By Kieran Smith
(Vancouver)
For
the first time in its 150-year history, Canada has more seniors aged 65 and
over than children under the age of 15.
Federal
2016 census data released in early May shows that seniors now account for a
larger piece of the population (16.9%) than children 14 years old and under (16.6%).
Meanwhile, younger demographics – especially millennials – are disrupting
traditional ways of doing business and engaging in leisure activities.
These
developments are not exactly surprising – but they will shape our nation for
decades to come.
The
question now is: As government policy makers adapt to the changes, how will the
commercial real estate community react?
Census data identifies
interesting trends
It
is hard to predict the future but strategic census and demographic data
analysis can be used to enhance the transaction process.
Federal
2016 census data, recently released in May 2017, has identified some
interesting trends. Demographics are changing
broadly as baby boomers reach retirement age and the younger age cohort
decreases in size.
Simply
put, Canadians are living longer, becoming increasingly urban and shifting away
from the single-family home. Therefore, housing-related issues are receiving
considerable public attention.
The
federal population and household data released in February 2017 received an
extensive amount of media coverage in Vancouver, particularly because the
information relates to housing affordability. The coverage tended to focus on
areas where populations are shrinking
and identifying municipalities with large numbers of unoccupied
dwellings – particularly in certain transit-oriented
development areas of Metro Vancouver. Whilst these issues are related to
residential real estate, there is an associated relationship with commercial
real estate.
Recent
government policy changes in Vancouver (and BC) have been implemented to assist
housing affordability for locals. The lack of affordability and focus on empty
dwellings contributed to new tax rules – a 15% foreign
buyers tax (2016) and a 1% vacant home tax (introduced this year). Its
knock-on effect will play out over the next few years. And although these
changes are aimed at residential real estate (the 15% tax doesn’t apply to
commercial property), there is uncertainty over what the effect of this tax
would be from a commercial perspective, from suggestions
that commercial investors will be put off, or that speculators will redirect
investments from residential to commercial properties. It’s still too early
to draw conclusions.
Data analysis can
enhance transaction process
The
demographic changes highlighted by the census will influence real estate in the
years ahead because long-term planning and policy decisions are based on what
the aforementioned types of data show. As such, the use of census and
demographic information can enhance the transaction process. First of all, data
analysis can provide insight that increases the value proposition. Secondly,
the statistics can help validate a broker’s local knowledge.
Getting
back to our aging population, governments (local and federal) will have to put
increased resources into meeting the needs of an older population. From a
commercial real estate perspective, this scenario might result in a greater
need for residences, hospitals and care facilities, leisure centres and retail properties
that cater to seniors. Personal services and senior-specific businesses are also
likely to grow.
Seniors
will be less inclined to commute to local services and amenities, preferring
instead to reside in higher-density residential areas. This scenario could lead to an increase in senior-specific multi-family
residences that cater to empty nesters, who are increasingly downsizing from
single-family homes. These changes could affect brokers – and clients – across
many sectors, including multi-family, investment, office and retail.
We
also need to interpret the census data to know where these changes are
happening at the local level. For example, proportionally more investment in
services for seniors is likely to be required in BC
and Atlantic Canada compared to Alberta, where there is a high discrepancy
between the proportion of population aged 65 and older.
Incorporating broader demographic
and lifestyle changes
Despite
the headlines generated by the census data regarding older Canadians, younger
generations have also driven change to our lives and lifestyles. Millennials’
non-traditional attitudes are evident in their preferences to live in central
locations versus outlying areas, rent rather than own their homes, and reside
near public transit in order to reduce their dependence on automobiles. These
recent trends, driven in combination with technology and millennials’
non-traditional attitudes, have begun to influence
real estate, both residential and commercial. Increased urbanization, revised
lifestyle preferences, the growth of disruptive services such as online retail
and Uber are just some ways in which things are changing. Shared
office space is gaining ground within the office commercial sector.
Whilst
millennial-related stories often generate continued media interest, census data
are clearly important when it comes to understanding local market demographics.
By using the data wisely, brokers will broaden their market knowledge and,
ultimately, clients will remain highly confident throughout the transaction
process.
Results
of the 2016 Canada Census are being released throughout 2017 and can be
accessed at Statistics Canada’s website (http://www12.statcan.gc.ca/census-recensement/index-eng.cfm).
(Kieran Smith is the Director
of Geographic Information Systems (GIS) for Avison Young’s Vancouver office,
where he assists brokers and clients with data analysis, demographics and
mapping requirements related to transactions.)
