Personally, I have been through 17 recessions throughout my work moving around North America and I have always found that apartments have done better than other assets in a downturned economy.
We’ve seen that apartments have been recession-proof and to a large extent they have divorced themselves from the normal economic ebbs and flows. Look at Calgary where office vacancies are at 29 per cent while apartment vacancies have risen, but not nearly by the same magnitude, to 6.6 per cent.
In general, the office and hotel sectors are suffering massively yet apartments are doing well relative to those other asset classes.
So, we’ve always known that apartments are somewhat decoupled from the regular economy.
Apartments have also survived the pandemic
Now we’ve been through an 18-month pandemic. In many cases, other than downtown core locations, apartments have once again strengthened ─ so now we see that apartments are both recession-proof and pandemic-proof.
Bloomberg, CNN Business and most financial news outlets talk of a “wall of money” that is looking for a home. We believe the best place for those funds is in apartments.
Canada and many places in the world are undersupplied when it comes to apartments. The marrying of that wall of money and apartment developers seems like one of the most logical things that should happen.
We have found in our business that this is happening more and more. We are seeing sources of independent capital, whether from institutions or private individuals, looking for ways to invest in apartments.
There are many ways for people to invest in apartment development, regardless of their knowledge of the industry.
Most of our clients are developers from other sectors who have not yet entered the apartment industry. They have 90 per cent of the skills they need to construct a building, and we are teaching them the last 10 per cent, specific to apartments, that will lead them to success.
Others with wealth looking to be parked somewhere stable, and with significant returns, may joint venture with a developer at the ownership level or provide mezzanine financing for a competitive return.
A sector investors can understand
The nice thing about apartments is that everyone understands the basic concept of an apartment house. Investors don’t necessarily understand Bitcoin, or biotechnology, but they have all lived in an apartment at some point in their lives and probably have many memories associated with that season of their lives.
There’s wide understanding of the business, but not of the returns, the stability and the opportunity to invest in it.
Also, unlike Bitcoin apartments are a proven, steady, long-term asset. As long as the apartment is built in the right market, and with the right specifications, you can be almost certain that it will produce positive returns.
The wall of money is looking for somewhere to be and those investors don’t know that apartments are THE significant opportunity to safely earn development returns. Apartments are one of the most stable asset classes the world has known.
It’s time to park those funds and materialize those returns!