold for $2,900,000 or $1,074 per square foot.

In Yorkville, 15 Hazelton Avenue, a three storey Victorian semi, sold for $4,700,000 or $1,343 per square foot for this 3,500 square foot building.

15 Hazelton Avenue

Moving south to 725 King Street West, a doctor purchased a 1,766 square foot condo unit for his own use for $2 million or $1,133 per square foot while 2216 Bloor Street West in Bloor West Village sold for $2,725,000 or $1,048 per square foot. The building measures 2,600 square feet.

We note a number of sales on the popular Ossington Avenue including 126 Ossington Avenue for $3,650,000 or $1,083 per square foot for 3,370 square feet, acquired by Bellwoods Brewery to expand their footprint in this hip neighbourhood. Across the street at 129 Ossington Avenue, a vacant, 1,216 square foot building sold for $2,099,900 or $1,727 per square foot. We’ll toss in one more that doesn’t meet the “You must be this tall to ride” requirement and add 216 Ossington Avenue that sold for $1,985,000 or $923 per square foot for a 2,150 square foot building. There hasn’t been much trading on Ossington for a while, so this amount of activity is note worthy.

The above is not an all encompassing report on $1,000 per square foot plus dollar sales in this sector but rather a cross section.

Industrial Sales

We noted in our opening remarks that we recorded 30 sales in excess of $10 million in this sector, quite a feat but testament to the strength of the industrial market. Of those 30 trades, eight are attributed to non-arms length transactions undertaken by Orlando Corporation. One of these properties produced the high dollar sale for the quarter. As these are not open market transactions, similar to the Bloor Islington Place in our Office sector, we will only provide some basic details of the respective sales, outlined in the chart below:

160 Cochrane Drive

Turning to market sales, the high dollar sale comes in at $45,150,000 or $197 per square foot and is located at Cochrane Business Park which includes buildings located at 110, 160, 750, 752, 800 and 802 Cochrane Drive in Markham. The buildings range in size from 22,535 to 57,071 square feet for a total area of 228,719 square feet. Summit REIT acquired the properties from the Public Service Pension Investment Board. The buildings were 94.4 per cent leased at the time of sale and were churning out an income of $1,941,450 for a 4.3 per cent return. Summit REIT didn’t stop at the above sale as they also acquired 5900 Fourteenth Avenue in Markham from Kubota Canada who occupied the building at the time of sale but intends to vacate at the end of 2020. The building measures 184,561 square feet and sold for $39,840,000 or $216 per square foot. Kubota offered Summit a going-in return of 4.2 per cent based upon a net income of $1,673,280.

455 Magna Drive

Integrated Asset Management sold 1995 Markham Road to Dream REIT for $33,100,000 or $137 per square foot. This 240,776 square foot, multi-tenant building was fully occupied at the time of sale.

The Stronach Group sold 455 Magna Drive in Aurora to a private, numbered company for $30 million or $246 per square foot. This 121,921 square foot building, formerly occupied by the Stronach Group, was vacant at the time of sale.

Mapletree Investments from New York purchased 6800 Millcreek Drive in Mississauga from Digital Realty Trust, another New York based investment company, for $29 million or $346 per square foot. The high selling price is attributed to the building’s use as a data centre, occupying 83,758 square feet.

Dream Industrial purchased 100 East Beaver Creek in Markham from a private vendor for $24 million. This 110,000 square foot building was occupied by Kumon Canada, Via Education and Ozawa Canada and fully leased at the time of sale. The selling price provides for a value of $218 per square foot. The property was acquired in 2017 for $13,400,000 and was vacant at the time of acquisition.

2 Colony Court

Pure Industrial REIT acquired 2 Colony Court in Brampton from Alliance Labelling Inc. for $23,750,000 or $198 per square foot. This 120,058 square foot building was acquired by Alliance in 2018 for $16,6225,000 when they were the tenant in the building.

266 Rutherford Road

Takol CMCC Rutherford GP Inc. paid $21 million for 266 Rutherford Road South in Brampton from a private vendor. This multi-tenant facility was fully leased at the time of sale, representing a value of $164 per square foot. Pure Industrial REIT were active again this quarter picking up a vacant, 103,290 square foot building located at 390 Chrysler Drive in Brampton from Maywood Property Corporation for $19,815,000 or $192 per square foot. An interesting note in regard to the listing of the property was that it originally came to market at $18,637,380 suggesting a bidding war may have ensued for this rather attractive building.

800 Gana Court

Pier Capital Properties Inc. sold 800 Gana Court in Mississauga for $19 million or $630 per square foot to a private investor. Yes, this writer wrote $630 per square foot. The building measures 30,149 square feet on 7.049 acres of land. The property is leased to Wabash Canada, a truck trailer manufacturer that uses the excess land for storage of inventory.

220 Water Street

Dream Industrial is back again, purchasing 220 Water Street in Whitby from Manufacturing and Technology Centre for $17,600,000 or $85 per square foot for this 207,700 square foot building on a large site measuring 24.463 acres. The vendor acquired the property in 2010 through a court vesting order for $2,600,000 or $13 per square foot with the intent of occupying the site after the acquisition.

Aecon Group Inc. purchased 8401 Fifth Sideroad in Halton Hills for $16,500,000 or $562 per square foot. The 29,342 square foot building was sold by a private vendor. Aecon had been the sole tenant in the building prior to the sale. The property had been listed at $19,750,000 originally but was unable to attract a buyer at that pricing level. Two private parties transacted the sale of 70 Disco Road in Etobicoke for $15 million. This is a rather unique three storey industrial building measuring 99,112 square feet, resulting in a value of $151 per square foot.

245 Bartley Drive

Thomson Reuters Canada Limited sold 245 Bartley Drive in North York to a private investor for $14,750,000 or $154 per square foot. This 1954 vintage building had been occupied by Thomson Reuters but was vacant at the time of sale.

1870 Birchmount Road

MNA Properties Inc. sold 1870 Birchmount Road in Scarborough to Henga Developments for $14,200,000 or $134 per square foot. This 106,327 square foot facility was 35 per cent leased at the time of sale. The purchaser intends to occupy part or all of the vacancy within the building.

1387 Cornwall Road

Summit REIT continues to be an active buyer in this quarter, buying 1387 Cornwall Road in Oakville from a private vendor for $13,300,000 or $258 per square foot. This 52,490 square foot building was occupied by Media Resources who were paying a rent of $625,100, providing a 4.7 per cent going-in return to Summit. Crestpoint Real Estate paid $12,915,000 or $86 per square foot for 2001 Forbes Street in Whitby from Lear Corporation. Prior to the sale, Lear had occupied the building but sold the property with vacant possession.

A private investor won the court ordered sale of 35 Coronet Road in Etobicoke for $2,400,000 or $153 per square foot. This 1960 vintage building measures 15,704 square feet.

6950 Kenderry Gate

Another private party transaction sees 6950 Kenderry Gate in Mississauga sell for $12 million or $1,285 per square foot. No, this is not a retail sector sale at this pricing level. The site is improved with a 9,342 square foot cross dock facility, a rather unique use. Subsequent to the sale, the purchaser intends to use the facility for their own business purposes.

Gold Touch Industry Corp acquired the vacant building located at 189-195 Milner Avenue for $11,800,000 or $127 per square foot. The vendor of this 93,050 square foot building was a private party. These are two, older, 1964 vintage buildings on 7.77 acres of land.

Only two left in this section, we’re getting there! Imperial Expo sold 1177 Caledonia Road in North York to a private investor for $11,200,000 or $347 per square foot. This building is located in the Caledonia Design District and is a quasi industrial/ showroom retail facility that was partially occupied by the vendor prior to closing.

Our last sale pertains to another court ordered sale for the property located at 500 Carlingview Drive in Etobicoke. The purchaser of this 88,867 square foot building was a private buyer. This 1965 constructed building sold for $11 million or $124 per square foot. The building was vacant at the time of sale. The building last sold in 2013 for $4 million to a user group.

High Density Residential Land Sales

Well transaction volumes are off from Q4, 2019 in this sector but that last quarter was an anomaly with 61 transactions and 21 sales over $10 million. We see 46 sales in this quarter, generally the average, and 16 high dollar sales with two in the $100 million range.

The first sale pertains to 175 Wynford Drive in Don Mills, acquired by Freed Developments for $102 million for 5.420 acres of land.

The site is currently improved with a 354-room hotel. The vendor was Allied Hotel Properties from Vancouver. An application to develop the site was submitted by the vendor in 2018 seeking 754,281 square feet of development, including 201,181 square feet devoted to hotel use. The proposal sought to see two buildings with heights of 32 and 39 storeys. If Freed proceeds with this structure of development, the selling price equates to $135 per square foot buildable.

175 Wynford Drive

Well parking could soon be an issue along the waterfront. Canada Lands Company sold their 8-storey parking structure located at 200 Queens Quay West to Lifetime Developments and DiamondCorp for $100 million. The site measures 1.248 acres. At the time of writing, no application for redevelopment had been tendered.

Bene Developments sold 152 and 180 Burnhamthorpe Road West and 3672 Katya Drive in Mississauga to Three Elements Inc. for $87 million. The site measures 5.321 acres. No development application has been submitted at the time of writing. Of note, the vendor purchased the property in 2017 for $35 million.

Marlin Spring acquired from Castlepoint Realty Partners a property with no fixed address on Sterling Road near Lansdowne and Bloor for $60,665,000 for 3.195 acres of land. No application for development has been submitted at the time of writing.

3180 Dufferin Street

Dean Myers Chevrolet sold their car dealership at 3180 Dufferin Street for $54,650,000 to RioCan REIT and Woodburn Investments. The site measures 4.04 acres. As with most of the sales so far in this sector, no development application has been submitted.

Menkes Developments purchased the famous Filmores “dance studio” located at 212 and 218 Dundas Street West for $51,518,000 from a private investor. The site measures 0.583 acres. No plans for development have been tendered for development at this time.

25 Dawes Road

Minto Group acquired 9 and 25 Dawes Road in the east end from a private owner for $47 million. This 1.257-acre site was submitted for rezoning in 2019 to permit 684 residential units with 512,642 square feet of proposed development within a 30 storey tower, a price equivalent to $92 per square foot buildable. At the time of writing, this application had not been approved. The vendor purchased the property in 2018 for $19,280,000.

Fieldgate Commercial purchased 53-63 Sheppard Avenue West and 62-66 Bogart Avenue in North York for $44,949,072 or $198 per square foot buildable. A proposed rezoning application was submitted by the vendors Grmada Holdings and a numbered company in 2015 for this 1.018-acre site. The proposed development contemplates 227,183 square feet of contained within a 14 storey, 182 unit condominium and 8 stacked townhouses.

Tribute Communities acquired two properties on The Queensway which includes 1325 The Queensway and 1361 The Queensway, from two different vendors. The 1325 The Queensway property measures 1.694 acres and was sold by Hakim Optical who had the vision to see a good deal and were paid $32,500,000. Car Park Management Services Limited sold 1361 The Queensway to Tribute for $7,500,00 for 0.483 acres of land. The assembled area of the properties is 2.177 acres with a combined value of $40 million. No development application has been submitted.

Jet Transportation sold their Esso branded gas bar at 33 Sherbourne Street to Menkes Developments for $28 million. The site measures 0.307 acres and adds to Menkes assembly at this location as they purchased 178 Front Street East, 0.164 acres, in 2018 for $12,050,000. The combined sites measure 0.471 acres. The site is subject to a rezoning application by Menkes initiated in 2019. The proposed development envisions a 37-storey building with 315,785 square feet of development. If approved, the development has a value equivalent to $127 per square foot buildable.

High rise development and Milton aren’t necessarily words one would use in the same sentence but the sale of 130 Thomson Road South for $20 million changes that perspective. Jacal Holdings sold this 3.772-acre site to Greenpark Group for an equivalent value of $20 per square foot buildable. An application to redevelop the site was submitted in 2016 to permit 994,456 square feet on site, located within towers measuring 27, 29 and 31 storeys.

6 Wellesley Street West

CentreCourt developments add to their assembly at Wellesley and Yonge, adding 6 Wellesley Street West to their 2019 acquisition of 8 Wellesley Street West. The acquisition in this quarter, sold by a private company, measures 0.030 acres at a price of $13,750,000. Their 8 Wellesley purchase in 2019 offered 0.038 acres of land for $6,333,000. In total, CentreCourt has accumulated 0.068 acres of land for $20,083,000.

Voreon Inc. sold their 0.809 acre holding at 45 Agnes Street in Mississauga for $12,500,000 to Reid’s Heritage Properties. No application for development has been submitted at this time of writing.

An assembly of five house located at 16 to 26 Jopling Avenue South sold for $12,325,000 to Amdev Properties. The properties are located in the Bloor and Kipling area. No other information was available at the time of writing.

We note the sale of another property on Agnes Street in Mississauga. This 0.703- acre property was sold by one numbered company to another for $11,500,000. No applications have been submitted for redevelopment.

Our last report sees TAS Design Build pay $10,900,000 for 80 Knox Avenue from Centra Web Reproductions Inc.. The 0.397- acre parcel is located in the Eastern Avenue and Coxwell neighbourhood. This acquisition adds to an assembly by the purchaser which also includes the purchase this quarter of 220 Eastern Avenue for $7,200,000 for 0.275 acres of land. The vendor was Michael and Michael Auto Body Ltd.. The combined site area is 0.672 acres with a total investment of $18,100,000. No application for development has been submitted.

45 Agnes Street

Closing Observations

The results of the first quarter are overshadowed by what we find ourselves in today. Working from home for an agent is not a new experience. This report is written on the dining room table or in a hotel room while travelling on motorcycle, in most instances. We are lucky at these times to have the technology to keep our respective companies running. What will happen, as some have defined it, when this pause is over?

This writer entered the commercial real estate market in December 1980 when interest rates headed to 20 per cent. Given a lack of any real-world business experience, this writer could only conclude making a buck in this business was harder than imagined.

Next came the 1990s and companies like Bramalea and Inducon were wiped out. An investment agent made their incomes by selling power-of-sale listings. At this time, this writer was selling downtown office buildings for $30 per square foot and $8.00 per square foot for buildings in King West. Credit completely dried up and if you were buying, it was a cash sale. It was a very difficult time as you watched values literally drop week by week.

Then 2008 came and the financial crisis. This was an interesting time as our Canadian banking policies saved us while other countries were on the brink. Offers started coming in right away fast and furious. The market before the crash was in the 5 per cent cap rate range, offers were being made at 10 per cent. Vendors didn’t flinch, in most cases, as their rent rolls hadn’t really suffered. Nine months in, prudent investors realized that things weren’t going to implode and started buying in earnest at pre-crash cap rate levels. Others followed suit and this brought us to where we are today.

This time it’s really different, this is not a financial crisis, it’s a Black Swan, an event that comes as a surprise and has a major effect. As you’ve witnessed, the Canadian government and other levels of government stepped in right away to manage the situation with unprecedented support for business and individuals. The banks, from speaking to market participants, are there for their clients, offering financial support where possible.

So, what’s happening now? A number of observations. There are those that feel this will be the 1990s all over again, the technical term we use for this group is “Buyers”. The others believe we’ll be back where we were in 2008, this group is called “Owners”. There isn’t evidence that your banker is going to rush in to sell off assets, yet some buyers are already looking for deals. Those same investors will be seeking longer due diligence, using the valid reason that you can’t conduct proper due diligence at this time. If you aren’t under any pressure to sell, then why bother? If you do go to market, your buyer universe believes you’re in trouble and will provide the bids they believe you deserve.

As an example, this writer has come across one group that is testing the waters right now to reduce their real estate exposure. They have signalled that they are not doing a fire sale but would like offers in a week’s time. If it’s not a fire sale, why the rush for offers?

Looking at brokers listings that come in daily, not much new is being offered. It’s more or less the same ones that came around prior to COVID-19 with only a few offering a slight price reduction. Some listings with bid dates have, in some instances, extended the time for offer submission. This writer has noted quite a few agents advertising that they are happy to let us know that their property is back on the market again (not sure if anyone should be happy about that other than buyers smelling blood in the water). In reviewing the MLS system, there have been a few new listings come to market in April, but pricing is in the $900 per square foot range for a couple of office buildings. Hardly desperate pricing.

To conclude, this writer believes this is a “pause” with some fallout, but markets will resemble more 2008 than the 1990s assuming credit remains available and our current shutdown does not extend beyond another few months. Concern is for the retail sector as it will likely get hit hard. Your favourite restaurant may not be able to survive and some national and local retailers that were near the brink prior to the pandemic will likely fail, as examples. The high-rise sector could also suffer losses as, even prior to Covid-19, we were noting receivership sales. Investors with limited experience and capital might be in trouble. The commercial real estate landscape will change.

It’s not hard to suggest that the second quarter might result in a three-page report from this writer. What is far more important is staying healthy in this current climate and keeping your distance. ZOOM away with friends and loved ones. We have the technology; we are resilient and we shall prevail. Business will be there when we get back.

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