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!
Kembangan by Jason Waltman on 500px
Earlier this week I attended RealNet’s Q1 2015 market update webinar for the Greater Toronto Area. If you don’t already subscribe to RealNet, you should consider it. They’re one of the best sources for Canadian real estate market information.
During their webinars, they occasionally run interactive surveys where they ask the audience a question and participants respond using their web browser. On this particular webinar, they asked the following question, which I thought was interesting:
What is the likely housing moving by Millennials in raising their families?
A) Move Up - Embrace urban high-rise housing forms
B) Move Out - Accept extended commutes (including the Greater Golden Horseshoe and Hamilton Area) to find affordable ground oriented housing
C) Move In - Cohabitate parental homes
It’s an interesting question because it’s one that I’ve asked myself a number of times. Sure, Millennials are rushing back to cities and living in high density and walkable communities, today, but what are they going to do and where are they going to move when they start having children?
As a Millennial myself, I know that I’ve always told myself that I want to stay urban for as long as I can (i.e. Move Up). But I’m only one data point. And given the seemingly endless demand for low-rise housing in Toronto, I always felt like I was in the minority. I figured that the majority of people, at least here in this city, still want a ground-related home when it comes time to raise a family.
Putting aside economics, I still think that may be the case for a lot of home buyers. But the majority of people on this week’s RealNet webinar (which would be almost exclusively folks from the real estate industry) either think that preference is going to change (or already has) or that consumers won’t have a choice due to affordability.
50% of the people on the call answered A – move up and embrace urban high-rise housing forms. The balance was about 44% for B and 6% for C.
That’s not the outcome I expected to see. So today I’d like to re-ask this question to the Architect This City Community. Where do you think Millennials are going to move once they start having children? Please let us know in the comment section below.
We all know that the Greater Toronto Area is growing and intensifying at an incredible pace. In fact, last year the region set a record with 25,571 new condominium units completed.
If you listen to industry experts, such as George Carras of RealNet, they’ll tell you that this level of intensification — which usually means condominiums — is really a decade in the making. That’s when the government set out to explicitly encourage this type of growth.
But in the decade since that decision, we’ve seen both government and the market evolve in terms of what that intensification should look like. It started out with a largely high-rise building typology. Tall buildings were to be allowed in the downtown, as well as in specific growth nodes throughout the region. But for everything in between — the officially designated “neighborhoods” — there was to be no development.
This is what I’ll call the first stage of intensification.
Then, we started to think about mid-rise intensification along the avenues. Most of these “avenues” (also an official term) cut through those same stable neighborhoods, but the main streets were seen as an appropriate place to allow additional growth. It makes perfect sense and so guidelines were created to help dictate what this new building typology should look like.
This is what I’ll call the second stage of intensification.
And it’s one that I’d argue we’re currently living through with new mid-rise projects like DUKE in the Junction (TAS project), Kingston&Co in Kingston Road Village (another TAS project), Abacus Lofts on Dundas West, and The Hive in Etobicoke. These are all mid-rise buildings going up in established neighborhoods.
With the recent decision to also allow wood frame buildings up to 6 storeys in Ontario (instead of 4), we’ll probably see an even greater surge in mid-rise buildings once the private sector gets its head around this shift.
So what’s next?
I think it’s inevitable that we’ll eventually see low-rise intensification within our established neighborhoods. We started by avoiding them altogether, and then deciding that it was desirable to build along their periphery. But as demand for urban housing continues to increase, I believe it’s only a matter of time before we start to loosen the reins on our single family neighborhoods.
Some of you might be thinking that this is going to be a bad thing, but I actually think the opposite. Projects such as Vancouver’s Union Street EcoHeritage prove that it’s entirely possible to intensify existing neighborhoods through sensitive and beautiful infill interventions. And of course, let’s not forget about laneway housing.
The fact of the matter is that Toronto has already been intensifying its neighborhoods for a very long time — likely since the beginning — by converting single family homes into duplexes, triplexes, and other multi-family dwellings. We just haven’t been doing it in any sort of structured way.
I don’t know when this will change, but I think it’s only a matter of time. And that will be the third stage of intensification.
Image: Flickr