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Calgary’s commercial real estate market driven by multi-family demand

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5 months ago

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Call it a rental boom.

A new report shows that Calgary’s commercial real estate sector is driven by demand for housing, resulting in unprecedented purpose-built rental development in the city.

“We’re seeing more multi-family purpose-built rentals constructed than apartment condominiums,” says Darryl Terrio, broker with Re/Max Complete Realty in Calgary. The Re/Max 2024 Commercial Real Estate Report notes purpose-built rental development starts overtook condominium starts for the first time in 2023.

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Driving that growth has been record migration to the city leading to Canada Mortgage and Housing Corp. reporting that rental vacancy was 1.4 per cent in the fall of last year.

“The influx of interprovincial migration and immigrants is challenging the city’s housing stock, with vacancy rates at the lowest level in a decade,” the report notes.

That led to “more than 3,000 new units” in the city in 2023 “in the Beltline, downtown and the North Hill areas.” Terrio adds that recent changes to zoning bylaws in the city, allowing for higher density housing in typically single-family detached home neighbourhoods, have spurred a boom in small-scale multi-family projects.

“It’s just so much more affordable and feasible now to build multi-family rental,” he says.

A factor in that is CMHC’s MLI Select program allowing builders to get financing with only a five per cent down payment providing the new build, or renovation on an existing building, meet certain affordability, accessibility and climate compatibility metrics.

“Everybody is wanting to build a fourplex or put a suite in their house, but once you’re into five units or more, you can qualify for this CMHC program offering 95 per cent financing,” Terrio says.

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The Re/Max report notes that multi-family development — next to industrial real estate — is not just the hottest sector in Calgary. It’s leading development across Canada due to record high international migration, sparking huge demand for housing that has outpaced supply.

“The big story is how much investment there is in multi-family unit residential affordable housing units,” says Chris Alexander, president of Re/Max Canada.

“For the foreseeable future we will see a lot of that going to purpose-built rentals and affordable multi-family housing.”

The report notes that — besides Calgary — Vancouver, Regina, Winnipeg, London, Ottawa and Halifax had vacancy rates below 1.8 per cent, driven by net international migration of more than 1.2 million people in 2023. Yet Alberta stands out in particular, adding about 202,000 more residents last year, or 4.4 per cent growth, the fastest rate since 1981.

The Re/Max report also highlights Calgary’s success in redeveloping downtown office space into rental and other housing, noting that by next year more than 11,000 people will live in the downtown core.

Alexander adds that Calgary’s multi-family market reminds him of Toronto’s market in the early 2000s.

“There was a lot of new construction development with condo towers and investors looking to rent them out,” he says. “There were a lot of people wanting to move to the city at the time, as well as investing in from across Canada and outside the country.”

That growing demand helped push prices to where they are today, with the average selling price of an apartment condominium in May sitting at nearly $700,000 in Toronto.

Alexander notes those investments 20 years ago were “big time” successful.

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Unlock Reliable U.S. Real Estate Opportunities with Oak Street Partners

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1 day ago

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November 20, 2024

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OAK STREET PARTNERS UNLOCKING OPPORTUNITIES  FOR CANADIAN INVESTORS IN THE U.S. RENTAL HOUSING MARKET

Oak Street Partners is leading the way in cash-flow-focused U.S. affordable housing investments

TORONTO, ON | NOVEMBER 18, 2024 – With the Canadian real estate market facing challenges and declining opportunities for investors, Oak Street Partners, a Toronto-based private real estate investment firm, is offering a new avenue for Canadian investors to diversify into the U.S. rental housing market. Oak Street Partners enables investors to passively invest in U.S. affordable housing, providing them with stable, cash-flow-focused returns while helping meet the growing demand for quality, affordable housing in the United States.

“Market conditions in Canada have made it more difficult for investors to find reliable, income-generating opportunities,” says Parker Christie, Founder & CEO of Oak Street Partners. “By turning to the U.S. affordable housing market, we’ve been able to create consistent, cash-flowing investments that benefit both our investors and local communities.”

Building on this approach, Oak Street Partners facilitates investment by strategically acquiring and managing properties in the U.S., particularly in the Midwest and Southeast regions. Investors provide capital, while Oak Street handles all aspects of property ownership and management. Similar to a Real Estate Investment Trust (REIT), but privately structured, Oak Street ensures investors receive stable, cash-flow-driven returns without the need for direct involvement.
A key part of Oak Street’s approach is leveraging the Section 8 Housing Choice Voucher Program, America’s largest federal rental subsidy program that pays private landlords rent on behalf of low-income tenants. This guarantees a reliable, high cash flow income stream, even when real estate markets are challenged with high interest rate environments. By leveraging this program, Oak Street is not only able to provide consistent returns to its investors, but it also enhances lower-income communities, creating sustainable, quality homes for residents.

“It’s a win-win situation,” explains Trumbull Fisher, Director of Oak Street Partners. “Tenants are able to secure and enjoy quality, affordable housing, while investors benefit from reliable, government-backed rental payments that ensure steady cash flow.”

By investing in these properties, Oak Street is able to support the demand for affordable housing, while also contributing to the broader social good by addressing housing shortages and improving community infrastructure. This dual focus on financial return and social impact is what makes Oak Street’s approach stand out in today’s real estate investment landscape.

In its first year of operation, Oak Street has acquired over 100 units in Ohio. With $10 million in assets under management, the company has been able to offer its investors a 10 per cent cash dividend, which was distributed nine months into its operation. This is a rare milestone for companies in their first year, as many real estate investment firms operate at a loss in their early stages.

“As we look to the future, our goal is to expand Oak Street’s portfolio in high-demand areas across the Midwest and Southeast,” adds Christie. “Our focus will remain on sourcing properties that deliver strong, stable returns while positively impacting local communities.”

For more information on Oak Street Partners visit oakstreetgp.com/.

ABOUT OAK STREET PARTNERS

Oak Street Partners is a real estate investment firm focused on creating diversified and stable opportunities for investors in the U.S. rental housing market. We offer a unique pathway for investors to build and expand their portfolios by investing in affordable housing opportunities, improving the quality of life for tenants while delivering consistent returns for investors.

Website: https://oakstreetgp.com/

LinkedIn: https://www.linkedin.com/company/oak-street-partners-gp

Instagram: https://www.instagram.com/oakstreetgp/

Email: info@oakstreetgp.com  n

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‘The Bidding War’ taps into Toronto’s real estate anxiety

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1 week ago

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November 12, 2024

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‘The Bidding War’ is a play skewering Toronto’s real estate market via a story about a one-day bidding war over the city’s last affordable home. The cast and crew say it exposes how the housing crisis brings out “the worst in people.” (Nov. 12, 2024)

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Greater Toronto home sales jump in October after Bank of Canada rate cuts: board

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2 weeks ago

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November 6, 2024

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TORONTO – The Toronto Regional Real Estate Board says home sales in October surged as buyers continued moving off the sidelines amid lower interest rates.

The board said 6,658 homes changed hands last month in the Greater Toronto Area, up 44.4 per cent compared with 4,611 in the same month last year. Sales were up 14 per cent from September on a seasonally adjusted basis.

The average selling price was up 1.1 per cent compared with a year earlier at $1,135,215. The composite benchmark price, meant to represent the typical home, was down 3.3 per cent year-over-year.

“While we are still early in the Bank of Canada’s rate cutting cycle, it definitely does appear that an increasing number of buyers moved off the sidelines and back into the marketplace in October,” said TRREB president Jennifer Pearce in a news release.

“The positive affordability picture brought about by lower borrowing costs and relatively flat home prices prompted this improvement in market activity.”

The Bank of Canada has slashed its key interest rate four times since June, including a half-percentage point cut on Oct. 23. The rate now stands at 3.75 per cent, down from the high of five per cent that deterred many would-be buyers from the housing market.

New listings last month totalled 15,328, up 4.3 per cent from a year earlier.

In the City of Toronto, there were 2,509 sales last month, a 37.6 per cent jump from October 2023. Throughout the rest of the GTA, home sales rose 48.9 per cent to 4,149.

The sales uptick is encouraging, said Cameron Forbes, general manager and broker for Re/Max Realtron Realty Inc., who added the figures for October were stronger than he anticipated.

“I thought they’d be up for sure, but not necessarily that much,” said Forbes.

“Obviously, the 50 basis points was certainly a great move in the right direction. I just thought it would take more to get things going.”

He said it shows confidence in the market is returning faster than expected, especially among existing homeowners looking for a new property.

“The average consumer who’s employed and may have been able to get some increases in their wages over the last little bit to make up some ground with inflation, I think they’re confident, so they’re looking in the market.

“The conditions are nice because you’ve got a little more time, you’ve got more choice, you’ve got fewer other buyers to compete against.”

All property types saw more sales in October compared with a year ago throughout the GTA.

Townhouses led the surge with 56.8 per cent more sales, followed by detached homes at 46.6 per cent and semi-detached homes at 44 per cent. There were 33.4 per cent more condos that changed hands year-over-year.

“Market conditions did tighten in October, but there is still a lot of inventory and therefore choice for homebuyers,” said TRREB chief market analyst Jason Mercer.

“This choice will keep home price growth moderate over the next few months. However, as inventory is absorbed and home construction continues to lag population growth, selling price growth will accelerate, likely as we move through the spring of 2025.”

This report by The Canadian Press was first published Nov. 6, 2024.

The Canadian Press. All rights reserved.

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