Once the crown jewel of the national commercial market, the GTA is now essentially frozen
The manifold economic impacts of the current pandemic mean that the resumption of activity involving commercial mortgages is still a long way off, if data from Avison Young is any indication.
“After several weeks in an initial ‘transition’ phase, many aspects of the CRE business now appear to be entering a ‘holding’ phase where all activity is paused,” Avison Young said in its latest industry insights covering the Greater Toronto Area.
This was a significant departure from the market’s rosy prospects just two months ago. The COVID-19 outbreak has upended Avison Young’s earlier predictions of low vacancy, steady investment, and elevated activity levels in the GTA commercial sector this year.
“Some building owners are moving from quarterly to monthly valuations of assets to keep pace with change in the market – while other appraisals have been put on hold,” Avison Young said. “Leases are now incorporating revised ‘Delay’ language to account for further COVID-19/Government regulation delays.”
Furthermore, “various landlords are reviewing Force Majeure clauses to confirm if delay in permit process or tenants being deemed ‘not an essential service’ are grounds for force majeure. Business interruption clauses [are] also being reviewed,” Avison Young said.
The office and industrial property sectors are relatively well positioned to weather the worst of the coronavirus-related impacts, but the retail market is not so fortunate.
“E-commerce, grocery and food-anchored/essential-service anchored outlets are doing well, but not shopping malls. Centres with higher proportion of mom-and-pop retailers (as opposed to major chains) are the hardest-hit,” Avison Young said. “Some retail tenants have sought to have their security deposits applied in lieu of rent payment.”
