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Keeping You Informed — Q4 2021

Despite Ontario taking a temporary step backward in the province’s reopening plan, we saw Q4 2021 end on a positive note. Fundamentals continue to support the resilience of Crown’s assets, platform and operating team.  Rent collections remained consistently high across the portfolio, renewals were steady and often on financially better terms, while leasing tours reached a two-year high.

Investment activity also concluded the year at an all-time high, with portfolio transactions, REIT privatizations and private buyers all active.  The prospect of any “COVID discount” was nowhere in sight and cap rates continued to compress, especially for the popular industrial and multifamily asset classes.  Faced with fewer options investors sought alternatives, including office and retail assets, and the year ended with the completion of a marquee transaction in downtown Toronto, the sale of the RBC tower.  This was a strong vote of confidence by the world’s 17th richest person as to the future relevance of the downtown core and the value of an office presence for businesses.

Crown’s core markets of the GTA and Ottawa remain two of the tightest office markets in North America, with quarter end vacancy rates of 12.2 and 8.7%, respectively.  In the case of Ottawa’s office market, which has been relatively stable throughout the pandemic, the overall vacancy rate fell this past quarter.  This is consistent with Crown’s experience in the Ottawa market, where leasing has been slightly more buoyant than in the GTA.  Crown’s active model suites program continues to facilitate leasing and present vacancies in their best light, especially when competing with other fully-built-out options available through the sublet market.  While our leasing database confirmed a significant increase in touring, the step backward in the province’s reopening plan will certainly result in a similar step backward for our building occupants’ return-to-office plans.  Crown’s Q4 2021 tenant survey suggested that many firms are still refining the implementation and timing of their return to the office plans.

Crown’s commitment to adapt to the ever-changing needs of our stakeholders enhances the experience for our building occupants and maximizes value for our investors.  The past year has continued to highlight issues such as racial equity, mental health, childcare and different generational expectations from employees.  This is something we are mindful of, not only as it relates to our own team, but also how it applies to our tenants.  During the UN Climate Change Conference that took place in Glasgow (COP26) this past quarter, the world was focused on climate change. Many countries, municipalities and companies subsequently increased their commitment to decarbonization.

We recognize that the long-term value of our assets will be affected by how we navigate the global energy transition in the years ahead.  As an investor and a fiduciary, we believe that our value-add platform, an essential part of which is focused on retrofitting existing buildings to achieve sustainability goals, will be essential to meet the imperative of transitioning to a low carbon world, while protecting and growing the value of our assets.    We look forward to keeping you informed on our plans for 2022.