Population growth -- so, immigration -- is a crucial demand driver for the real estate industry, and for the growth of the overall Canadian economy. Last year, Canadian immigration averaged about 28,400 people per month, according to a recent equity research report (on the apartment sector) by TD Bank. The total number for 2019 was 341,175 people.
Not surprisingly, this number fell off in March of this year with the closing of our borders. In March, immigration declined to 18,560 per month and bottomed out in April with only 4,135 immigrants being admitted to the country. This has no doubt been a factor in some of the rent softening that we have seen in the multi-family space.
While it's unlikely that Canada will meet its 2020 target of 320,000 to 370,000 new immigrants, it's important to note that we have seen a fairly swift recovery (see above). In June of this year, the number rebounded to 19,175 new immigrants. And I'm certain that most of this cohort still went straight toward our biggest cities.
It's also important to keep in mind that Canada's three-year goal (2020-2022) remains 1 million new immigrants. TD is of the opinion that this target is still attainable, as this "short-term immigration headwind" is likely to flip into a tailwind once our borders become more porous and we get to the other side of this pandemic.
Looking back on this post from earlier in the week, I think it's pretty safe to say that you could bucket this immigration blip into (1) short-term dislocation. It is not a (3) long-term structural change. Canada remains one of the greatest countries in the world. We will continue to attract smart and ambitious people from all around the world, and most will want to settle in our urban centers.
All of this, of course, will be good for the real estate industry and will be vital to the strength of the Canadian economy as a whole.
Chart: TD Securities
A few days ago it was announced that Blackstone has entered the multi-family space in Canada through a JV with Starlight Investments. They are buying 6 undisclosed multi-family buildings. 5 in Toronto. And 1 in Montréal. The total is 746 units.
The message in the press release is that apartment buildings in Canada are difficult to find and buy at meaningful scale. Most are held by small private investors and those owners are reluctant to sell.
At the same time, places like Toronto and Montréal have built relatively little purpose-built rental over the past few decades. Supply is restricted.
This is an interesting stat from the announcement: The Canadian rental market is about 2 million housing units. Dallas, alone, is 500,000 units. But this must only be purpose-built, investment grade, and/or some other subset of units. Because there are over 14 million private households and over 4.4 million rented households in Canada (2016 data).
They also hint at a longer-term relationship between Blackstone and Starlight. Perhaps that will translate into some purpose-built rental development in the future.
On a related note, I recently picked up the book, King of Capital: The Remarkable Rise, Fall, and Rise Again of Steve Schwarzman and Blackstone. It was published in 2012, so it’s not new. But as soon as I stumbled upon it, I picked it up. It was new to me.
Once I’m finished it maybe I’ll report back here on the blog.
Photo by Warren Wong on Unsplash
The Detroit Free Press recently published a summary of some of the new rental apartments coming online in and around downtown Detroit. Here’s the map that they published along with their piece:
Population growth -- so, immigration -- is a crucial demand driver for the real estate industry, and for the growth of the overall Canadian economy. Last year, Canadian immigration averaged about 28,400 people per month, according to a recent equity research report (on the apartment sector) by TD Bank. The total number for 2019 was 341,175 people.
Not surprisingly, this number fell off in March of this year with the closing of our borders. In March, immigration declined to 18,560 per month and bottomed out in April with only 4,135 immigrants being admitted to the country. This has no doubt been a factor in some of the rent softening that we have seen in the multi-family space.
While it's unlikely that Canada will meet its 2020 target of 320,000 to 370,000 new immigrants, it's important to note that we have seen a fairly swift recovery (see above). In June of this year, the number rebounded to 19,175 new immigrants. And I'm certain that most of this cohort still went straight toward our biggest cities.
It's also important to keep in mind that Canada's three-year goal (2020-2022) remains 1 million new immigrants. TD is of the opinion that this target is still attainable, as this "short-term immigration headwind" is likely to flip into a tailwind once our borders become more porous and we get to the other side of this pandemic.
Looking back on this post from earlier in the week, I think it's pretty safe to say that you could bucket this immigration blip into (1) short-term dislocation. It is not a (3) long-term structural change. Canada remains one of the greatest countries in the world. We will continue to attract smart and ambitious people from all around the world, and most will want to settle in our urban centers.
All of this, of course, will be good for the real estate industry and will be vital to the strength of the Canadian economy as a whole.
Chart: TD Securities
A few days ago it was announced that Blackstone has entered the multi-family space in Canada through a JV with Starlight Investments. They are buying 6 undisclosed multi-family buildings. 5 in Toronto. And 1 in Montréal. The total is 746 units.
The message in the press release is that apartment buildings in Canada are difficult to find and buy at meaningful scale. Most are held by small private investors and those owners are reluctant to sell.
At the same time, places like Toronto and Montréal have built relatively little purpose-built rental over the past few decades. Supply is restricted.
This is an interesting stat from the announcement: The Canadian rental market is about 2 million housing units. Dallas, alone, is 500,000 units. But this must only be purpose-built, investment grade, and/or some other subset of units. Because there are over 14 million private households and over 4.4 million rented households in Canada (2016 data).
They also hint at a longer-term relationship between Blackstone and Starlight. Perhaps that will translate into some purpose-built rental development in the future.
On a related note, I recently picked up the book, King of Capital: The Remarkable Rise, Fall, and Rise Again of Steve Schwarzman and Blackstone. It was published in 2012, so it’s not new. But as soon as I stumbled upon it, I picked it up. It was new to me.
Once I’m finished it maybe I’ll report back here on the blog.
Photo by Warren Wong on Unsplash
The Detroit Free Press recently published a summary of some of the new rental apartments coming online in and around downtown Detroit. Here’s the map that they published along with their piece:
Based on this article, demand is outstripping new supply and rents are starting to push above $2 per square foot. This strikes me as a solid number given that there are also for sale lots/houses in the city going for $10,000.
Going back to some of the posts I have written about rental apartment development in Toronto, you might remember that $3 psf is roughly our magic number given current cost structures.
In some special circumstances you might be able to get a project off the ground with rents closer to $2 psf, but that’s an exception to the rule. There are many areas in the Toronto region with $2 psf rents and few, if any, new rental apartments.
But Detroit is obviously a different city, as is every real estate market.
Land would be cheaper. Many of these new rental apartments are conversions of existing buildings (which were probably bought for cents on the dollar). And I wouldn’t be surprised if there are tax abatements and other incentives to encourage more development.
I also wonder if people in the city aren’t being at least partially drawn to multi-family buildings because of the safety and security benefits. That’s something that certainly came up when I was in Detroit last weekend.
Regardless, this is a good news story for Detroit, which is not always the story you hear people telling of the city.
Based on this article, demand is outstripping new supply and rents are starting to push above $2 per square foot. This strikes me as a solid number given that there are also for sale lots/houses in the city going for $10,000.
Going back to some of the posts I have written about rental apartment development in Toronto, you might remember that $3 psf is roughly our magic number given current cost structures.
In some special circumstances you might be able to get a project off the ground with rents closer to $2 psf, but that’s an exception to the rule. There are many areas in the Toronto region with $2 psf rents and few, if any, new rental apartments.
But Detroit is obviously a different city, as is every real estate market.
Land would be cheaper. Many of these new rental apartments are conversions of existing buildings (which were probably bought for cents on the dollar). And I wouldn’t be surprised if there are tax abatements and other incentives to encourage more development.
I also wonder if people in the city aren’t being at least partially drawn to multi-family buildings because of the safety and security benefits. That’s something that certainly came up when I was in Detroit last weekend.
Regardless, this is a good news story for Detroit, which is not always the story you hear people telling of the city.
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