Canadian Office Landlord Takes $371M Writedown Amid Remote Work Trends

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The persistence of remote and hybrid work is causing ripple effects across Canada's commercial real estate sector. Allied Properties Real Estate Investment Trust, a major office landlord, recently took a $371 million writedown on the value of its holdings across Toronto, Montreal, Calgary, and Vancouver.

Occupancy Rates Drop as Demand Softens

Allied reported an 86% occupancy rate at the end of 2022, down from around 90% in the previous year. Before the pandemic, occupancy rates were around 95%. The lower demand is forcing Allied and other landlords to reduce rents or offer incentives to retain and attract tenants. However, Allied noted that operating income rose year-over-year due to higher rents from its remaining tenants.

Uncertainty Clouds Outlook for Offices

While some major companies like Apple and Goldman Sachs have mandated a return to offices, many other firms are embracing flexible and remote policies for the long term. This is making it challenging for commercial real estate investors to value office assets. Adding to the uncertainty is the potential for a recession, which could further dampen demand for office space.

Allied has taken strategic steps to shore up its portfolio, including the $1.35 billion sale of two Toronto data centers last year. The company also continues investing in properties with a residential or retail component to diversify away from offices. Still, the stock dropped over 8% on the writedown news, indicating investors' concerns.

Other Sectors Show Resilience?

The multifamily rental sector has remained strong despite economic uncertainty. With mortgage rates high, rental demand is expected to continue rising. Investing in multifamily apartments could be a smart strategic move for weathering this market.

To learn more about opportunities in multifamily real estate, contact me at 604.613.1693 or email me at [email protected]. As market conditions evolve, staying informed on commercial real estate trends can help guide smart investment decisions.

The source article, linked here, provides full details: Canadian office landlord takes $500 million writedown

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