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How is the Labour Market and WeWork Affecting the Real Estate Market?

The real estate market is closely related and affected to other economic aspects. In today’s news, real estate expert, Steve Saretsky, focuses on the labour force and WeWork, the second-largest office tenant. How do these two affect the real estate market? Read below to find out.

Latest on Canadian Real Estate Market Trends by Steve Saretsky

Happy Monday Morning!

The troubled unicorn start-up, WeWork, continues to make headlines as it gaps for air to stay afloat. Recent reports from the Financial Times suggests WeWork’s bankers are scrambling to complete a new debt financing package as soon as next week to buy time to restructure after the company’s failed initial public offering. Two people briefed on the fundraising efforts said the office company’s cash crunch was so acute that it had to raise new financing no later than the end of November.

WeWork’s losses have climbed as fast as its revenues: it lost about $1.9bn in 2018 on sales of $1.8bn. Fitch estimated the company had less than $1.5bn in unrestricted cash at the end of the third quarter, and warned that it faced “material restructuring cash charges” as it lays off several thousand of its 12,500 employees.

This of course has posed questions as to the potential ripple effects it may have on the cities in which it has “invested” in.

Here in Vancouver, WeWork is the region’s second-largest office tenant, after Amazon. WeWork has a total footprint of 678,000 square feet, including 279,000 sqft of existing space and 399,000 sqft of planned space, with firm deals, across nine locations, according to a recent report on Canada’s co-working market by CBRE brokerage house.

Would they turn and run?

“If you sign a lease, that’s a very significant commitment. But if you don’t have the capital to build that space out, then what do you do?”  noted a concerned Ross Moore, senior vice-president and tenant advisory specialist with Cresa in Vancouver.

Adding to the muddled outlook for Vancouver’s second largest commercial tenant, Stats Canada reported the BC labour market continues to slow. The province recorded its fourth consecutive monthly contraction in the labour force following a slump in the housing market.

This trend in British Columbia runs counter to the national labour market, which surprised to the upside once again, notching an additional 53,700 jobs last month. Although the details were far less impressive. Private sector jobs plunged 21,000, the second decline in the past 3 months. Total hours worked dropped 0.3%, in other words, WeWork less- no pun intended.

Three Things I’m Watching:

1. The BC Labour force contracted for the fourth consecutive month in September. This is the first time that has happened since 2012/2013.
British Columbia labour force

2. Canadian workers hourly pay was up 4.3% in September from a year earlier. This is a tailwind for the housing market but will ultimately cut into corporate profits.
Canadian wage growth

3. Residential mortgage credit in Canada has been accelerating in recent months, although it is coming off multi-decade lows.
Canadian residential mortgage

 

Steve Saretsky profile picture

About Steve Saretsky

Steve Saretsky is a Vancouver Residential Realtor and author behind one of Vancouver’s most popular Real Estate Blogs Vancity Condo Guide. Steve is widely considered a thought leader in the industry with regular appearances on BNN, CBC, CKNW, CTV and a contributor to BC Business Magazine.

For more expert insights on the real estate market and trends, visit Saretsky’s website at www.stevesaretsky.com

Steve Saretsky
[email protected]
604-809-8149