The Canadian real estate market remained remarkably robust during 2020. It managed somehow to brush off the wider economic disruptions caused by COVID-19. Why this is so presents a deeply complicated picture. Some of it portends well for the real estate sector in 2021 while other serious negatives effects are likely to fall out.
For starters, COVID-19 has produced a large-scale reshuffling of the markets. This is being caused by a desire by thousands of people to move out of so-called “top tier cities” to what are now called “18-hour cities.”
Let’s define that before we move on. Top tier cities are the “cities that never sleep,” so to speak. Services and businesses across the scale are generally open and available 24/7. This includes Canada’s largest urban areas, such as Toronto, Montreal, Winnipeg, Vancouver and others.
The smaller cities are called 18-hour cities because they have downtimes when stores and services are not available. Broadly speaking, this is 18 hours.
The shift is on by people to move out of 24-hour cities because they want to escape the dense urban conditions where COVID-19 is more dangerous and harder to avoid. Furthermore, rents and home prices are higher in the top tier cities. Because of the economic stress produced by COVID-19, many people are striving to downsize their budgets. One of the best ways to do that is to move to an 18-hour city were renting and/or buying is significantly less expensive.
This has meant a boom in demand for housing in 18-hour cities. Thus, the secondary city real estate sector in Canada is enjoying an in-rushing of new clients. The opposite is true for the major urban areas.
It’s not just the price that is driving the shift. COVID has also forced many companies to send their workers home to work remotely. As it turns out, it really doesn’t matter, in many cases, if employees are remote or “very remote.” It means they can move away from the city where their employer is headquartered.
Not surprisingly, this same situation is dramatically affecting the need for office space and commercial locations. Less of both are needed as a large-scale shift to remote working is happening. The difficulty in finding occupants for commercial space may be a significant problem for real estate professionals in 2021.