GWL Realty Advisors Adapts to the COVID-19 Pandemic
April 3, 2020
The COVID-19 pandemic has spawned unprecedented challenges for individuals, society and the economy. The people of GWL Realty Advisors have been responding with professionalism and integrity to circumstances that change daily, ensuring our tenants and investors are well served while also maintaining personal safety. Below we offer a summary of recent GWLRA activity related to staffing and operations, real estate business decisions and longer-term strategic considerations.
GWLRA Operating in Dynamic Times
The priorities at GWLRA are the health and safety of our employees, service providers, and the tenants and residents in our buildings.
GWLRA personnel who can work from home are doing so. GWLRA is fortunate to have digital platforms including Microsoft Teams, Skype and Yammer that facilitate remote work. Many employees are finding themselves connecting with colleagues across the country more than ever before, which will be an advantageous legacy of this unfortunate experience.
At the property levels, employee safety alongside business continuity for tenants are key. Many properties have at least one essential service, whether a bank, food or pharmacy store, insurance provider, a medical office or government service, for example. We remain dedicated to supporting the operations of essential services in our portfolio.
Commercial buildings require fewer GWLRA staff than before COVID-19. Therefore, our operations teams have been able to reduce their personal exposures and property operational risk. Most teams are rotating days to avoid a situation in which an entire team is exposed to the virus and forced to self-isolate for 14 days. Operations teams have also been ensuring that cross-training exists between assets, allowing an individual from a different property to fill in should illness or isolation require it.
Personal Protective Equipment (PPE), which includes masks, gowns and goggles, is available if any employee needs to enter a tenant suite with potential infection. We have also asked our staff to avoid going into occupied tenant suites as much as possible. Our cleaning contractors across the country have worked diligently under changing protocols and have been exemplary in adapting to the circumstances by increasing frequency as well as undertaking urgent full disinfections following a potential or known COVID-19 exposure.
GWLRA is continuing with a measured and modified capital expenditure program for 2020. This includes essential building repairs and life-safety work. Some other planned capital projects have been rescheduled owing to availability of trades and the need for social distancing at present.
In our multi-residential operations, we have 23,000 residents across 10,000 suites in addition to our employees. Our safety procedures meet or exceed provincial and federal regulations and guidelines. We have closed common areas such as gyms and tenant lounges and have removed seating from lobbies to discourage congregating. Cleaning protocols have increased in the entries, mailroom, hallways and elevators. GWLRA Residential released a website for our residents on how we are ensuring their safety, and that of our staff, and asking for compliance with distancing. Most residents have been wonderful and supportive.
Rent relief requests have been received from apartment, commercial and industrial tenants. GWLRA has established a process for working with each tenant to understand their needs and determine how best to work with them during these challenging times. GWLRA is also tracking government programs that could help renters and tenants in each province and is ensuring qualified tenants are aware of these as part of the rent-deferral discussion.
Lease negotiations underway prior to the current physical-distancing requirement have generally continued in all asset classes. Apartment renters who needed a new home still need to move, and we are working with them. Office and industrial leases reasonably advanced in the negotiations have generally continued, although a few tenants have requested additional time to evaluate the agreement.
Both the commercial and residential leasing teams are building capacity to offer virtual tours of spaces, anticipating a need for tenants and renters to find new space before the physical distancing is fully lifted.
Longer-term Market and Strategy Implications
The COVID-19 pandemic and associated social and economic disruption will change real estate markets, impacting portfolio investments and asset strategy. GWLRA is monitoring industry trends in North America as well as behavioural pattern changes, including those in Asian cities (such as Seoul, Shanghai and Shenzhen) where the quarantine has been lifted. Key topics under investigation:
Future of office space and co-working
Millions of office workers and their employers now have experience working remotely. Many market watchers are pondering whether everyone will return to office buildings at the conclusion of the pandemic. GWLRA Research is analyzing this and expects to release a report in the coming weeks. Concerned investors should note that all previous prognostications of “the end of office demand” have not materialized.
Co-working operations that cater to small businesses and independent workers are being especially stressed in this pandemic as their members shift (back) to working from home. Those locations with enterprise tenants on longer-term sub-leases should be better positioned. GWLRA Research will continue its analysis of the coworking sector under these changed conditions.
Rental apartment market conditions during and post COVID-19
Apartment demand may stay flat or decrease while competitive supply increases in some markets. GWLRA Research will be analyzing international and domestic migration patterns in 2020 alongside whether thousands of Airbnb and equivalent short-term rental suites will return to long-term rental stock as travel is reduced in 2020.
The energy sector stresses and implications for Alberta real estate
With Western-Canadian-Select oil down to $5.08/barrel on March 31, and WTI at $20.48/barrel, the global energy industry is making sharp cuts to capital spending plans and employment levels. Industry watchers also anticipate more bankruptcies alongside acquisitions of struggling firms by stronger players. GWLRA will be analyzing the trends and the implications for Alberta real estate investments.
Implications of the COVID-19 era for retail and industrial demand
Millions of consumers are making greater use of eCommerce and deliveries while being asked to stay home–a positive indicator for industrial demand. Canadians also continue to patronize grocery stores. GWLRA’s retail investment strategy has focused exclusively on food-anchored centres, which have outperformed other types of shopping centres, and we anticipate this will continue in the COVID-19 era. GWLRA Research will be analyzing possible long-term changes versus shorter-term virus-related stress happening in the retail and related industrial sectors.
These are dynamic times. Government policies and economic conditions that impact real estate change daily. GWLRA leadership takes optimism from the unprecedented cooperation among governments (including health authorities), business associations, civic groups and many corporations who are working together to guide the country through this challenge.
GWLRA Research is continuing to monitor the situation and its implications and will share analysis in the future.
GWL Realty Advisors
GWL Realty Advisors Inc. is a leading North American real estate investment advisor providing comprehensive asset management, property management, development and specialized real estate advisory services to pension funds and institutional clients. GWL Realty Advisors Inc. manages a diverse portfolio of office, industrial, retail and multi-residential assets as well as an active pipeline of new development projects.