Customer-driven Demand Shapes Real Estate in Canada

E-commerce fulfillment, Proptech and mid-priced housing on upward swing

• Companies are adapting their developments and spaces to offer the top-quality amenities and services that users demand.
• The expectation of technology disruption is driving the growing trend of Proptech.
• Labour shortages, skills gaps and uncertainty about policy challenges continue to fuel affordability issues that could further disrupt the industry.

TORONTO, Sept. 19, 2019 /CNW/ - Canada's real estate sector is carefully monitoring government policy changes, housing affordability and technology disruption and what that may mean for the industry. Developers, investors, lenders and other leading experts are cautiously optimistic according to the 2020 Emerging Trends in Real Estate report published today by PwC Canada and the Urban Land Institute (ULI). The best bets for 2020 are mainly about "beds and sheds," with a focus on mid-priced apartments, transit-oriented development, as well as warehousing and fulfillment.

Residential Real Estate
In the past year, we have seen the first results of the mortgage stress test which has restrained activity in markets like Vancouver and Toronto. Some homebuyers have been taken out of the market because traditional lending markets are closed to them, so an unregulated lending market has emerged, resulting in greater consumer and market risk.

Survey respondents rated construction, material and land costs, along with approval processes, as the top development issues in 2020. Many of these are supply-related issues where governments can play a role. There is an opportunity to do more as governments and the real estate industry embrace the mutually-beneficial approaches to housing supply issues through transit-oriented development policies and increased density allowances around transit hubs.

"Governments must recognize that increased supply can help address the affordability issue and be willing to embrace innovative ways of unlocking a supply-constrained market," says Frank Magliocco, National Real Estate Leader, PwC Canada.  

“It is clear that we need greater innovation across the spectrum of land use, fiscal and technological tools to broaden the supply of housing options, especially in Canada’s tightest markets,” says Richard Joy, Executive Director, Urban Land Institute (ULI) Toronto.

Rising customer expectations influences commercial real estate
Changing workplace practices, like remote and flexible working is creating an environment of Real Estate as a Service (REaaS). The push for amenities and the need to make office environments as attractive as possible to attract and retain top talent is having a significant impact on shaping real estate.

Rising customer expectations for same-day e-commerce deliveries continue to spark demand for large-scale facilities close to population centres and transportation routes. "The rise of e-commerce doesn't necessarily mean the end of the brick-and-mortar presence, and in fact retail remains an important solution to last-mile delivery," adds Magliocco. As online shopping continues to grow in Canada, the need for dedicated space for deliveries, including cold storage for food deliveries, is an emerging trend in the multifamily residential sector.

Proptech
Proptech, which covers everything from new lending services to construction technology, is changing the way properties are bought, built, sold and managed. According to the report, Proptech investment is projected to reach a record US$6.3 billion across 382 deals in 2019. By comparison, the figures were US$4.5 billion and 399 deals, respectively, in 2018. With customers looking for digitally enabled and mobile-friendly spaces, the real estate industry is exploring new applications across the technology spectrum, with a focus on smart-buildings, energy efficiency and embedding IoT (Internet of Things)-powered sensors into their systems. 

"Digitization, including the rising use of the Internet of Things-enabled sensors in buildings has created an added layer of vulnerability for many real estate players," adds Magliocco.

Cybersecurity is ranked fourth on the list of real estate disruptors for 2020, with many interviewees in the report having been victims of cyberattacks. We expect to see more training, hiring and embedding teams of cybersecurity professionals within the real estate industry.

The top five markets to watch in 2020 are: Vancouver, Toronto, Montreal, Ottawa and Halifax.

Click here to access the full report. 

About PwC Canada
At PwC, our purpose is to build trust in society and solve important problems. More than 7,000 partners and staff in offices across the country are committed to delivering quality in assurance, tax, consulting and deals services. PwC Canada is a member of the PwC network of firms with more than 250,000 people in 158 countries. Find out more by visiting us at www.pwc.com/ca.

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SOURCE PwC (PricewaterhouseCoopers)

Contacts: Pierre Campeau, Public Relations Senior Manager, Tel: [phone], E-mail: [email protected]; Andrea Magee, Communications Manager, Tel: [phone], E-mail: [email protected]

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