Here's some unsurprising but important news via Urbanation:
New condominium apartment sales last year totalled 4,590 homes. This is a 78% decline compared to the latest 10-year average of 20,835 homes, and the slowest year for new condo sales in the Greater Toronto and Hamilton Area (GHTA) since 1996. See above chart.
Only 802 new condominium apartments were sold in Q4-2024.
Six projects launched in Q4-2024, totalling 1,829 homes, of which only 10% were sold. A total of 1,506 new condominium apartments started construction during this same quarter.
A total of 29,800 condominium homes were completed in 2024 -- a record. This year, 30,793 homes are expected to complete, which if it happens, will create another new record.
In total, 78,742 new condominium homes are currently under construction across the GTHA, as of Q4-2024.
This may seem like a lot. But 30k of these homes are expected to complete and occupy this year. That leaves around 48k under construction, plus whatever new starts end up happening in 2025. So as Shaun Hildebrand points out in the above release, at some point around 2026-2027, we are going to see a dramatic fall off in completions and new housing supply.
Even if starts magically ramped up this year (which would be unexpected), there would still be a period of relatively low completions that would need to work its way through the system. Development is, by nature, excruciatingly slow to respond to changes in demand. There's always a lag. So overall housing supply is something we're paying close attention to right now as we execute on our real estate strategies.
Chart via Urbanation
Happy new year, everyone! Yesterday we spoke about what actually happened in 2024 (and evaluated my predictions from exactly a year ago). Today, let's prognosticate about what might happen in 2025 (keeping in mind that I'm based in Toronto and so there will naturally be a bias toward this market):
Very broadly speaking, our current commercial real estate downturn started, in my opinion, around the middle of 2022. That's when sentiment started to feel different and the market was starting to respond to increasing interest rates. Over the past few years, I've been overly optimistic in terms of how soon the market would reset. But eventually I'll be right. So I'm going to call 2025 as an important turning point where we see more capitulation, more bankruptcies, and a shedding of legacy assets/deals. For the other side of the market, this will mean more new deals.
This, however, does not mean that we will see a development environment that anywhere resembles what we saw prior to 2022. On the new construction residential side (condominium and multi-family rental specifically), I think it's going to take 2-3 years for us to work through and absorb our current supply pipeline. This will be an obvious headwind for land prices. The successful projects in this environment will be located in core/prime locations, underwritten at more modest scales, and focused largely on end users.
In 2024, we saw the continued rise of more people going back to the office. Here in Toronto, the average weekday figure is approximately 73% of what it was pre-COVID (data from November 2024). This year, I think we'll see this figure get close to 90% and then likely start to level off, some five years after the first lockdowns. I think it makes sense that we'll stabilize at some number below pre-COVID levels, but I also think it'll be a number that is much higher than most people expected just a few years ago.
I am reversing my position on autonomous vehicles (relative to last year). I believe we're much further along -- specifically Waymo is -- than most people think right now. Autonomous vehicles are happening and, in 2025, I think we'll see a significant expansion of coverage across the US led by Waymo + Uber. I don't think we'll see anything earth shattering from Tesla in regards to FSD, but who knows, Elon is good at making things happen. The big test will be cities with snow. This will likely take longer.
At the time of writing this post, the price of EU carbon permits is approximately €71.98 per tonne of carbon dioxide. It's all-time high was €105.73 in February of 2023, but some/many believe that it will need to be closer to €150 by 2030 if the world hopes to reach net zero by 2050. So for this reason, I'm going to say that its price rebounds to between €90-100 this year. This is largely a guess, but I'm including it in my predictions (at least partially) because it's quantifiable and easy to score later.
Crypto and technology more broadly are going to have an awesome year in 2025. As Fred Wilson wrote on his blog yesterday, one of the things we saw in 2024 was "Silicon Valley's hostile takeover of the federal government, via an infiltration of Donald Trump's MAGA movement." The "establishment government" was seen as being antagonistic toward tech and innovation, and so the industry jumped teams. One would expect that to pay dividends this year.
More specifically, I think we're going to see a web3 consumer application that finally breaks into the mainstream. Already, I've been impressed by NFT marketplaces like Rodeo. Many people won't appreciate that it's powered by some blockchain, but that's exactly what we want. We want the underlying technology to recede into the background and for the experience/utility to come into the foreground.
And with that, I will end and leave you all with this recent tweet from Chris Dixon. It's worth clicking through and reading the entire thing.
And so this knowledge will be unfolded…
A big thank you to everyone who continues to read this blog. We're now into year 12 of this daily writing practice (my first post was in August 2013), and I'm still feeling more inspired than ever. It truly feels like we're at the dawn of so many new and exciting things: a new real estate cycle, an unprecedented innovation environment, and the list goes on. Next up, I'm going to write specifically about what we at Globizen are focused on for this upcoming year.
Cover photo by Tyler Rooney on Unsplash
Our team has been spending a lot of time underwriting sites that would fit within the City of Toronto's new Major Streets Study. The last time I checked these policies were still under appeal, but the expectation is that they will eventually come into force and start encouraging small-scale apartments up to 6-storeys on all "Major Streets" across the city. This is meaningful progress for our city, and we're excited to be working on projects in this space.
At face value, 6 storeys on all major streets sounds like every great European city you've ever been to. But after studying countless sites, what I will say is that these policies are not designed to recreate Paris or Barcelona or Berlin. Instead, they are intended to be deferential to single-family houses. You see this in the required setbacks and in the maximum building depth, among other things. We all know why this is the case, and it was probably needed as a first step, but I think it's important to point out this subtlety.
Because there are at least two effects to this: one, the end future state will not be a uniform urban street wall, like what you'd find in Europe. That is not the goal of the current policies. And two, it unnecessarily makes the smallest sites more challenging to develop. That's a real shame, because more granularity is often a positive thing for cities. So we still have work to do. But I'm optimistic we'll get there, eventually. City planning typically works in increments.