Building over the past couple of years, a culmination of economic forces have gathered strong headwinds into the sails of the multi-residential markets in Southern Ontario, particularly in hotspots like the GTA and Ottawa. Apartment rental rates are rising significantly, fuelling a demand for prime multi-residential portfolios, while the supply of these assets is rather limited. Primecorp Commercial Realty has had the distinct privilege of brokering a range of recent transactions in the primary and secondary markets of this highly competitive space. The residential market is seeing record high transactions, and some amazing investment and business opportunities.
Last September, Primecorp Commercial Realty was pleased to announce the sale of two major multi-residential real estate portfolios, in the pivotal markets of Hamilton and London, Ontario, totaling $302.7 million CAD, in our capacity as Co-Advisor with TD. The GTA, Southern Ontario and Ottawa are key markets where our National Multi-Residential Investment Team, lead by Primecorp Co-Founders Aik Aliferis and Sam Firestone, pay close attention.
Our entire firm works very hard to stay abreast of current market trends, in order to offer maximum value and maximum results for our valued clients. Primecorp’s brokers are often sought as panel experts, presenters and moderators at key commercial real estate conferences across Canada and the United States. This involvement is a great way for us to strengthen our important industry networks, as we share insights and stay focused on the nuances that indicate where the market is heading.
Primecorp CEO, Aik Aliferis, weighed in on the current dynamics of the multi-residential market at the Canadian Apartment Investment Conference, held last September at the Metro Toronto Convention Centre, referencing our Hamilton and London deals to provide a working sense of current market conditions.
Aik recounted how the Hamilton and London deals were both parts of a very involved and highly competitive process with multiple bids… and these bids were very aggressive. He says that for the past 12-24 months, the market has been very hot. With strong pricing in both localities, competition has been steadily increasing in these markets. Debt and equity are readily available resulting in a “very, very strong,” market.
To further demonstrate the kind of interest in multi-residential real estate investments that locations in and around the Greater Toronto Area, are attracting, Aik quips how one proponent referred to Hamilton as, “The Brooklyn of Toronto” as it is now considered to essentially be part of the GTA. You can watch the interview with Aik in the following YouTube video:
The high cost of home ownership, compounded by rising interest rates and a string of government regulations, make renting an increasingly attractive option in key Ontario markets. Rent controls, implemented in Ontario’s Rental Fairness Act (2017) have created also incentives for renters to stay put, lowering the turnover of available units for rent.
On top of this, the ethnically diverse GTA is a very strong draw for new immigrants to Canada, most of whom choose to rent, at least initially upon their arrival. Immigration levels, dictated by the federal government, are on the rise, with Ontario receiving over 100,000 new immigrants per year. As a result, rising rental rates are contributing to significant profits for building owners and high asset valuation, intensifying demand.
This demand is outpacing the available supply of multi-residential assets in the GTA, going into 2018:
On the investment front, the multi-residential sector remained starved for product, and multi-residential properties continue to be the least-traded asset class in the GTA. Nevertheless, year-to-date multi-residential sales are up 21% year-over-year to $1.1 billion.– AvisYoung
The Ottawa area is also seeing a strong upswing in the multi-residential sector. Anchored by a stable and growing public service, and revitalized by the resurgence of high tech and the pending arrival of the new Light Rail Transit system, multi-res in Ottawa is hot going into 2018:
Transaction volume in Ottawa has increased substantially year to date [Q3 2017] led by the multi-family market which has seen a number of large transactions between regional and local owners at increasingly low capitalization rates. – Colliers Canada
A recent high-level industry survey “Emerging Trends in Real Estate 2018,” by PwC, found that “Survey respondents rank Ottawa the No. 4 market to watch in Canada for investment prospects.” Ottawa presents a viable renting alternative to the GTA for young, price-sensitive professionals with work/life balance top of mind:
The relative affordability of the Ottawa market is luring people to the city from other areas, particularly high-priced Toronto, as millennials and young families search for a better, less expensive lifestyle. Technology companies are expanding or moving into the market as well, eager to capitalize on the influx of talent—and doing their best to attract more people to the city. “Ottawa is a great place to live, work and raise a family,” notes one interviewee. “It sells itself.” – PwC Canada
Ottawa is also an attractive market for developers and investors seeking to diversify and rebalance their portfolios, amidst stiff competition for prized rental assets, throughout Southern Ontario.
Disruptions taking place due to technology and increased government regulations are also causing owners, developers and investors in the multi-residential sector to be very diligent about finding the best deals, suited to their specific business needs and interests. Primecorp has the industry focus, seasoned experience and deep understanding of the market dynamics to deliver high-quality results… drop us a line, we’d love to hear from you!
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