On May 6, the BC government announced that the province could begin a slow and gradual re-awakening of business and a more normal way of life. Will we be able to hold off a second shutdown due to COVID 19, and how will the commercial sector manage a slow recovery?
Where the residential sector has taken a long nerve-wracking pause, the retail, office and industrial commercial sectors have taken a punch that could either cause a knockout, or set them up to a new way of operating.
Bricks and mortar
That the bricks and mortar retail sector was in trouble was well known before the pandemic caused a shutdown of most stores. Will the forecasted economic slump kill it off once and for all? And how will the mom and pop stores and restaurants manage that struggle to make a profit in the best of times?
Most offices have closed their doors and laid off some employees while sending others home to work remotely. Will they be brought back or will they be left where they are, using Zoom and other communications technology to do the job – leaving the proverbial sagebrush tumbling past office towers?
At the forefront of the disruption are the commercial Realtors like Charles Wiebe (RE/MAX Little Oak) and Larry Anderson (Sutton Premier), both with many years of experience and the success to show for it. We wanted to find out what Charles and Larry have been thinking about through the drawdown of the business sector and what they’re doing to adapt to it.
Adapting to change
LARRY: “Well, the world was already going through retail change and not everyone was adjusting. We look at retail overall, and even the large very successful companies like Sears were going under because they were not able to retool to make it in a new on-line environment.
“And now people have found out how easy it is to shop on-line at Amazon and have things delivered to your door.”
CHARLES: “The retail sector will be hit hard, I’m afraid. I think we’ll see a number of vacancies in restaurants and retail, unless they had a thriving business prior to the pandemic so that they are more resilient, and if they are very interactive with their customer base. If not, it will be difficult for them to survive.”
LARRY: “Once we get out of this, how many people are going to have their credit maxed, the phone bills and mortgages and whatever else they’ve deferred?”
LARRY: “I would love to get back to seventy five per cent of where we were. But I’m not sure we will. I think it’ll take at least a year to get to there. If you have been living paycheque to paycheque, and you go backwards six thousand dollars, it could take you two years to pay that back.”
CHARLES: “After the lifting of economic sanctions we’re going to see some vacancies of some business that just couldn’t make it through.”
LARRY: “If you look at commercial, all of a sudden everybody started getting in the habit of working from home and realizing they could. How many businesses are going to reassess their models now and say, do we need bricks and mortar anymore?”
CHARLES: “We’re going to see a shift in the office market, especially professional offices. They’re still running and operating, but from their homes. I’m already hearing from my clients… ‘do we really need all this square footage?'”
Dealing with it
LARRY: “The thing is, Realtors are always busy whether it’s residential or commercial, in bad times or good times. I believe we will be busy because clients will want out of commercial leases and that means lots of vacancies.”
CHARLES: “We’ve been doing a lot of work with landlords and tenants to help them through this crisis, especially where tenants have had to close their businesses.
There’s a lot of risk analysis that we’re doing. What is my business worth today, what will it be worth later on? Should I sell the business, or lease out the space I’m in?
“I have also been heavily involved in different discussions with city officials, and chambers of commerce, to make sure I have my finger on the pulse as to what they are hearing and some suggestions for local businesses.”
Reaction from agents
LARRY: “If you’re the type of agent that waits for the phone to ring, it’s going to be tough. But if you’re kind of a grinder and you know how to make a deal, there’s going to be deals to be made. The landlords may not get all their rent covered, but 75 per cent government rental subsidy is better than nothing. The industry is kind of excited about the potential opportunities here.”
CHARLES: “It’s been almost like a reboot on our business and we have taken the attitude that we’re going to continue to service our customers in whatever form is required by them. Overall, what I hear from other agents is that they’re getting ready themselves to do more deals.
“We’re trying to be very proactive with our clients, to reach out to our client base with good information so that we can assist them to keep moving forward. We’re also supplying our clients with information about how to navigate the government with the economic help being offered.”
Help for clients like Charles has come in a variety of ways, although whether it will be enough to rescue business owners is not yet clear.
The federal government recently announced the creation of a Canada Emergency Commercial Rent Assistance program (CECRA) to help small businesses with commercial rent payments for the months of April, May, and June 2020.
In mid-April the BC Government announced it was reducing most commercial property tax bills by an average of 25 per cent.
Also, in an effort to give businesses and landlords more time to pay their reduced property tax without paying a penalty, the province postponed the date that late payment penalties apply for commercial properties in classes 4 through 8 until October 1, 2020.
And to reduce the impacts of revenue shortfalls hitting local governments, the province introduced the following measures:
- Local governments can borrow, interest-free, from their existing capital reserves to help pay for operating expenses, such as employee salaries
- Provincial school tax remittances are delayed until the end of 2020.
- There will be more flexibility for local governments to carry debt for an additional year.
CHARLES: “I find that, whether it’s a slow, hot or balanced market people still need Realtors to assist them with advice, experience and market knowledge. We are there to help our clients make good decisions for themselves.”
LARRY: “There will be lots of vacancies to negotiate good deals because the landlords won’t have line-ups of people waiting to get into a commercial lease. So for the commercial dealmakers, it will be wide open after this. Just put your pedal to the metal and hang on.”
CHARLES: “We can all create a hypothesis, or look into a crystal ball, but in the end, we really are currently dealing with the unknown. All we can do is work on various scenarios and move on in any one version of that once we have more information. That’s what businesses have to do.
“This [pandemic] has knocked us all down to our knees, but we’re going to stand back up and be running again. It may go from a stroll to a walk to a run, but we’ve got to make sure that we’re there for our clients now, ready and able.”
Source: FVREB Communications