The bill has come due for Canadian businesses to repay interest-free pandemic loans – a deadline that has the potential to rattle B.C.’s commercial real estate market.
“There's potential for some fairly sizable impact to the market and the retail landscape,” said Susan Thompson, associate director of research at commercial real estate firm Colliers.
“We're watching this very closely to see what happens. This is one of those things that doesn't occur very often, so there's a potential for change.”
About 900,000 small businesses tapped interest-free Canada Emergency Business Account (CEBA) loans of up to $60,000 geared towards providing pandemic relief. Businesses that pay back the loan prior to the Jan. 18 deadline will receive partial forgiveness of up to 33 per cent, according to the Government of Canada.
Data gathered in December found 22.4 per cent of businesses with outstanding CEBA loans won’t be able to repay them on time, according to the Canadian Federation of Independent Business.
Outstanding loans past today’s due date will convert to three-year-term loans, subject to interest of five per cent annually.
“In the case where they’re unable to find an option to either repay or refinance that loan … they'd have to look at what they have in terms of savings. What can they put off and what can they afford? Then they ultimately have to make the decision, if they can't do any of those things, if possibly closing down is an option,” said Thompson.
CEBA loans and their impact on the retail real estate was identified as one of the “big areas” that Colliers will be watching in 2024, said Kirk Kuester, executive managing director of the firm’s Vancouver office.
“We are also hearing about businesses waiting in the wings to buy out these businesses or snap up locations as they come available,” he said in a December email.
Despite some challenges, Colliers concluded retail real estate will be stable going into 2024. Metro Vancouver’s average retail vacancy rate was roughly 3.9 per cent as of the end of June 2023, according to the Urban Retail Colliers Index Vacancy Rate. That’s down from 4.7 per cent in February 2023.
Retail vacancies near busy grocery stores, shopping centres with notable anchors and high-traffic streets are “relatively low,” according to Thompson.
“While there has been turnover in those markets, we're still seeing options few and far between,” she said. “There's activity out in the market, but the CEBA loans could change how many options and how frequently they're coming up.”
Both Thompson and Kuester said that overall retail vacancy may not change due to difficulties paying back loans, but that there will likely be activity beneath the surface.
“There's going to be change. However, if you were just somebody who was monitoring the top-line numbers, you might not see the activity that's going on out on the street,” Thompson said, adding that it will take one to two quarters “for it to play out in the numbers that we monitor.”
