I have been saying for years that it’s time for Canada to build new apartments. It was only a matter of time before the marketplace noticed that prime conditions existed for a resurgence in purpose-built rental apartments.
In the Greater Toronto Area, spaced among the condominium boom are announcements of new residential buildings going up that will be rented out rather than sold. Examples include a 600-unit luxury high-rise development in the posh Forest Hill neighbourhood. In another case, Park Property Management announced it was adding to its 40-year-old development at 100 Spadina Rd., and that further additions to its properties are planned.
In total, more than 5,000 purpose-built rental units are planned or under construction in the Greater Toronto Area.
A meeting of the minds
Purpose-built rental apartments have been quietly wowing real estate experts as the sector continues to outperform the rest of the industry during and since the 2008 recession. Developers are starting to understand that apartments offer the best return on investment, not only for short-term gains, but also in terms of long-term income.
I took this message with me as I hosted a symposium on student housing and new apartment construction in May at the Sony Centre in downtown Toronto. In partnership with the good folks at MediaEdge, we brought together developers, investors, building managers and financiers to build connections, share knowledge, and talk about the future. Approximately 400 people attended the two-day symposium.
The energy of the audience was exhilarating, and I was honoured to facilitate a number of panel discussions on aspects of the industry.
I like talking about apartments; I like advocating for new apartment construction. I like sharing knowledge about the purpose-built rental apartment industry. I am passionate about apartments because I know the opportunity that exists in this industry.
Even so, nothing recharges my batteries more than getting together with other people in the industry and listening to what they have to say about the opportunities in this industry.
Learning of the opportunities
I helped put together the two-day symposium in Toronto because I want the purpose-built apartment industry to succeed, and because I know that it can. Only one thing really holds this industry back, and it isn’t regulation. It isn’t economics. It certainly isn’t interest rates.
The biggest thing holding back development in this industry is a lack of knowledge about what is possible. With these symposiums, I intended to change that.
At the symposium, we talked about how apartments in Canada are undergoing a perfect storm of limited supply and rising demand. The after-effects of rent controls and over-regulation, now easing, have suppressed construction of new apartments so that any new construction is immediately placed at the top of the marketplace.
In addition, aging baby-boomers and young urban professionals are turning away from large mansions in the suburbs, looking for smaller units more closely matching their lifestyles, located in neighbourhoods with amenities within easy walking distance.
We also learned of technological and design breakthroughs that make apartment development even more economical. One of the most exciting discoveries was the discussion of six-storey wood frame construction. This form of construction is as much as 20 per cent cheaper than concrete or steel construction.
With cities across Canada encouraging intensification with mid-rise mixed-use developments along city streets, six-storey wood-frame construction occupies a sweet spot, allowing developers to build buildings at less cost. Suddenly, developers and builders have a built form that can make the economics of new developments work.
A good education in student housing
It’s no coincidence that we spent half our time at this two-day symposium discussing student housing. This marketplace has taken off in the last five year in cities such as Waterloo, Ont., with a large and growing body of increasingly affluent students looking for better accommodations close to campus.
Our panels discussed where the growth markets have been for student housing, and where they’re going to be in the future. We discussed the unique aspects of student housing management, and the opportunities for financing.
This is an industry where it is important to move quickly and secure the best location. Financing has been a challenge in the past, but that is changing as institutions become more aware of existing opportunities.
I really appreciated hearing from attendees. Whether they were developers, investors, building managers, financiers or city officials, there was an excitement in the air. Contacts were being made, knowledge was being shared, and new business was happening. This was precisely why I set out to organize these symposiums.
Canada, it’s time to build new apartments
It is an excellent time to be in the purpose-built rental apartment business, and I am excited to be a part of it. I am looking forward to next year’s symposium, meeting developers, builders, investors and financiers and sharing the excitement that is building up around this industry.
Save the date on your calendar and make time to come to the next symposium.
I will see you there.
Derek Lobo is the founder and CEO of SVN Rock Advisors Inc., a real estate brokerage with over 30 years of experience in helping investors make the most out of buying, selling, and renovating purpose-built apartment buildings. Learn more about SVN Rock Advisors Inc., Brokerage on their website at www.SVNRock.ca.