Real Estate has long been a driving force for the Canadian economy, contributing more than 20% to GDP and employing more than a half million Canadians either directly or indirectly. So when COVID-19 came to Canada, how did the industry respond – and what’s the impact on the short and long term for the real estate sector?
A recent HSBC webinar brought together a cross-section of industry leaders to discuss how the coronavirus has affected their business and industry, measures they’ve taken to manage it and how they envision the impact on the sector shaping the future.
Managing the pandemic has involved a three-stage approach, Concert Properties President and CEO Brian McCauley told the webinar: Safety, Support and Recovery.
The safety stage involved ensuring that all employees, residents and workers were taken care of. This was of particular urgency in communities designed for seniors, he said, as well as making sure all active construction sites were safe. That required Concert to quickly implement new protocols and procedures to make sites safe, adhere to physical distancing rules and implement enhanced health and safety protocols. Most employees have been able to work from home, a transition that was smooth at Concert Properties, McCauley said, since the company had previously invested in technology that allowed for remote work.
The support stage for commercial and residential tenants has included constant communication with tenants, including providing clear guidance on access to provincial and federal support programs. Concert launched food delivery services for those who could not leave their homes, as well as virtual villages so residents could connect with and support other tenants in the same buildings.
The recovery stage, McCauley said, has involved establishing protocols to ensure that reopening can be successful and adhering to them, while also adapting and continuing to adopt technology, including online virtual tours for prospective tenants.
Other industry leaders say they followed a similar approach.
For Timbercreek, its three-step plan started by assessing its diverse portfolio. According to Managing Director Michael Tsourounis, the company’s approach was informed in part by its presence in Asia, which helped the company prepare for what loomed ahead for the sector in Canada as the pandemic arrived and the economy shut down. The company employs more than 600 frontline staff who support many thousands of tenants, and so ensuring they’re both safe and productive has been paramount.
Reliance Properties moved to remote work immediately, began communicating with residents more frequently and worked to support tenants by helping them understand and access various government support programs. “Sixty per cent of the team is already back in the office and are following established safety protocols,” says Jon Stovell, CEO of the company.
For Slate Office REIT, which boast an average employee age of only 31 years, the company has used the crisis as an educational opportunity, with young staff learning how to maintain proactive communication with customers and to be adaptable and responsive. “We’ve tried to keep our people highly engaged throughout the entire ordeal, organizing social gatherings like cooking and exercise classes that they could participate in remotely,” says Steve Hodgson, CEO of Slate Office REIT.
Each of the webinar participants agreed that, alongside the heightened focus on supporting staff and residents, one of the most pressing short-term priorities was managing cash flow carefully during the worst of the pandemic.
What’s next, and what’s new?
It’s a critical time for all industries, and for those in the real estate sector the ability to be adaptable, nimble and open to change has come to the forefront.
But for Reliance’s Stovell, it’s also important to note that the extreme situations faced in the heat of the coronavirus crisis should not necessarily determine the future course. “It is important not to measure the average wind speed in the middle of a hurricane,” he said.
And while the promise of a completely revamped working style that favours work-from-home exclusively may be a growing narrative, Timbercreek’s Tsourounis said the office still plays an integral part in collaboration and building long-lasting relationships that can’t be replicated on a screen. Company teams benefit from office staff meetings, and socializing is another important factor in building a company culture that is difficult to achieve virtually, he said.
Larger offices with fewer people, voice-activated elevators and doors and a firm boycott of the firm handshake are likely features of the workplace in the near future, added Stovell, though that may change over the long term. Things that are very likely to stay for good, however, include virtual tenant tours and electronic rental payments, which have practical applications in good times and bad.
Will the hotel and hospitality industries ever recover from COVID-19?
Few industries suffered as immediate a challenge from the coronavirus pandemic as the hotel industry.
Lockdown measures, travel bans and health concerns in the earliest days of the pandemic led companies like InnVest Hotels (like countless other hotel owners and operators) to be forced to lay off 80% of its workforce, according to CFO George Kosziwka.
InnVest was able to find some cost savings by renegotiating a number of supplier contracts, helping to reduce operating costs in the short term. The company also applied for the Canadian Emergency Wage Subsidy as well as BDC and EDC support programs for much-needed financial relief.
With substantially fewer bookings, the company used its resources to help those in need, including offering stays to frontline healthcare workers, returning Canadians who couldn’t self-isolate at home and seasonal workers in need of accommodations.
“The Hotel Association of Canada has been instrumental in working with the government to design much-needed support programs,” says Kosziwka.
While the entire sector has been under incredible strain, there is light at the end of the tunnel. InnVest closed 25 of its hotels when the pandemic was at its peak, and since reopened five locations in May, another five in June, and plans to open the remaining in July and August.
In the years ahead, Kosziwka said, look to hotels to provide revamped and enhanced room cleaning procedures, the elimination of breakfast and buffet areas, a shift to mobile check-in and check-out to limit face-to-face interaction, keyless entry and elevators where guests don’t need to press floor buttons.
And in the short-term, as concerns surrounding international travel remain high, the likelihood of an increase in domestic travel - where Canadians can take short road trips for leisure breaks - is likely to be another trend that helps the challenged hotel sector recover quicker than some may expect.
In summary, the real estate industry has responded swiftly and adopted new approaches in response to COVID-19. The focus has been on providing support to, and ensuring the safety of, customers – tenants, buyers, and staff. The crisis has been a test of resilience with both people and businesses adapting, and has presented a learning opportunity, which will be critical as Canada reopens and moves into the recovery phase.