A Falling Vacancy Rate
Once per year, Canada Mortgage and Housing Corporation provides a comprehensive review of rental markets across Canada. The survey occurs during the first half of October. Results for this year were released on November 28.
For October 2018, the vacancy rate was 2.4%, which was a substantial drop from the 3.0% rate recorded a year earlier. The vacancy rate for 2018 is far below the average of 3.3% for the entire period shown in this chart. The reduction in vacancies resulted in more rapid rent increases, at 3.5% this year. Over the entire period shown, the average increase was 2.6%. This data shows that the situation has become increasingly challenging for Canada’s tenants.
Vacancy rates fell in 7 of the 10 provinces. Manitoba, BC, and Ontario saw small increases in their vacancy rates. These three provinces also saw the most rapid rent increases. The lowest vacancy rate is now in PEI, followed by BC and Ontario. The highest vacancy rates are in the three provinces where economies have been hurt by the plunge in oil prices (Saskatchewan, Newfoundland and Labrador, and Alberta). These provinces saw the weakest rent increases.
Since the data is collected only once per year, it is difficult to construct any models for analysis or forecasting of rental markets. The author’s experimentation over many years, for many different communities across Canada, has resulted in statistical models that have low “reliability”. But, those low-reliability results have been surprisingly consistent, and have led to a conclusion: the two most important drivers of changes for the vacancy rate are job creation during the past year (which allows more people to buy or rent housing) and total completions of housing during the past year.It is tempting to expect that completions of new-rental apartments would be important, but the author’s analysis has found that this is rarely the case.
On reflection, this makes sense:
- The rental market is part of a complex housing system in which there are very large flows between ownership and renting, and between different forms of housing.
- Expansion of the total stock of housing offers people more choice: even when people move into new home ownership dwellings, that move sets of a chain of other moves. Much of the time, that chain of moves includes someone moving out of a rental, which creates an opportunity for a new tenant.
- Moreover, the tenure on a new dwelling is not fixed for all time. In particular, it is well known that many new condominium apartments are occupied as rentals. In addition, some low-rise dwellings (single-detached, semi-detached, and town homes) are ostensibly built for ownership but are made available as rentals.
It is also tempting to expect that changes in resale market activity will affect the rental market. But, once again while the statistical analysis produces unreliable results, over many repetitions it has been found that resale activity has little effect on vacancy rates. This also makes sense on reflection. Most of the time a resale transaction does not add to total demand for housing (the buyer usually moves out of a different dwelling) and it usually does not alter the total supply of housing (unless the new buyer adds or removes a basement apartment).
Our impressions about the employment situation are largely based on data from Statistics Canada’s Labour Force Survey (“LFS”). This data indicates that during the year up to this September, employment in Canada expanded by 1.2%. This is slower than the rate of population growth (1.3%), and this therefore should be considered a mediocre result. Based on this data, we would expect that housing demand would be weak, and the drop in the vacancy rate this year would be a surprise.
However, the data from the LFS is derived from a sample survey and like all such surveys, it can produce errors. Statistics Canada has a second survey (Survey of Employment, Payrolls and Hours, or “SEPH”), which is based on data from employers, and is therefore likely to produce more-accurate data. This data receives much less attention because it is published almost two months after the LFS (the most recent data is for August). The two datasets usually tell similar stories. At present, however, SEPH shows growth of 1.8% (as of August) versus the 1.2% shown by the LFS (as of September).
Over the entire period shown in this chart, job growth averaged 1.5% per year. Strong job growth in both 2017 and 2018 helps to explain the drops in the vacancy rates that were seen in both years. Housing completions were at above average levels during 2017 and 2018 (the chart shows the figures for 12 month periods ending in September). These elevated volumes of new housing supply provided some relief for rental markets. Without this additional housing supply, the drops in the vacancy rates in 2017 and 2018 would have been even larger than they were.
The mortgage stress tests have resulted in reduced buying of new and existing homes. It takes some time for changes in purchases of new homes to translate in reduced housing starts (and even longer for housing completions to be affected). Increasingly, it appears that housing starts have peaked, and may have started to fall. The next chart illustrates that total housing starts were very strong during 2016 and 2017, but the trend has started to fall during 2018. A more detailed examination would show that housing starts have turned sharply for low-rise dwellings (single-detached, semi-detached, and town homes) but remain very strong for apartments. During 2019, starts for apartments will gradually reflect the reductions in sales that have occurred this year. This is explored in more detailed within the Housing Market Digest reports (for Canada and the regions) that can be found here: https://goo.gl/kJ6mcC
Following from these trends for housing starts, housing completions are expected to fall only slightly during the coming year, meaning that new housing supply will continue to provide some relief for the rental sector. However, housing completions are expected to fall considerably during 2020. As for employment, higher interest rates can be expected to gradually weigh on job creation during 2019 and 2020.
For 2019, a combination of continued high levels of housing completions and a slowdown of job creation should mean that there will be little change in the apartment vacancy rate (perhaps a drop to 2.3% from the 2.4% seen in 2018). The low vacancy rate can be expected to result in continued rapid rent increases, at a rate of at least 3%.
During 2020, the reduction of housing completions that will result from the mortgage stress tests will add to pressures in the rental sector. For 2020, the vacancy rate is expected to drop further (approaching 2.0%) and rent increases will quicken.
Government Policies at Cross Purposes
The federal government has announced plans to make major expenditures in support of affordable housing ($40 billion over 10 years). The federally-mandated mortgage stress tests, by reducing movements out of renting, will add to pressures within rental housing markets, and are operating at cross-purposes to the National Housing Strategy.
Disclaimer of Liability
This report has been compiled using data and sources that are believed to be reliable. Mortgage Professionals Canada Inc.
accepts no responsibility for any data or conclusions contained herein. Completed by Will Dunning, November 28, 2018.
Copyright: Mortgage Professionals Canada 2018
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In late October, the Bank of Canada (“BOC”) announced the third 25 bps rate hike this year, which brought the overnight target rate to 1.75%. The increase comes after continued strength in economic figures and the negotiation of the “new NAFTA” trade deal with Mexico and the U.S. This pushed the prime rate of major Canadian banks to 3.95%.
Spread premiums between the Government of Canada (“GOC”) 3, 5, and 10-year term bond yields remain extremely tight. Through Q3/18, the premium between 3-year and 10-year tightened by 4 bps, while the premium between 5-year and 10-year remained unchanged.
In Q3/18, Telus sold its Vancouver headquarters, Telus Garden, to a partnership of investors represented by Regina-based Greystone Managed Investments for an undisclosed amount. The property was built as a joint-venture by Telus and Westbank Corp. for $750 million and consists of an office tower and residential building in Downtown Vancouver. Telus is expected to generate approximately $170 million in profit on the sale.
Lenders and borrowers have maintained balanced supply and demand for the 5th straight month with commercial mortgage spreads staying flat. 5-year deals are pricing 145 bps to 160 bps over GOC bonds for top quality assets, while 10-year spreads are pricing at a 10 bps premium for similar risk. The liquidity premium of commercial mortgage spreads over BBBrated corporate bonds remained generally unchanged since our last report with the premium down slightly from 64 bps to 62 bps as a result of a slight increase in corporate spreads. This moves the liquidity premium away from the long-term average of 70 bps.
The CMBS market continues to be challenged by unattractive profitability due to tightening commercial mortgage spreads relative to CMBS bonds. Recent weighted average breakeven mortgage spread for new CMBS issuance was approximately 225 bps and with current spreads around 190 bps, the prospects of profitability falls short by 35 bps. Until the commercial mortgage spreads move past the CMBS breakeven point, new issuance activity is expected to be thin.
Senior Unsecured Debt
In Q3/18, senior unsecured debt issuance slowed to $625 million, down from $1.65 billion in Q2/18. However, cumulative 2018 issuance is up 27% on a YTD basis and makes up 86% of the total issuance in 2017. Since our last report, Crombie REIT issued a $75 million, 2.9- year note with a 170 bps spread. Overall, spreads on BBB-rated unsecured debt decreased through Q3/18 to 145 bps. For now, spreads on unsecured REIT debt continue to receive cheaper investor dollars compared to conventional commercial mortgages with a difference of only 10 bps at the end of Q3/18.
Spreads on multi-family CMHC-insured loans remained stable since our last report with spreads ranging between 80 bps and 105 bps over GOC on 5-year terms and between 85 bps and 110 bps over GOC on 10-year terms. This is partly due to the relatively unchanged spreads on CMHC-backed Canada Mortgage Bonds (“CMB”). 5-year CMB spreads only decreased 3 bps to 28 bps and the 10-year CMB spreads remained flat between July and September.
In Q3/18 the British Columbia Securities Commission (BCSC) announced it will not be renewing the exemption that previously allowed Mortgage Investment Corporations (MICs) to operate in BC without engaging in the onerous registration process with the BCSC. The impact of this announcement will be felt in the local industry as many small MICs will now have to endure registration costs.
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Mortgage Loan Insurance for Multi-Unit Residential Properties
CMHC mortgage loan insurance enables Approved Lenders to offer greater financing choices to borrowers providing standard rental housing accommodations in multi-unit residential buildings.
Construction financing, purchase or refinance.
PROPERTY TYPE AND SIZE
● Projects providing standard rental housing
● Minimum project size of 5 units.
Not to exceed 30% of gross floor area nor 30% of total lending value. Loan relating to non-residential component must not exceed 75% of lending value of non-residential component.
MAXIMUM LOAN-TO-VALUE RATIO
Construction financing: up to 85% of lending value as determined by CMHC or 100% of cost, whichever amount is less.
Purchase: up to 85% of the purchase price or lending value as determined by CMHC, whichever amount is less.
Refinance: up to 85% of the lending value as determined by CMHC.
Purchase/Refinance with improvements: up to 85% of the ‘as is’ or ‘as improved’ lending value, as determined by CMHC.
Is your multi-unit project eligible for affordable housing flexibilities or an energy-efficient housing premium refund? Check out the Affordable Housing and Energy-Efficient Properties information sheets for helpful information.
Construction financing: During construction the loan can be advanced up to 75% of costs or lending value, whichever is less. The advancing of additional funds is subject to rental achievement.
● Construction costs are to be reviewed and recommended by a quantity cost surveyor (flexibility may be provided in small markets).
● Construction must be completed under a fixed price contract with a general contractor or under a construction management arrangement.
● First and last advances must be approved by CMHC. The lender has the option to approve advances occurring between the first and last.
Purchase or refinance of existing properties with improvements:
● Where rental income is not disrupted during construction, the loan advances will be limited to the greater of 75% of the “as improved” value or 85% of the “as is” value.
● Where rental income is disrupted, the maximum advance allowed during construction is based on 75% of the “as improved” value. The advancing of additional funds is subject to rental achievement.
Where loan advances are required above 75% level, authorization to advance will be given by CMHC once the Approved Lender has provided evidence acceptable to CMHC, that the property has achieved the projected rent level.
CMHC may consider amortization periods of up to 40 years. A premium surcharge applies for amortization periods greater than 25 years. The amortization period must not exceed the remaining economic life of the property, as determined by CMHC.
First, second and pari passu mortgages are permitted.
Second mortgages are permitted as an interim measure.
GENERAL GUIDELINES FOR BORROWER ELIGIBILITY
The borrower must demonstrate competence and experience commensurate with the size and type of property for which mortgage loan insurance is being sought. The borrower or a corporation affiliated with the borrower must have at least five years of demonstrated management experience in the operation and management of similar multi-unit residential properties. Alternatively, a formal property management contract must be in place with a professional third party property management firm.
BORROWER NET WORTH
The borrower must have minimum net worth equal to at least 25% of the loan amount being requested, with a minimum of $100,000.
Construction financing: The borrower and guarantor must provide their covenant/guarantee for 100% of the outstanding amount owing under the housing loan from time to time until stabilized rents have been achieved for 12 consecutive months, at which time the additional guarantee required may be reduced to 40% of the outstanding loan amount owing under the mortgage, from time to time.
Purchase or refinance of existing properties: For new loans on existing residential rental properties, the guarantee amount required by CMHC is 40% of the outstanding loan amount owing under the mortgage, from time to time.
Limited recourse: Where a loan does not exceed 65% of lending value, as determined by CMHC, Approved Lenders may request that the loan be considered non-recourse to the borrower. The recourse of the Approved Lender shall be limited to the property and the other assets taken as security and not personally against the borrower.
CMHC may require additional risk mitigation measures as it deems appropriate (e.g. equity retention, replacement reserves, collateral security, personal guarantees).
CMHC mortgage loan insurance provides access to preferred interest rates lowering borrowing costs for the construction, purchase and refinance of multi-unit residential properties and facilitates renewals throughout the life of the mortgage.
Units in high-rise condos are a hot commodity, but critics worry they will hurt the city’s vitality
On a cold Saturday morning in April, a small group of hockey fans mixed with real estate investors in the showroom of one of the many upscale condo developments in the city.
The 55-storey tower bills itself as “Montreal Canadiens-inspired,” and is being built in the shadow of the Bell Centre, near two other Habs-themed high-rises.
Guy Carbonneau, the team’s one-time captain and coach, was on-hand signing autographs, and hawking units.
“The Habs are built on a history of greatness and I believe Tour des Canadiens 3 will do the same for the Montreal real-estate landscape,” Carbonneau said, reading from a prepared statement.
Such is the velocity of Montreal’s condo market these days that everyone seems to be sucked into its orbit.
While the city’s real-estate market is enjoying a sustained growth period, downtown condo sales have been particularly hot.
Last year, 3,365 condo units were sold in central Montreal, a record that surpassed previous highs reached in 2012 and 2006, according to figures compiled by Altus Group, a real-estate data firm. There was a near 22-per cent increase in the fourth-quarter alone.
Former Candiens captain and coach Guy Carbonneau met with fans and investors at a recent event in the showroom of the Tour des Canadiens 3 condo development. (Jonathan Montpetit/CBC)
High-rise condo boom
Much of this growth was driven by new construction projects, such as the Tour des Canadiens 3, suggesting there is no longer any excess supply on the market.
“We’ve exhausted the inventory of unsold new units that were in the big towers during the difficult years of 2013, 2014 and 2015,” said Vincent Shirley, director of real-estate development at Altus.
“Today it is the launch of condo projects that is really effervescent. They will account for 50 per cent of first-quarter sales this year.”
Foreign investors have started to take note. They now account for roughly 1.7 per cent of Montreal purchases, though that’s small compared to Toronto (3.4 per cent) and Vancouver (4.8 per cent).
The high-rise condos in downtown Montreal are a bigger draw for professionals with no children or older people with equity looking to downsize. Market observers estimate as many as 25 per cent will be used as investments.
“What we’re seeing is people are wanting to live in larger spaces in the downtown. They want great views and to be able to walk to everything,” said Rizwan Dhanji, a residential sales executive with Canderel, the developer behind Tour des Canadiens.
High-rise projects with names like Crystal, YUL and the Drummond are the most ostentatious manifestations of the city’s hot condo market. (Jonathan Montpetit/CBC
In the condo development’s showroom, prospective buyers can visit a mock-up of a two-bedroom, 1000 square-foot unit.
Hints of the lifestyle on offer are embedded in the furnishings: modern leather-backed chairs, a crystal decanter on a quartz kitchen countertop, wooden Henriot box tucked away in the corner.
A floor-to-ceiling high-resolution photograph of the Saint-Lawrence River represents the view available to those who can afford the upper-level units.
Outside, Montreal’s new condo towers — imposing steel and glass structures rising 100 meters or more — are impossible to miss.
City of glass
With names like Crystal, YUL and the Drummond, they are the most ostentatious manifestations of the city’s hot condo market.
Many consider them to be its most problematic element as well.
Some of these concerns will be familiar to anyone who has followed recent developments in the country’s two other major real-estate market.
These include worries about affordability, which has declined steadily in Montreal since 2015. And some municipal politicians have mooted the need for a foreign-buyers tax.
But alongside the economic, there are architectural concerns. Not only have these residential skyscrapers reshaped the city’s skyline, they have dramatically altered the pedestrian experience along René Lévesque Boulevard and large parts of Griffintown.
In the condo development’s showroom, prospective buyers can visit a mock-up of a two-bedroom, 1,000 square-foot unit. (Jonathan Montpetit/CBC)
Like all skyscrapers, the new downtown condo towers block out sunlight and deflect air currents.
“You need lead shoes just to stay on the ground because of the wind vortex,” joked Dinu Bumbaru, policy director of the urban advocacy group Heritage Montreal.
And if the condo towers can be unpleasant to walk by, some feel they’re not much better to look at either.
“I don’t see virtue in any of them. It’s not architecture, it’s commodity,” said Phyllis Lambert, founder of the Canadian Centre for Architecture and an influential architecture critic.
“Montreal used to be a place where you would have high-rise buildings with light and air between them. But now it’s just a cavern down Réné-Lévesque.”
Thinking beyond boom-and-boom
Neither Lambert nor Bumbaru are opposed to downtown condo-living per se. Indeed, both acknowledge the need for mid-rise residential building to combat sprawl.
But they are concerned that many of the high-rise condos are being built with little consideration for the impact they will have on surrounding neighbourhoods.
The Projet Montréal administration is expected to draw up a new master plan this year, which will guide zoning and development decisions.
They hope it will encourage a greater emphasis on the aesthetics of high-rise towers and the “strollability” of the surrounding area, by ensuring new developments don’t block out sunlight or include street-level stores, for instance.
Community groups, parents and the Commission Scolaire de Montréal (CSDM) have been pushing for a new French-language school in the downtown area, between Atwater and University streets. (Verity Stevenson/CBC)
Mayor Valérie Plante has also suggested making the downtown more accessible for families is a priority for her administration.
But many of the new condo developments don’t contribute to that goal, said Lambert.
She was dismayed to see that the development on the site of the old Montreal Children’s Hospital was allowed to proceed without setting aside space for an elementary school, which the neighborhood needs urgently.
“There isn’t proper planning in Montreal,” Lambert said.
Bumbaru, whose group intends to contribute several proposals for the new master plan, agreed. Proper planning, he said, should consider the city’s needs beyond the current boom in the real-estate market.
“In the past, we managed to generate genuine neighbourhoods with real life in them. But you wonder if the kind of building we’re doing today will support authentic city life because there is no room for families. The units are basically there to generate short-term gain for builders and investors,” he said.
“We have to raise our planning skills in this city.”
Jonathan Montpetit · CBC News ·
Bylaw requiring real estate developers to build minimum number of parking spots to be nixed
Mayor Valérie Plante said she wants to amend the bylaw so that parking spots are no longer mandatory at new residential buildings in the Ville-Marie borough. (Paul Chiasson/The Canadian Press)
Condo developers will no longer be required to build a minimum number of parking spots at new housing projects in Ville-Marie, as the Montreal borough plans to change that requirement today.
A city bylaw currently forces residential developers to build a number of parking spots that’s proportional to the number of housing units, among other factors.
If that number is not met, they have to pay a fine of $80,000 for each missing parking spot.
Mayor Valérie Plante said the bylaw is outdated and that several developers have pleaded with the city to make exceptions.
She wants to amend the regulation so that parking spots are no longer mandatory at new residential buildings.
The Ville-Marie borough — which includes the city’s downtown core, and runs east-west from the railway tracks a few streets east of Frontenac Street to Atwater Avenue — is expected to vote on the measure at its meeting Tuesday.
“I heard you, you believed this bylaw was a bit passé. So we’re getting rid of it,” said Plante, speaking at an event hosted by the Urban Development Institute of Quebec, a commercial real estate lobby group, on Monday.
She said a required minimum number of bike racks will remain in place, though.
“We want to give developers the flexibility to decide, depending on the target population and the distance from public transit, whether it is really necessary to build parking spaces,” Plante said.
The group’s CEO, former Parti Québécois leader André Boisclair, said he welcomed the planned change.
“This is a good thing, especially since households and young households in particular, behave differently than those of their elders,” he said.
More affordable housing units
While builders in Ville-Marie will no longer have to dig out space for parking, they soon will have to include affordable housing units in their plans.
Plante said the city has one year to draft the bylaw that will make the affordable units mandatory, and it plans to hold consultations through the city’s public consultation office (OCPM).
Plante says the city is also working on a bylaw that would require large real estate projects to include a certain number of affordable housing units. (Paul Chiasson/The Canadian Press)
The new rules, which were one of Plante’s election campaign promises, are expected to come into effect in July 2019.
Developers want to see the bylaw as soon as possible to see how it would affect future projects, Plante said, and the city is calculating the financial impact they might incur.
“We want to be reassuring — we’re working collegially with the different stakeholders,” she said.
The City of Montreal’s metropolis status, secured by former mayor Denis Coderre, grants it the power to make it necessary to have a minimum number of affordable housing units in large real estate projects.
CBC News ·
With files from Radio-Canada
Middle-class families in Ottawa will benefit from 243 new rental units being built in the city with an investment from the federal government.
Two projects will be financed through the CMHC’s Rental Construction Financing initiative including $70.8 million for the construction of a twenty-seven storey building with 227 rental housing units. More than 200 will have rents lower than 30% of median household income in the area.
“The project represents a major step forward in sustainable design with ambitious design targets to reduce energy consumption by 50% and reduce carbon emissions by over 75% with an integrated geothermal system for the project,” said Neil Malhotra, Vice President, Claridge Homes who will build the 70 Gloucester development.
The other will be $3.9 million for a passive housing Centretown Citizens Ottawa Corporation project on Arlington Avenue. It will feature 16 rental housing units with rents well below 30% of median household income in the area.
“Through the National Housing Strategy, more middle class Canadians – and those working hard to join it – will find safe, accessible and affordable homes where their families can thrive and have the stability and opportunities they need to succeed. Our Government is committed to increasing the supply of rental units for Canadians through projects like the ones we are announcing today,” added Jean-Yves Duclos, the Minister responsible for Canada Mortgage and Housing Corporation.
by Steve Randall Ι 24 Sep 2018
Investment activity in commercial real estate in British Columbia has continued its bull run in the first half of 2018.
A new report from Avison Young says there were 102 deals with a total value of $3.04 billion, the second highest on record for both deal count and total dollar volume.
However, a more cautious approach is being shown by investors in residential land amid rising political uncertainty, rising construction costs, and affordability issues.
Investors are questioning the high land values, especially in Vancouver. But for other CRE sectors, demand remains strong.
“Rising land values had the effect of increasing the cost of not only land, but any and all commercial real estate assets that included a land play,” comments Avison Young Principal Bal Atwal. “This has been one of the contributing factors of cap rate compression for a large majority of investment sale transactions over the last few years. As the land market now starts to take a slight breath, it remains to be seen over the next few months if the market will maintain its recent upward trajectory, stabilize at current levels or begin to falter.”
How the sectors are performing
Office investment sales activity in BC generated more than $1 billion in the first half of 2018 with 23 transactions valued at $1.04 billion.
The sale of BC retail assets remained exceptionally strong in the first half of 2018 with 43 transactions valued at $1.55 billion following the record-smashing retail investment sales performance of 2017.
Industrial investment activity still remained strong in the first six months of 2018 with 36 industrial transactions valued at $449 million – a slight decline from the first half of 2017 when 37 deals valued at $456 million were completed.
Sales activity of BC multi-family assets remained at historic heights with 42 transactions valued at $674 million in the first half of 2018 with the number of deals falling just short of the first half of 2017 (46) but with greater dollar volume ($652 million) than what was recorded a year ago.
by Steve Randall Ι 24 Sep 2018
Investment in Edmonton’s multi-family residential rental and industrial market helped fuel a record-breaking quarter in 2018 as the province continues to claw its way out of recession.
According to data released by CBRE Limited, Edmonton had its best quarter ever in Q2 this year, recording $1.49 billion in commercial real estate investments, representing a 51 per cent increase from the previous quarterly record of $994 million set in the fourth quarter of 2016. This brings Edmonton’s first half investment total to $2.07 billion, which is an all-time high for a half-year period and up from the previous record of $1.7 billion set in the second half of 2016.
Dave Young, executive vice-president with CBRE Limited, said Friday the growth in investment in the multi-family market is being spurred on by consumers looking for high quality apartment buildings, especially in the downtown core.
“We’re starting to see a transition from old to new,” said Young. “If you look at the inventory of apartment buildings, a lot of that was built from the mid-1950s to maybe the early-1980s, so you have a lot of older stock out there and it’s not giving what tenants are demanding.”
Tenants are looking for newer amenities that older apartment buildings don’t have, such as en suite laundry, and developers are beginning to take advantage of that demand.
Ice District has helped to fuel the demand within the downtown core, said Young, but it’s also about a shift in mindset.
“It’s urbanization, it’s densification. In terms of transportation patterns, in terms of traffic and in terms of transit, everything is focused on an urban lifestyle and we’re finally getting to see that,” said Young, citing The Hendrix apartment building, 9733 111 St., as an example.
“Ice District, for sure, has had an impact on our downtown core for the positive, but you also look at 104 Street from basically 100 Avenue all the way to 104 Avenue, there’s downtown urban living there that wasn’t there when I got into this business in 1990.”
There is still some demand for development around the Anthony Henday, Young says, but it’s not as active as downtown.
Out with the old
The demand for higher quality buildings is also being felt in industrial markets.
Tenants are really demanding more functional space and are being more strategic where they invest, said Young. Vacancy rates remain healthy, but the majority of future vacancies will be in older industrial buildings that just aren’t as adaptive.
“It’s kind of like the old apartment buildings where you see tenants getting sucked out into the new ones, the same thing is happening in the industrial buildings,” said Young. “The days of a 19-foot, distribution building just off 142 Street and the Yellowhead, they’re gone.”