Across the country, competition is stiff among apartment hunters as the rental market gets tighter. In Calgary, that struggle to find rental space is fuelling an unprecedented amount of rental construction.
As of September, construction has begun on 2,799 new rental apartment units in Calgary this year. That’s the highest number on record, though 2021 was another banner year with 2,572 apartment starts, numbers from the Canada Mortgage and Housing Corporation (CMHC) show.
Developers describe it as a classic Economics 101 scenario: supply rising to meet demand.
For years, they say a lack of rental construction in Calgary has left that side of the market underserved. On the demand side, higher interest rates are driving more people to rent rather than own.
The province is also seeing a significant uptick in people moving to the province, with more than 50,000 coming to Alberta to live in the first half of 2022 alone.
Alkarim Devani is the president of RNDSQR, which started off building single-family homes, but has since shifted to purpose-built rentals. (Paula Duhatschek/CBC)
“We have this huge void space compared to a lot of the other major metropolitan cities within Canada of rental housing,” said Alkarim Devani, president of the Calgary-based development company RNDSQR, which has shifted in recent years to building rentals exclusively.
“We’ve had almost a 20-year gap of rental product, and so that’s why we’re seeing such an influx of it.”
According to the latest numbers from Rentals.ca, the average Canadian rental apartment was $1,810 a month in September, up about 12 per cent from the previous year.
In Calgary, the average one-bedroom rental was $1,629, an increase of 29 per cent year-over-year.
Outlook across Canada
Calgary isn’t the only city that’s seeing some shift toward rentals.
In several big cities, the share of apartments being built for rentals, rather than condominium ownership, has grown in the first half of this year compared to the average for the same period in the previous five, according to CMHC numbers.
One exception is Toronto, where the share of rental construction dipped in the first half of 2022, something CMHC analyst Michael Mak says is likely due in part to the high cost of land in that city.
“There are rising interest rates … and rising construction costs and labour costs, and those all play a factor in lower rental starts,” he said.
In Vancouver, development firm Anthem Properties is pushing hard on multi-family rentals, with about 3,000 units that are either in preliminary planning stages, under review or under construction, most in Metro Vancouver, according to Gage Marchand, the company’s manager of investment.
“I don’t see the affordability crisis getting any better anytime soon,” said Marchand, whose company also has offices in Calgary, Edmonton and Sacramento.
“I think moving forward in this next generation, renting will be more accepted as a sort of normal reality [and] Anthem wants to continue building homes for people.”
Policy also driving development
Public policy also has a role to play in driving rental development.
In Vancouver, Marchand pointed to policies that provide incentives to developers for building close to public transit, or higher density allowances if affordable housing is included, among other benchmarks.
Ken Toews is the senior vice-president of Calgary-based Strategic Group, a development firm that builds rental properties. He’s pictured outside the Barron Building, a historic office tower in Calgary that’s being converted into residential units. (Paula Duhatschek/CBC)
Another example is a City of Calgary program that provides grants for converting empty office space into residential buildings, said Ken Toews, senior vice-president of Strategic Group, which is in the middle of transforming one of the city’s first oil and gas office towers into residential apartments.
Toews said many developers are also using a CMHC program called MLI Select, which offers insurance incentives if a rental development hits certain targets for affordability, energy efficiency, accessibility or some combination of the three.
“It’s a really good program, and it brings more product online than you would normally have in a market,” he said.
Future outlook
Opinions vary about whether rental development will accelerate or slow in the months and years ahead.
High interest rates and construction costs are also putting pressure on developers, which Paul Battistella predicts will lead to some pullback in rental development going forward.
“Rents are just not going to be able to accelerate at that same proportion to be able to make the math work on those things,” said Battistella, a managing partner with Calgary-based condo developer Battistella Developments, which also sets aside some of its units for rental.
Paul Battistella, with Battistella Developments, says a long-time lack of rental supply has spurred developers to build more purpose-built rentals. But he warns the current climate of high interest rates and construction costs could cause some to pull back. (Paula Duhatschek/CBC)
“The [projects] that are in play now, they’ve been contracted for, their costs are locked, they’re OK … I just think anything new is going to be really, really difficult to get going.”
As for when, and if, the increase in supply will lead to relief for current renters — opinions vary on that, too.
Mak expects some buildings under construction now, especially the low-rise buildings, will wrap up in the months ahead leading to some loosening of the market.
But if demand continues at the current clip, Toews believes any new apartments added will likely be absorbed pretty quickly.
“I think we’re undersupplied and it’s gonna create challenges,” he said. “Less supply means that your prices are gonna go up.”
MONTREAL – Travel company Transat AT Inc. reported a loss in its latest quarter compared with a profit a year earlier as its revenue edged lower.
The parent company of Air Transat says it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31.
The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.
Revenue in what was the company’s third quarter totalled $736.2 million, down from $746.3 million in the same quarter last year.
On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.
Transat chief executive Annick Guérard says demand for leisure travel remains healthy, as evidenced by higher traffic, but consumers are increasingly price conscious given the current economic uncertainty.
This report by The Canadian Press was first published Sept. 12, 2024.
Dollarama Inc.’s food aisles may have expanded far beyond sweet treats or piles of gum by the checkout counter in recent years, but its chief executive maintains his company is “not in the grocery business,” even if it’s keeping an eye on the sector.
“It’s just one small part of our store,” Neil Rossy told analysts on a Wednesday call, where he was questioned about the company’s food merchandise and rivals playing in the same space.
“We will keep an eye on all retailers — like all retailers keep an eye on us — to make sure that we’re competitive and we understand what’s out there.”
Over the last decade and as consumers have more recently sought deals, Dollarama’s food merchandise has expanded to include bread and pantry staples like cereal, rice and pasta sold at prices on par or below supermarkets.
However, the competition in the discount segment of the market Dollarama operates in intensified recently when the country’s biggest grocery chain began piloting a new ultra-discount store.
The No Name stores being tested by Loblaw Cos. Ltd. in Windsor, St. Catharines and Brockville, Ont., are billed as 20 per cent cheaper than discount retail competitors including No Frills. The grocery giant is able to offer such cost savings by relying on a smaller store footprint, fewer chilled products and a hearty range of No Name merchandise.
Though Rossy brushed off notions that his company is a supermarket challenger, grocers aren’t off his radar.
“All retailers in Canada are realistic about the fact that everyone is everyone’s competition on any given item or category,” he said.
Rossy declined to reveal how much of the chain’s sales would overlap with Loblaw or the food category, arguing the vast variety of items Dollarama sells is its strength rather than its grocery products alone.
“What makes Dollarama Dollarama is a very wide assortment of different departments that somewhat represent the old five-and-dime local convenience store,” he said.
The breadth of Dollarama’s offerings helped carry the company to a second-quarter profit of $285.9 million, up from $245.8 million in the same quarter last year as its sales rose 7.4 per cent.
The retailer said Wednesday the profit amounted to $1.02 per diluted share for the 13-week period ended July 28, up from 86 cents per diluted share a year earlier.
The period the quarter covers includes the start of summer, when Rossy said the weather was “terrible.”
“The weather got slightly better towards the end of the summer and our sales certainly increased, but not enough to make up for the season’s horrible start,” he said.
Sales totalled $1.56 billion for the quarter, up from $1.46 billion in the same quarter last year.
Comparable store sales, a key metric for retailers, increased 4.7 per cent, while the average transaction was down2.2 per cent and traffic was up seven per cent, RBC analyst Irene Nattel pointed out.
She told investors in a note that the numbers reflect “solid demand as cautious consumers focus on core consumables and everyday essentials.”
Analysts have attributed such behaviour to interest rates that have been slow to drop and high prices of key consumer goods, which are weighing on household budgets.
To cope, many Canadians have spent more time seeking deals, trading down to more affordable brands and forgoing small luxuries they would treat themselves to in better economic times.
“When people feel squeezed, they tend to shy away from discretionary, focus on the basics,” Rossy said. “When people are feeling good about their wallet, they tend to be more lax about the basics and more willing to spend on discretionary.”
The current economic situation has drawn in not just the average Canadian looking to save a buck or two, but also wealthier consumers.
“When the entire economy is feeling slightly squeezed, we get more consumers who might not have to or want to shop at a Dollarama generally or who enjoy shopping at a Dollarama but have the luxury of not having to worry about the price in some other store that they happen to be standing in that has those goods,” Rossy said.
“Well, when times are tougher, they’ll consider the extra five minutes to go to the store next door.”
This report by The Canadian Press was first published Sept. 11, 2024.
TORONTO – The U.S. Consumer Financial Protection Bureau has ordered TD Bank Group to pay US$28 million for repeatedly sharing inaccurate, negative information about its customers to consumer reporting companies.
The agency says TD has to pay US$7.76 million in total to tens of thousands of victims of its illegal actions, along with a US$20 million civil penalty.
It says TD shared information that contained systemic errors about credit card and bank deposit accounts to consumer reporting companies, which can include credit reports as well as screening reports for tenants and employees and other background checks.
CFPB director Rohit Chopra says in a statement that TD threatened the consumer reports of customers with fraudulent information then “barely lifted a finger to fix it,” and that regulators will need to “focus major attention” on TD Bank to change its course.
TD says in a statement it self-identified these issues and proactively worked to improve its practices, and that it is committed to delivering on its responsibilities to its customers.
The bank also faces scrutiny in the U.S. over its anti-money laundering program where it expects to pay more than US$3 billion in monetary penalties to resolve.
This report by The Canadian Press was first published Sept. 11, 2024.
