Virtual Data Rooms for Canadian Real Estate

Canadian real estate was a hot market in early 2022, but Covid restrictions made real estate projects reduce in both volume and price.

However, in 2023, Canadian real estate deals are likely to increase again. Experts at TD Economics indicate that sales will increase on a quarterly basis throughout 2023, with more robust growth anticipated in the latter half of the year. But due to a weak start to the year, there will still be a significant drop in the average annual sales in 2023. One of the ways to balance the state of the real estate industry is to adopt virtual data rooms, which make it faster, more secure, and easier for real estate professionals to collaborate on documents online. Let’s see how.

Commercial real estate property trends in Canada in 2022-2023

Despite optimistic predictions for 2023, the Canadian real estate market is still facing a significant disruption. According to PwC, there were several factors causing this surge in real estate transactions:

• A series of interest rate increases that were more pronounced and rapid than anticipated
• Record-high inflation levels not witnessed since the 1980s
• Unpredictable geopolitical climate

Looking ahead to 2023, PwC predicts several key trends, including:

• Mounting difficulties regarding costs and access to capital
• An increasing emphasis on sustainability and ESG matters in the real estate industry
• The urgent need to address Canada’s housing affordability crisis

To maintain future success, real estate companies must focus on proptech and other solutions that enhance their business operations.

That said, technology will play a crucial role as a way to drive forward real estate project management.

Among the new tools adopted by Canadian real estate firms are real estate project management software like virtual data room solutions (VDRs).

What is a virtual data room for real estate?

A real estate virtual data room is a secure data storage solution for real estate firms, agents, and stakeholders, using which they can easier store, share, and structure real estate documents and more conveniently interact with each other. For real estate professionals, virtual data rooms facilitate all phases of property management before a sale.

This may sound like any other file-sharing platform, but there’s a crucial element that sets VDRs apart from the likes of Google Drive and Dropbox. That element is security, which is guaranteed by a set of important security features:

• Encryption. Data rooms for real estate are secure platforms, where all data stored is end-to-end encrypted, which reliably protects all types of confidential documents during transfer or storage.
• Granular permissions. In virtual data room software, all access permissions are customizable to a granular level, which makes files readily accessible only to users with proper access rights, which prevents unauthorized access and data leaks.
• Detailed reports. In each real estate data room, all user activity is constantly monitored with fully traceable audit logs, providing complete control for real estate professionals over any interactions with data.

Here you can learn more about what a virtual data room is.

Unlike traditional data rooms, online data rooms offer several key features that are particularly beneficial to real estate transactions, including:

• Insightful analytics for more thorough due diligence and better investor communications
• A centralized digital space for asset management and portfolio management
• Ability to manage multiple projects and track multiple projects simultaneously
• Complete trails of user activity with detailed audit logs for more informed decisions
• Secure file sharing capabilities for safely exchanging confidential data
• Advanced search capabilities available in many languages
• Deal management tools simplifying communication with potential buyers
• Branded user interface providing better brand image before institutional investors

Last but not least, virtual data rooms can provide access to essential due diligence documents both online and off, which allows potential buyers and other interested parties to review documents even on the go.

This enables asset managers and business partners from different locations to participate in the due diligence process without the need for in-person meetings or physical document exchange.

Comparison of real estate data room providers

As you can see, a data room for real estate should support a wide range of document formats to ensure that all types of files can be securely stored, accessed, and shared. Some of the most common document formats that real estate virtual data rooms should include are:

1. PDF — popular for sharing and viewing documents and is often used for sharing legal and financial information in real estate transactions.
2. Microsoft Office — Word, Excel, and PowerPoint files are commonly used for creating and sharing due diligence documents.
3. Images — construction documents often involve photos, drawings, and maps, which should be supported in common formats such as JPEG, PNG, and TIFF.
4. CAD files — computer-aided design files, such as AutoCAD and Revit files, may be used in construction documents listing architectural and engineering plans of a commercial or personal property.
5. Audio and video — real estate projects often deal with audio or video recordings for virtual property tours or inspection reports. Virtual data rooms should support common formats such as MP3, WAV, MP4, and AVI to ensure that these files can be securely stored and shared as part of real estate portfolios.

Why and how real estate specialists use data rooms?

Professionals such as real estate managers, brokers, agents, appraisers and attorneys use virtual data rooms for real estate in many ways:

• Sharing documents. When selling a piece of real estate, an agent will simply upload all pertinent documents in bulk onto the virtual data room, then share the access links with the prospective buyers — instead of having to mail thousands of pages to dozens of different people.
• Storing documents. When law requires that property documents be stored for a certain period, a manager will upload them onto a virtual data room for real estate — instead of having to print, class, and archive them in the agency facilities.
• Keeping documents organized. When facilitating commercial real estate transactions, a broker will upload and organize files and folders in the VDR in a matter of minutes — instead of spending hours printing, stapling, and labeling hundreds of documents. It is possible to organize many documents at once with VDR’s auto-indexing features.
• Sharing information. During any real estate process, brokers, appraisers, attorneys and other stakeholders can view and edit property information and communicate about it through comments on the documents and on Q&A rooms.
• Giving prospects a commercial property tour. During a diligence period or a forthcoming sales process, agents can show prospects around the property by uploading video tours onto the virtual data room.
• Enjoying the ease of setting up. Property managers can more easily set up and use a data room for real estate for portfolio management purposes.

Commercial real estate due diligence checklist

When choosing a virtual data room for your real estate company, here are a few elements to take into account:

• Security. The security level your real estate data room requires will depend on two things — the profiles of the properties and clients you work with and the laws where you operate. Make sure your VDR provider fulfills your security needs, from encryption levels to granular access permissions and compliance with due diligence regulations in your region.
• Cost-quality ratio. If you manage multiple projects simultaneously, choose a virtual data room provider that offers a plan with a large or unlimited number of data rooms, so you won’t have to pay for extra rooms or users every time you start a new deal. If your portfolio includes only a few properties, then you can save by getting a plan with fewer data rooms and lower prices.
• Possibility to upload all necessary file formats. Construction blueprints and design plans often come in formats such as AutoCad and CorelDraw. Make sure your real estate data room allows you to upload all the file formats your technicians use, so you don’t have trouble with missing files and botched file conversions.
• Real estate experience. Check if your data room provider has previous experience with real estate projects. If they do, they will have already encountered and solved most of the issues that could come up for you.
• User analytics. Your time is a limited resource, and if you know which prospects are really interested in a real estate transaction, you can focus your time and attention on them. Your VDR should include detailed user analytics and reporting, so you can find out exactly how much time each user has spent interacting with each document.
• Due diligence checklists for the real estate industry. While this feature comes last on our list, it is probably the most important. Be sure to check if the real estate data room offers a checklist of all the documents you must upload onto the VDR — including regulatory documents, acquisition documents, construction blueprints, and so on. Below you can find a sample of this checklist ready-to-use, which you can adjust to your real estate projects.

Bonus content: Commercial real estate due diligence checklist

A commercial real estate due diligence checklist typically includes the following diligence documents:

Learn more about virtual data room features.

Conclusion

• The Canadian real estate market experienced a reduction in both volume and price due to Covid restrictions in early 2022, but experts predict an increase in sales throughout 2023.
• To facilitate real estate industry growth, virtual data rooms should be used for arranging property tours, creating better deal-making opportunities, and ensuring safe storage of confidential documents.
• When choosing a virtual data room for your real estate company, take into account security, cost-quality ratio, due diligence checklists tailored for real estate, support of necessary file formats, the provider’s real estate experience, and analytics features.