A rebounding Canadian real estate market. What recent activity means for self-storage acquisitions

Despite early fears and reservations about whether or not the real estate market would be able to survive the full strike of COVID-19, now, six months later, turns out the Canadian market is doing just fine.

Statistics released on August 17th, 2020 stated that new national home listings hit their highest level on record for the month of July, sales reached the highest level of any month in history, and actual activity was up 30.5% year-over-year! Is this a fake bubble that’s about to burst or is it living proof of a Canadian refocus on property that’s here to stay? Only time will tell.

Purchases

National home sales rebounded by 26% in July, 2020, and for the third month in a row, transactions were up on a month-over-month basis around the country.

Why are people buying property?

When it comes to real estate activity surrounding property acquisitions, there are a few key influencing factors at play:

1.    Increased number of people working from home.

COVID -19 has triggered the work-from-home movement into high gear. If it appeared as though we were moving in that direction previously, it is now happening at an accelerated pace – and in many cases, it may be here to stay. Not surprisingly, if your home is now your place of work, it’s no doubt that you may be looking to change, upgrade or relocate to optimize your space.

2.    “New-found importance of home”.

We all feel it. What was a forced home-bound lifestyle at the start of the pandemic has now transitioned into a preferred home-bound way of living. Even though most of us are venturing out at least somewhat these days, we haven’t yet fully returned to our old lifestyles, and therefore, we are still spending more time at home. So then, why not have the living space we really want?

3.    Incredibly low interest rates.

Statistics show that many of those actively in the real estate market today are second-time homebuyers who have capitalized on rising home prices and are now taking advantage of low interest rates to seize the opportunity to move up.

Listings

From June to July 2020, the number of newly listed properties climbed 7.6% and the national sales-to-new-listings ratio tightened to 73.9% in July (up from 63.1% posted in June). While some people are listing their homes as a result of COVID-19 and its impacts, others are not listing their homes for the same reason. For those who are, common reasons include:

·      Capitalizing on rising market prices

·      Financially compelled

·      Desire to move up (or move to a different more desirable area, etc.)

·      Displeased with current space

Office markets

In the major markets of both Toronto and Vancouver, office space subletting and vacancy rates are up. More specifically, in the second quarter of 2020, these two large office markets saw their vacancy rates and subletting activity increase, while their rents dropped slightly. Interestingly, this comes after multiple years of decreasing office vacancy rates and rising rents, marking a clear shift in momentum.

 Industrial

 Contrary to office markets, Canada’s industrial real estate is a sector that may very well boom in the light of COVID-19. In Vancouver, its availability rate rose to 2.9% from 2.1% after the delivery of nearly 2.1 million square feet of new industrial supply. Toronto’s availability rate also rose to 2.0%, up from 1.6%, with the delivery of 5.4 million square feet of new industrial space.

 These numbers directly reflect a significant increase in new supply as a direct response to the surge in e-commerce logistics activity that demands industrial space. According to CBRE, it is expected that industrial properties will come out ahead as a result of COVID-19.

 Implications for the self-storage market

 In the more obvious sense, the increased market activity from listings to purchases and everything in between, means greater need for self-storage in order to facilitate those relocations.

 Given the fact that people have been hit with volatile and challenging situations regarding their work and home lives, regular expenses are being rethought and reevaluated.

 For example:

  I’m changing my living space but I’m not ready to throw away all my things.

 I don’t know when I’m going back to college or university and I need somewhere to store my desk, bed and couch.

 I’m struggling financially and need a smaller space right now, but that’s not to say it’s forever, so I need a place to securely store my belongings that don’t fit at the moment.

 I’m downsizing my business for the time being and I need to store some extra office equipment in the interim.

 Experts are forecasting an uptick in demand for self-storage in the months ahead, which points to the fact that this may be an ideal time for investors to enter the market. It must not be forgotten that the self-storage sector saw massive booms over the last decade. Now, in light of all the impacts COVID-19 is having on people and businesses in a wide variety of circumstances, it seems inevitable that self-storage will play a vital role in many lives in the months and years ahead as we continue to navigate these uncertain waters.