Ontario is set for a boom in new apartment construction, says Derek Lobo, founder and CEO of Rock Advisors Inc., a real-estate valuation consultant and broker specializing in apartments. “The boom is already starting,” says Lobo. “It’s just that some developers haven’t realized it, yet.”
Lobo points to the softening condominium market and continued low vacancy rates as a sign the development industry may soon shift their focus from condos to purpose-built rental apartments.
“While speculation has driven the condominium market in the past, the demand for rental accommodations is a real market that has always been strong and getting stronger,” says Lobo.
“In many ways, condominiums have helped grow the rental apartment market. People are investing in units and then renting them out on an ad-hoc basis. As developers find it harder to sell condominium units to investors, they have this huge base of potential renters that they can turn to. This will provide an income and strong returns for their investments for years to come.”
Lobo notes that new apartment construction stalled in Ontario in the mid-1970s as rent controls choked off new supply. Many developers left the rental apartment market, so that very little was built until the turn of the millennium. But rent controls and regulations have been relaxed, and new apartment units have been added to the market since 2000.
“Developers who have re-entered the purpose-built rental apartment market have found great returns,” says Lobo. “They’ve found a market where demand far exceeds supply, and where new construction enters at the top of the market. Really, the only thing holding back this industry is a lack of knowledge in the opportunities that exist here.”
“Condominium developers are well placed to participate in the new apartment construction boom,” says Lobo. “They already know how to build new units. They only need to learn how to market them, manage them and rent them out.