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Keeping You Informed — Q1 2021

More than a year since the pandemic with Ontario now facing a third set of lockdowns, we expect a return to some degree of normalcy as vaccines become more widely deployed. A major structural change to office requirements resulting from COVID-19 remains to be seen, but the common belief is that hybrid work will prevail post-pandemic and may ultimately lead to increased vacancy in major Canadian markets such as the GTA and GOA.

Empty office space

The debate that began almost a year ago regarding the demise of the office has concluded that the common workplace is essential for employees and employers. The physical office remains as a place for collaboration, culture and career progression. Looking to geographies with more widespread vaccination programs, Canadian markets can expect to see increased office occupancy as employers and their teams feel more confident about returning to their workplaces. Crown, as a best-in-class operator, remains focused on implementing and communicating the measures we have taken.

While investment activity continued to lag prior years, market research teams at CBRE Limited, Colliers, et al. cite optimistic investor sentiment. Brokers suggest that the listing pipeline will ultimately result in sales volumes recovering later in 2021. The continued transaction volumes for the quarter within the industrial, multifamily and development asset classes support this thesis. Investors continue to focus on these asset classes due to their stability and underlying fundamentals. The demand for development land also reinforced strong investor confidence in our core markets.


Transaction volume within the office sector continues to lag these other markets, despite the resilience it has demonstrated in terms of rent collections (click here for the most recent REALPAC Office Survey). Crown’s office portfolio continued to demonstrate high levels of cash rent collections during the quarter. Quarterly cash rent collections were at their highest level since the onset of the pandemic, averaging 97.4% across Crown’s funds.

With the debate regarding the future of the office seemingly behind us, the “topic du jour” is the rise in sublet space. This has increased overall office vacancy rates in Toronto and Ottawa to 9.1% and 10.7%, respectively, compared with pre-pandemic levels of 2.1% and 6.5%. It is important to put these shifts in context and although sublet vacancy is up in these markets, Toronto and Ottawa remain the second and fourth tightest downtown markets in North America.

People in office

Although sublet space is often used as a proxy for office occupier demand, a far superior leading indicator is tour activity. CBRE reports a pickup in national touring activity in Q1, 2021 of 45%, compared with the start of the pandemic. Crown also tracks touring within our portfolio through the use of VTS, a tenant management, marketing and leasing tool. We have seen a comparable increase in touring activity across the portfolio, with touring at an all-time high since the start of COVID. Another meaningful metric on which we can rely is the fact that renewals taking place within the portfolio are at or above in-place rental rates.

As a professional office operator, Crown continues to focus on identifying ways to differentiate our buildings and adapt to the ever-changing needs of tenants. As an active asset manager, Crown seeks to differentiate our buildings and the land around them to maximise their value. As an investor, Crown continues to apply prudent and methodical underwriting to the opportunities we review on behalf of our Funds. We look forward to continuing to keeping you informed on the developments we are seeing in the markets in which we operate.