While non-discretionary retail, such as grocery stores and pharmacies, has been very operational in the pandemic and investors have had a heightened interest in it, segments of the discretionary side – including destination shopping centres – have seen some of the strongest recoveries.
There has also been a return to physical occupancy of office buildings around the world, particularly in Australia and Asia (Tokyo, Hong Kong, Seoul, and Singapore), with rates creeping back up in Canada, too. Leasing is also returning, though it hasn’t quite reached the 2019 pre-pandemic levels, and Lynch noted TD is beginning to see more interest from tenants.
“Even though we’re seeing a directional trend, the jury’s still out,” said Lynch, noting many companies and industries are still defining what in-person work will look like in the near future, especially now that a recession could also be on the horizon.
As for residential space, while some people moved out of major urban centres, particularly in North America, in the early pandemic, some of that trend has reversed and rents are climbing again. There’s still a long-term trend to more affordable outlying housing, even though the prices have been accelerating.
There’s also demand for multi-unit residences, so their rents are increasing. While there is a supply shortage, Lynch said inflation and its impact on construction is making it more difficult to deliver new supply. That is a concern as cities, like Toronto, continue to experience more immigration. “If we don’t see a commensurate growth in supply,” he added, “then we will have some issues.”
