Apartment intensification an uphill battle

Provincial planning policy such as Ontario’s Growth Plan for the Greater Golden Horseshoe favours urban intensification, and municipalities consider it an important planning goal for purpose-built apartments.

However, that intensification doesn’t appear to be progressing as quickly as many think it should. A recently completed ROCK Research & Consultancy study titled “Research Brief on Apartment Intensification” examines new apartment building construction as a way to achieve higher densities.

The Heathview Building“To our knowledge, little intensification is happening, but a lot of developers and property owners are considering it, especially because land is difficult to source and zoning can take longer than the actual construction phase,” ROCK vice-president of real estate research and analysis Scott Midgley said.

(Image: The Heathview, a recently completed purpose-built apartment building in midtown Toronto.)

Right conditions for building apartments

With low interest rates, compressed capitalization rates and continued demand for product, purpose-built rental apartments have become an increasingly feasible and attractive asset class for developers who can acquire and entitle land that’s financially viable for their purposes.

But since urban, transit-oriented sites in close proximity to retail and services are seldom available for purchase — and their cost often makes rental apartment development prohibitive — owners of suitable existing properties have a distinct advantage.

New purpose-built rental apartments almost always achieve higher rental rates than older rental buildings on the same site because they can generally offer more and aren’t subject to the rent controls that apply to existing apartments and can keep rates well below the market average.

Site synergies

Mixed-use development is sweeping the industry and owners of other real estate asset classes may consider adding purpose-built rental apartments on their sites. There’s potential to add density to shopping centres developed as a single-level retail space, many of which have ample parking.

“Site synergies will be project-specific and will vary from project to project,” said Midgley. “Developers may be able to capitalize on significantly lower construction costs if they can utilize existing car parking and don’t need to construct underground car parking.”

Apartments close to retail can often also achieve a rental premium over units in other buildings.

“From a market feasibility perspective, determining the achievable rental rates at the site is one of the most important factors to consider when intensifying a site for apartments,” said Midgley.

Feasibility studies

Before starting new rental apartments, the ROCK report suggests developers ensure existing apartments are up to scratch to ensure old and new buildings offer a similar quality of units and attract a similar resident profile.

It recommends a feasibility study to assess the existing building’s staffing and service level, unit quality and potential for unit renovations, building amenities, curb appeal, signage and landscaping, and rental rates compared to competitor buildings.

“It’s all about building the right apartments for the neighbourhood and the people in that neighbourhood,” said Midgley. “If the building doesn’t have the correct unit mix, quality and amenity offering for the target demographic, the building will not achieve the optimal rents to make the project feasible.”

Having a central leasing office, shared marketing and leasing processes, and staff who work at all buildings will ensure economies of scale and operational efficiencies can be realized, according to the report, which added the feasibility study should assess existing operations and make recommendations for improvement in preparing for new apartment development at the site.


Steve is a veteran writer, reporter, editor and communications specialist whose work has appeared in a wide variety of print and online outlets. He’s the author of the book Hot…

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Steve is a veteran writer, reporter, editor and communications specialist whose work has appeared in a wide variety of print and online outlets. He’s the author of the book Hot…

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