While Canada’s office real estate sector stands to benefit from certain tailwinds, one research director says it faces a reckoning regarding its risk profile and status as a core asset.
Adam Jacobs, senior national director of research at Colliers Canada, said in an interview with BNNBloomberg.ca Wednesday that office real estate was previously viewed as a “core asset” with a low-risk profile over the longer term. With hybrid working arrangements staying in place beyond the COVID-19 pandemic, he said the market is grappling “with the fact that office clearly does have some risk now.”
“We’re seeing that technology can disrupt office also, and it has a lot more risk as a long-term investment. So that’s part of the reckoning happening in the market, trying to figure out what’s the price of this?” he said.
“What’s the value of it? How risky is it compared to a warehouse or a hotel or the other things I can own? We haven’t gone through that disruption for office (real estate) the way we have a retail and some other assets.”
Collier’s National Investment Report, released last week, said the industry has continued to experience rising vacancy rates over the past four years. According to data from Altus Group, released in January, Canada’s office availability rate came in at 17.6 per cent in the fourth quarter of 2023.
According to Jacobs, there was speculation as recently as a year ago that employees would broadly return to the office five days per week. But this doesn’t appear to have taken place, he noted, and negotiations in the industry are now commonly based on the assumption that hybrid working arrangements are “not just for the next six months, but the next 10 years.”
“So I think there’s still some reckoning on the tenant and
The post Office real estate faces ‘reckoning’ amid other tailwinds: research director first appeared on Insie Mesenza.