Canada’s real estate industry is part of a worldwide market. Developers from within Canada have seen tremendous returns building housing not only within Canada, but throughout North America and the world, and the world has also come to Canada. The condominium boom in Canada’s major cities has, to a great extent, been fuelled by investors from Asian markets buying units for their appreciation potential and renting them out to local tenants.
Just as the condominium boom appears to be shifting towards a boom in Canadian purpose-built rental apartments, so comes signs that new investors may be arriving to take advantage of the opportunities here. Whereas the Asian markets helped spark and maintain Canada’s condominium boom, American developers look set to foster the apartment boom.
I recently had the pleasure of speaking at the American National Apartment Association Education Conference and Exposition in Las Vegas, Nevada. This week-long conference gathers representatives from throughout the American purpose-built rental apartment industry, including building owners, developers and financiers. Everyone I spoke to was very interested in hearing about the opportunities that exist in the Canadian marketplace.
Lands of opportunity
The American purpose-built rental apartment industry feels a lot like the Canadian one, except that it’s a few years ahead. Like the Canadian marketplace, the American apartment market avoided the worst of the 2008 recession and outperformed all other sectors in the real estate industry. As with Canadian cities, American cities have seen rental vacancies drop and average rents rise as regulations ease and demand for apartments has started to outpace supply. As in Canada, the United States has seen a wave of affluent millennial renters who are turning away from suburban home ownership and looking to rent apartments in active urban neighbourhoods.
However, the Canadian apartment market has a number of unique features that makes the opportunity for American developers particularly strong. Not only are the trends of limited supply and increasing demand higher in Canada than the U.S., Canadian developers are only now realizing the opportunities that exist here.
The pace of new apartment construction in Canada is only just picking up. Most of Canada’s merchant developers are used to dealing with the Canadian condominium industry, where the mantra is build it, sell it and move on to the next one. They’re still learning the apartment mantra of build it, lease it, manage it, and then maybe sell it.
The benefit of experience
On the other hand, American developers have been building new apartments in the U.S. for years. They have the knowledge to move quickly in building, leasing and managing apartments, and Canada represents virgin territory for them.
American investors also appreciate the fact that the Canadian market is so similar — legally, financially and culturally — to the American one. It’s far easier for them to master its nuances and cater to them.
One such American developer is Pinnacle, a Texas-based multi-family management company with a portfolio of 135,000 apartment units. After looking at Canada for 10 years, it will enter this market by the end of this year.
American developers, building managers and financiers represent strong potential partners for Canadian developers, building managers and financiers to help invest in major new apartment construction projects in Canadian cities. The Americans have a lot of experience and plenty of capital to offer, and they would greatly value partners that understand the nuances of the Canadian marketplace.
Canada, it’s time to build new apartments. Economic forces, demographic trends and decreasing government regulation all favour a purpose-built rental apartment boom in this country. Now’s the time to get on the ground floor for the exciting opportunities ahead.
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.