Today I spent the day at the Land & Development conference here in Toronto. If there was one running theme throughout the day, it was: “Holy shit, I can’t believe that X piece of land sold for $Y million. How will they (the developer) ever make the numbers work?”

Outside of the real estate development community, there’s often the perception that developers are building everywhere and that there’s lots of land left in cities, like Toronto. When you see all the cranes in the skyline, it naturally seems like we’re building a lot. Things seem easy.

But the reality is that it’s extremely difficult to find “land” in markets like Toronto and Vancouver. And by “land”, I mean properties that can be feasibly acquired/assembled, entitled, developed, and then brought to market. The way the speakers today spoke about land it’s as if it were a rare precious commodity.

I say all this, not to complain about how tough things are, but simply to shed light on the process. A developer’s job is to take a piece of property and figure out a way to create additional value. But to do that, they need to find a suitable piece of real estate. “Land” is an input.

This has implications for consumers, because inputs turn into outputs. And if one of the inputs is becoming scarcer, then it’s pretty safe to assume that the outputs, such as new housing, are also becoming scarcer.

Today I spent the day at the 11th Annual Land & Development Conference here in Toronto. I found it particularly good this year, but it’s now late, I’m tired, and I want to go watch game 6 of the NBA finals. So I think this is going to be a fairly short post.

Here’s a summary of some of my key takeaways from the day (a lot of it is Toronto-centric):

• Increasingly, the commercial and residential sides of the real estate development business are converging. And it’s being largely driven by the focus on urban intensification and mixed-use.

• This is leading to an “institutionalization” of the residential side, which has historically been the domain of smaller private/local companies and rich families.

• Merger is creating complexity around asset valuations: Is it about the income (cap rates) and/or the future development potential?

• Low rise house prices in Toronto continue to skyrocket. Supply is highly constrained. This has been the story for a number of years now.

• High rise condo prices in Toronto continue to be more or less flat (modest increase). The industry is going to need to figure out how to work with and compliment the current surge in rental apartment development. There is an element of competition between the two asset classes.

• According the RealNet’s new home price index, the spread between low-rise and high-rise housing in the Greater Toronto Area widened to $326,659 as of this past April (2015).

• Rental Apartment Case Studies: Motion on Bay by Concert Properties (Bay and Dundas) was underwrote at $2.60-2.80 psf rents back in 2009. Rents are now in the $3 range. The Heathview by Morguard (Bathurst & St Clair) had $2.80-2.90 psf rents in its pro forma. It achieved and beat these numbers.

• There’s a flood of Asian money coming into (1) Vancouver and then into (2) Toronto looking for development projects. There appears to be a lot of impatient and/or dumb capital out there. Challenge remains finding good development sites.

• Vancouver is well ahead of Toronto in terms of transit oriented development. The initial intent in Ontario was to create a link between the greenbelt that surrounds Toronto + land use (intensification) + transit. But we haven’t been doing a good job of building transit and developing around it. This ties in nicely with a post I wrote called: The case for planning transit around minimum population densities.
  

I will end by saying that I found there to be greater transparency at today’s conference. There was a lot of talk about deal specifics and I don’t remember seeing this much detail at past conferences. 

Maybe I just wasn’t paying attention closely enough before or maybe the industry is slowly becoming more transparent. I hope it’s the latter.

If you were there today and I missed something groundbreaking, please share it in the comments below!

Today I spent the day at the Land & Development conference here in Toronto. If there was one running theme throughout the day, it was: “Holy shit, I can’t believe that X piece of land sold for $Y million. How will they (the developer) ever make the numbers work?”

Outside of the real estate development community, there’s often the perception that developers are building everywhere and that there’s lots of land left in cities, like Toronto. When you see all the cranes in the skyline, it naturally seems like we’re building a lot. Things seem easy.

But the reality is that it’s extremely difficult to find “land” in markets like Toronto and Vancouver. And by “land”, I mean properties that can be feasibly acquired/assembled, entitled, developed, and then brought to market. The way the speakers today spoke about land it’s as if it were a rare precious commodity.

I say all this, not to complain about how tough things are, but simply to shed light on the process. A developer’s job is to take a piece of property and figure out a way to create additional value. But to do that, they need to find a suitable piece of real estate. “Land” is an input.

This has implications for consumers, because inputs turn into outputs. And if one of the inputs is becoming scarcer, then it’s pretty safe to assume that the outputs, such as new housing, are also becoming scarcer.

Today I spent the day at the 11th Annual Land & Development Conference here in Toronto. I found it particularly good this year, but it’s now late, I’m tired, and I want to go watch game 6 of the NBA finals. So I think this is going to be a fairly short post.

Here’s a summary of some of my key takeaways from the day (a lot of it is Toronto-centric):

• Increasingly, the commercial and residential sides of the real estate development business are converging. And it’s being largely driven by the focus on urban intensification and mixed-use.

• This is leading to an “institutionalization” of the residential side, which has historically been the domain of smaller private/local companies and rich families.

• Merger is creating complexity around asset valuations: Is it about the income (cap rates) and/or the future development potential?

• Low rise house prices in Toronto continue to skyrocket. Supply is highly constrained. This has been the story for a number of years now.

• High rise condo prices in Toronto continue to be more or less flat (modest increase). The industry is going to need to figure out how to work with and compliment the current surge in rental apartment development. There is an element of competition between the two asset classes.

• According the RealNet’s new home price index, the spread between low-rise and high-rise housing in the Greater Toronto Area widened to $326,659 as of this past April (2015).

• Rental Apartment Case Studies: Motion on Bay by Concert Properties (Bay and Dundas) was underwrote at $2.60-2.80 psf rents back in 2009. Rents are now in the $3 range. The Heathview by Morguard (Bathurst & St Clair) had $2.80-2.90 psf rents in its pro forma. It achieved and beat these numbers.

• There’s a flood of Asian money coming into (1) Vancouver and then into (2) Toronto looking for development projects. There appears to be a lot of impatient and/or dumb capital out there. Challenge remains finding good development sites.

• Vancouver is well ahead of Toronto in terms of transit oriented development. The initial intent in Ontario was to create a link between the greenbelt that surrounds Toronto + land use (intensification) + transit. But we haven’t been doing a good job of building transit and developing around it. This ties in nicely with a post I wrote called: The case for planning transit around minimum population densities.
  

I will end by saying that I found there to be greater transparency at today’s conference. There was a lot of talk about deal specifics and I don’t remember seeing this much detail at past conferences. 

Maybe I just wasn’t paying attention closely enough before or maybe the industry is slowly becoming more transparent. I hope it’s the latter.

If you were there today and I missed something groundbreaking, please share it in the comments below!