Legal news and trends for Canadian in-house counsel and c-suite executives
Issue link: https://digital.canadianlawyermag.com/i/1410197
36 www.canadianlawyermag.com/inhouse FEATURE CANADA'S COMMERCIAL REAL ESTATE industry is poised to make a strong recovery following COVID-related disruption that slowed construction projects and led to a decline in demand for retail and office space. An extreme lack of materials and very high costs, layered on top of restricted working conditions, have resulted in significant challenges for some developers. The cost of lumber has tripled in price due to scarcity, according to Paul Morassutti, partner at Osler, Hoskin & Harcourt LLP. "Start early and plan, plan, plan because Commercial real estate industry bounces back after sudden decline Legal departments seek silver linings and seize new opportunities to develop the business everything is going to take a lot longer than you thought it was going to take, and it's going to cost more," says Morassutti. He suggests in-house counsel allow more time to meet deadlines in construction projects. As restrictions forced stores to shutter during the pandemic, e-commerce surged in demand, leaving a glut of empty retail spaces. Meanwhile, demand for industrial space has skyrocketed because of the need for logistics and warehousing space for online retailers. "I don't think we've seen the end of retail carnage due to COVID yet," says Morassutti. "COVID accelerated greatly what was already happening gradually." COVID has trans- formed the retail landscape amid prolonged closures and a boom in e-commerce in Canada, so the leasing market has suffered, opening up new opportunities. "We've naturally run into some vacancies, but we're able now to backfill them with the most opportunistically suitable tenancies," says Jennifer Suess, senior vice president, general counsel, corporate secretary at RioCan Real Estate Investment Trust. "There's been a shift in making sure that we're curating the best tenants for the centre in which the shopping centre is located." With office space, Morassutti expects the return will be far higher than many people initially suspected. Although work-from-home has proven to be a successful arrangement for many, it will not be a permanent full-time solution for office workers, he predicts. Suess concurs. She does not anticipate an ongoing decline in demand for office space, saying that human interaction is essential to build culture, continue brainstorming and amplify productivity. Suess and her team are carefully moni- toring legislative developments and entrenching themselves in the business. When there are discussions around rent, deferral situations, abatement situations, and opportunities to partner with tenants in new and creative ways, Suess says the legal group is at the forefront of these initiatives and available to offer practical advice. "Continuing our focus on mixed-use, transit-oriented urban-located centres is the future of RioCan," she says. Suess expects sectors such as apparel, movie theatres and gyms to come back with a vengeance as restrictions lift. It is essential to recognize the need to incorporate e-commerce with the brick-and-mortar shopping experience to maximize the customer and tenant's benefit, she says. Following a pause in the transaction "Our strategy, pre-pandemic, has really paid off and will continue to pay off in terms of the focus on building thriving urban neighbourhoods." Alison Harnick, First Capital REIT