M&M Panel: Government Response, Strong Fundamentals Will Limit Severity of Canada’s COVID-19 Downturn

TORONTO — Investment demand for commercial real estate assets in Canada will be adversely impacted by the outbreak of COVID-19, but the market’s strong real estate fundamentals heading into the crisis and extensive forms of government aid should work in tandem to offset the damage and fuel a strong recovery.

Such was the consensus of a panel of investment sales brokers and executives from Marcus & Millichap’s various Canadian offices, who convened on April 21 for a teleconference to discuss the state of the market. Marcus & Millichap, based in California, operates six offices with more than 60 combined real estate professionals in Canada.

Much like the United States, the public health crisis that is COVID-19 has caused innumerable closings of nonessential retailers, restaurants and hotels in Canada, as well as reduced office and industrial activity. As of April 29, there were 51,150 confirmed cases of COVID-19 in Canada and 2,983 deaths, according to Johns Hopkins University. Meanwhile, its citizens remain under stay-at-home orders.

Consequently, commercial investors across Canada are seeing their properties experience dips in occupancy rates, reduced cash flows from tenants whose businesses are suffering, and consequently less demand for assets that had been listed for sale prior to the outbreak.

Hessam Nadji, CEO of Marcus & Millichap, acknowledged these market conditions in his opening remarks for the panel. However, the firm’s top executive was also quick to point out that the depth of government aid flowing into businesses should work to alleviate the cash flow and occupancy issues that commercial owners are facing.

“Markets are really grappling with uncertainty as it affects pricing, net operating incomes, occupancies and rent collections,” he said. “The headline numbers are drastic and unprecedented, but the government responses have also been as unprecedented as the problem itself. The decisiveness and scale that governments have executed with will go a long way in mitigating the depth of the downsides and in fueling an exceptional recovery.”