VANCOUVER GOAL EMERGE AS STRONG AS EVER

Chuck We Senior Vice President, Western Canada Hudson Pacific Properties

Bentall Centre in Vancouver has 175 office and retail tenants. The building has remained open every business day during the COVID-19 pandemic, so that tenants offering essential services can continue to operate. As the concern over the spread of

COVID-19 increased, many Bentall Centre office workers stayed home and retailers elected to shut down.

“People did the right thing to help flatten the curve,” says Chuck We, Senior Vice President,

Western Canada, Hudson Pacific Properties. The company has been working closely with its retail tenants “to make sure they can emerge from this as strong as ever.” As for office tenants, We says approximately 95% across Hudson Pacific’s portfolio have continued to pay rent in April, and they are maintaining their work space while working from home, whether full time or part time.

With so many businesses affected by the pandemic, one might think lenders would be nervous, though that hasn’t been the case for Hudson Pacific Properties. “We have constant dialogue with our lenders, and they’ve been nothing but positive,” We says. “They understand that all of their clients are going through this right now. The real strength for us is we have a trophy asset in downtown Vancouver, and it’s got a world class rent roll, with great quality tenants that are well positioned to survive and even thrive in the current environment. When you have that kind of a tenant base it’s easy to have an open and clear dialogue with your lenders.” www.realestateforums.com On the leasing side, the current environment might prompt extra clauses in future leasing agreements, though We cautions that would come at a price. “I think the reality is that tenants and landlords will have to balance out the desire to embrace new clauses with the cost of doing so. As an example, tenants may want added protection from an insurance standpoint. That comes with more premium and will just impact deal economics.”

Bentall Centre has shifted its attention to return-to-work scenarios. When Hudson Pacific Properties welcomes people back into the building it will engage “a number of the strategies recommended by health authorities,” such as physical distancing. This might involve spacing people out on the common areas and in the elevators, and considering staggered work schedules, with workers starting their days at different times. Until 100% of the workforce can return, tenants are also embracing plans to bring employees back 20 or 30% at a time.

While We applauds business continuity measures that have worked well for many tenants, he says collaborative work is essential to many businesses. “Many tenants are looking at ways to adjust their space and culture to allow employees to physically space themselves out so they can work a little more collaboratively, but in a more spread out fashion.”

■ Michelle Morra

MONTRÉAL COVID WILL BRING CHANGE, GOOD & BAD, BUT REMEMBER THE CITY ENTERED THIS ON A HIGH NOTE

Roger Plamondon President, Real Estate Broccolini

Looking at the real estate market today, it’s like we’re frozen in space. No transactions are happening. No one can truly assess the value of an asset right now because nobody knows.

In my own business, we remain confident and bullish on the industrial sector, which happens to be among the first where governments are allowing people to return to work. Governments, both federal and provincial, have certainly voiced that they want to bring manufacturing back home. As for the state of the office sector, it will depend on people’s ability to return to work. How the Canadian economy will look when we come out of the COVID-19 pandemic will depend on one question that looms large: how many people will have lost their jobs, and for how long? If unemployment stays anywhere near the record levels that it’s at today, in the coming year government will be under an incredible amount of pressure to try and get those people back into the workplace. As a result, we can likely expect a drastic drop in immigration numbers – a sobering thought given that immigration has been the big motor driving the housing sector.

As everyone waits to see what will happen next, pension plans are weighing the value of their portfolios. Some may be trying to rebalance their assets. Will there be “prior sales” or “distressed sales” in the marketplace? What will happen to interest rates?

One thing that seems clear is that GoCs are quite low, but spreads are higher. If GoCs go up, spreads may come down, so perhaps the rates will stay somewhat stable for a while. It’s impossible to know for sure.

We at Broccolini have been in contact with trade associations and are trying to relay the message to governments that measures that were in place pre-COVID will be somewhat different post-COVID. Regarding laws that would have been coming into place now, we are asking governments if they could put those on pause, defer, and see if we can adjust later. www.realestateforums.com This is a good time to review important documents. Some of us might find that our construction contracts, insurance policies and leases already contain pandemic clauses as a result of Ebola or other pandemics, but some will not. What is on your quarantine bedside reading list? If there is a silver lining, it is this: There are always some great things that come out of any pandemic. The sewer systems and sanitary conditions enjoyed by recent generations throughout the developed world are the direct result of past pandemics. Expect an even cleaner future after this one. One more saving grace today is technology. It has not only softened the blow of physical distancing in these trying times, but could also contribute to innovative solutions. Case in point, this Real Estate Forum which, though it looks and feels nothing like past events, offers the essential elements of sharing information and ideas, broadening horizons, and some much-needed hope, inspiration and connection with peers.

On a personal note...

My wife has been keeping me sane. She is an amazing person. Also, I’ve never eaten as well as I am now. There is breakfast, a 10:00am break, lunch, a 3:00pm break, supper... and I even get delivery, right to my office!

On a more serious note, we have one daughter who works for the federal government in Ottawa and is an acute asthmatic. While following everything that’s going on, I’ve been feeding her every piece I find of interest that may help her, to make sure that in her work environment she can then voice that health measures have to be put into place. We certainly don’t want to risk her catching the disease.

Finally, my motorcycles have been like a godsend. In the initial part of the confinement, it was cold outside, you didn’t really feel like going out, so it wasn’t that bad. As time wears on and now it’s nice and sunny, I can hop on the motorcycle or on the electric bike or go for a run. I’m not contributing to the greenhouse effect – speaking of which, the views downtown are amazing. Everything is clean and crisp. That’s a positive.

■ Michelle Morra