The City of Toronto is seen by many as a major centre for new condominium construction. The city is undergoing such a building boom, some pundits are wondering how it can be maintained. However, signs are increasing that while Toronto’s building boom is continuing unabated, the buildings going up aren’t to be sold, but rented.
In 2013, Cadillac Fairview surprised many by announcing the construction of a 69-storey rental tower at the Queen/Yonge intersection in downtown Toronto. It was the first proposal of its size for a purpose-built multi-family residential rental building in Toronto in almost four decades, but at the time I predicted it would be the first of many.
Earlier this month, the man behind condominium developer the Rockport Group, announced the construction of another major rental building. Work on the Montgomery, a 27-storey, 233-suite rental apartment building near the Yonge/Eglinton intersection, is slated to begin this month.
Jack Winberg, the CEO of the Rockport Group, made a splash with the media as he made his convention-defying announcement.
For the past decade, conditions for the purpose-built rental apartment market have been steadily improving. Regulations have relaxed, vacancies have dropped and average rents have increased. The development industry has been slow to embrace rental housing, however, since rent control and over-regulation stalled the industry in the 1970s.
The current condominium boom has been key to launching the beginnings of the rental apartment boom.
Condo developers are rental building experts
For years, condominium developers have become experts in building rental apartments; they just didn’t know it yet. Condominium developers have made themselves familiar with the local political terrain, the development approvals process, as well as the construction process. They also made the concept of high-rise living fashionable.
Today, more and more people are turning away from large single-family homes in the suburbs for apartment-style units in the cores of our cities. This is the market purpose-built rental apartments is most adept at serving.
The only thing condominium developers have not learned is how to lease up their units rather than sell them off, and how to manage their buildings as landlords. The marketplace is already stepping in to meet this need. Thousands of condominium units have been purchased by investors that are creating a new marketplace of informal condominium rentals. The growth of this marketplace has been covered on such websites as Urbanation.
It all comes down to knowledge: once condominium developers learn how they can go about leasing and managing, they can eliminate the middle man of the informal condominium rental market and rent whole buildings on their own. There are management companies out there that can help.
Developers simply have to decide whether they want to go for the quick buck of selling units as they come on the market, or the long-term financial security of renting units for a steady monthly income.
As the Canadian condominium market becomes saturated with condominiums for sale, more developers will turn to the financial security of renting.
The Canadian Apartment Symposium Series
From April 21 to 22, 2015, a lot of that knowledge will be imparted at the Canadian Apartment Symposium Series. This two-day event taking place at the Metro Toronto Convention Centre will feature the North American New Apartment Construction Conference on the Tuesday, and the North American New Apartment Construction Conference with Student Housing on Wednesday.
At these conferences, developers, building owners, financiers and investors will have a chance to learn about the opportunities that exist in the purpose-built rental apartment industry. These symposiums will gather hundreds of people eager to listen to dozens of experts in the fields of building, financing and managing apartments, and it will be an excellent opportunity to meet and make business happen.
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.