GUEST COLUMN: One of the most-discussed topics at the moment in the Greater Toronto Area (GTA) multiresidential real estate market is whether the emerging trend of residents exiting the downtown core for more spacious or affordable suburban options will continue beyond the end of the pandemic.
A major contributor to this trend has been the option, for many office workers, to work from home. Will work-from-home become the new standard, making people less inclined to live near their workplaces?
Despite these questions, market fundamentals remain robust and new housing development is a long-term play, not easily derailed by short-term crises.
While people may adopt a more hybrid working model, the traditional office is far from gone, and there may even be opportunities to re-think residential design to better accommodate home offices.
Although demand has been negatively impacted in Toronto’s core for the short term, the GTA as a whole is still experiencing a drastic undersupply of rental stock, and non-core areas such as the inner Toronto suburbs and neighbouring Mississauga did not register the same short-term impacts in 2020.
Demand across the GTA is expected to rebound once the pandemic passes, with the resurgence of immigration, the return of out-of-town post-secondary students and the revival of short-term rentals.
GTA multiresidential investment strong
Thus far, stakeholders remain undeterred, with significant capital still attracted to the city’s multiresidential sector.
This includes not only robust investment sales volumes, but also investment in development of new purpose-built rental – as evidenced by the recent announcement of a joint venture by Tricon Residential and CPP Investments to construct up to 3,000 units across multiple development projects at a cost of up to $1.4 billion.
The joint venture will focus on building high-quality rental apartments located close to major transit and employment nodes.
Its first project will be located in Toronto’s Downtown East, a short walk from a future Ontario Line station.
Another contributing factor is the issue of housing affordability, as higher prices and smaller units in core areas motivate some people to consider a move to the suburbs.
The City of Toronto considers the equitable availability of sufficient affordable housing stock, providing housing opportunities across the economic spectrum, essential to the city’s future growth and success.
Economic recovery on the horizon
Economic forecasts show Canada is poised for a robust recovery in both economic output and employment, signalling that multiresidential transaction volume will likely return to pre-COVID-19 levels.
Furthermore, the Canadian government recently increased its immigration target to 1.2 million over the next three years to make up for the reduced immigration total in 2020 due to COVID-19 – and the GTA is a perennial destination of choice for many of those immigrants.
All this serves as a call to developers and investors to continue with the aggressive growth in development activity that has occurred in the past few years.
Despite the challenges faced by the GTA multiresidential market in 2020, the sector has experienced a rapid recovery. Fourth-quarter sales totalled $877 million – up 52% quarter-over-quarter.
More details are available in Avison Young’s Fourth Quarter 2020 GTA Multi-Residential Investment Review. Look for a broad range of investors to either grow their multiresidential portfolios or break into the sector as demand is expected to continue to outpace supply.
(Bill Argeropoulos is an Avison Young principal and the firm’s Canadian Research Practice Leader. He is based in the company’s global headquarters in Toronto.)