Future realities for residential and commercial real estate markets

The necessary lockdowns of the COVID-19 pandemic disrupted real estate in more ways than one. We experienced a shift in the residential market, as well as in the retail, office and industrial segments.

Despite higher case counts recently, the anticipation is for a broader reopening to continue in 2022. With this in mind, what does the future hold for the residential and commercial markets?

Residential market

During the initial phases of recovery from the pandemic, demand was very strong and market conditions tight for lowrise home types, namely detached and semi-detached houses and townhouses. Initially, inventory levels for condominium units were elevated, resulting in condo prices trending flat to down. However, as we moved through 2021, demand for condominiums picked up and excess inventory was absorbed. In the second half of this year, we saw a consistent acceleration in condo prices, as first-time buyer activity improved.

One thing that’s certain is demand isn’t going away. Immigration and non-permanent migration will pick up and will positively impact the demand for all types of residential real estate, in both ownership and rental. While we could see slightly softer demand due to higher borrowing costs over the next year, this impact will be mitigated, at least in part, by an increase in population growth.

Commercial market

In the commercial marketplace, the retail, office and industrial segments were affected in different ways. We saw an accelerated shift from bricks-and-mortar stores to an online shopping experience – ultimately resulting in more demand for industrial space to support logistics. While offices, cubicles, and meeting rooms quickly emptied, virtual tools such as Zoom and Microsoft Teams became the new reality.

But, what’s next for office buildings? Will we see a return to the pre-pandemic normal or will businesses embrace some form of hybrid approach, allowing in-office and work-from-home flexibility? While the return to the workplace remains a moving target, this obviously has ramifications for businesses that serve other workers, including restaurants and ancillary retail.

How conditions in different commercial market segments unfold over the next year is somewhat unknown and will depend on the degree to which the recovery from the pandemic strengthens over time.

If you’re interested in such topics, tune into TRREB’s Ready to Real Estate podcast “Back to Business” podcast episode on what a return to work might look like in a post-pandemic world.

You can also mark your calendars for the release of TRREB’s 2022 Market Outlook & 2021 Market Year in Review report. It’s coming out on Feb. 3, 2022, and will include joint research with the Toronto Region Board of Trade on the future of back to work and its effect on commercial and residential markets, as well as worker sentiment polling from Maru Blue.

Don’t forget to stay up to date with the latest market trends, both in residential and commercial sectors. Visit trreb.ca to explore the latest market reports. Plus, connect with a TRREB member realtor and search listings in real time on any device.