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2017 Land and Development Conference Roundup

日期:
May 4, 2017
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With another successful Land and Development Conference now concluded, Greybrook is happy to share some of the insights and discussion topics covered at the event.

 


ECONOMIC OVERVIEW: WHAT ARE THE IMPLICATIONS FOR LAND AND DEVELOPMENT ACTIVITY?

Speaker: Benjamin Tal, Deputy Chief Economist, CIBC World Markets Inc.

Providing a macro view of the global economy, Benjamin Tal touched on the state of world markets before focusing on the potential impact in Canada of President Donald Trump’s plans to stimulate the US economy – something Tal believe will likely yield very little results. However, according to Tal, Trump’s position on trade with Canada and the subsequent effect on interest rates and recession will be the real test for the housing market.

Tal also touched upon the recent Government of Ontario’s Fair Housing Plan, noting that the suggested measures will have a marginal impact (a sentiment shared by several other speakers at the conference), with rent control expected to have an effect on supply primarily. Rental activity in the luxury market has seen significant growth, with 50% of units leased for more than $2.75 PSF in 2016. Toronto is a global city, states Tal, as evidenced by the more than 100,000 new residents annually, but the city must act like one by encouraging residents to be proud renters. 


TECHNOLOGICAL TRANSFORMATION AND DISRUPTERS: IMPLICATIONS FOR CURRENT & FUTURE REAL ESTATE DEVELOPMENT

Speaker: Amy Erixon, Principal & Managing Director, Investment, Avison Young

We are living in a time of great technological advancement, according to Amy Erixon, who is optimistic about the real estate industry embracing it. Many developers, architects, and other real-estate based companies have already adopted virtual and augmented reality as a means of designing, visualizing and selling their product. The move to online shopping puts more pressure on retail storefronts to keep pace with technology, leading to brands like SportChek’s increasingly technologically advanced stores, highlights Erixon, which feature touchscreens to help consumers find specific products, diagnostic equipment to determine the proper running shoes, equipment technology and more.

Erixon also touched upon how technology can make logistics more efficient through a variety of systems, including autonomous vehicles, Amazon’s Kiva Robots, Internet of Things (IoT) and robotic process automation. Ending her presentation on Buildings of the Future, Erixon stressed the importance of cyber security and how the real estate industry will have to find innovative ways to address consumer concerns as technology becomes more integrated into homes. 


HUDSON YARDS: 17 MILLION-SQUARE-FOOT MIXED-USE PROJECT – THE LARGEST PRIVATE REAL ESTATE DEVELOPMENT IN U.S. HISTORY

Dean Shapiro, Senior Vice President, Investments, Oxford Properties Group

The largest development in New York City since the Rockefeller Center, Hudson Yards is expected to be completed in 2025 and will include more than 18 million square feet of commercial and residential space. Dean Shapiro provided insight on the massive undertaking of this 28-acre development, including the various planning, development, and infrastructure challenges faced by the architects, engineers, designers, planners and more involved in the creation of New York City’s next new neighbourhood built over the Hudson Yards Tracks. Providing a history of the site since the 1600s, Shapiro spoke to the complexities of building on a constructed platform, how the project changed hands over the course of the financial crisis, and how the residential building is expected to garner $4,200 PSF. 


WHY ARE ALL FORMS OF PURPOSE BUILT RENTAL DEVELOPMENT BOOMING ACROSS CANADA?

Moderator:
David Bloomstone, Director, Investment Banking, TD Securities Inc.

Panel:
Gary Lee, Senior Vice President, Residential, Bentall Kennedy (Canada) LP
Henry Morton, President, Campus Suites Inc
Peter Norman, Vice President & Chief Economist, Altus Group
Adrian Rocca, Former Managing Director, Tricon Capital Group
Michael Tsourounis, Executive Director, Investments & Valuations, Timbercreek Asset Management

Focused primarily on residential rental and student housing, this panel discussion kicked off with Peter Norman providing an overview of the rental market across Canada, stating his belief that there is no risk of oversupply in the GTA as there is an estimated need for approximately 13,000 units annually until 2026. All major markets have increased their supply of rental units to accommodate, with purpose-built rentals making up nearly 40% of the total number of apartment starts as of 2016. 80% of the GTA’s rental households are in newly built apartments, compared to the Canadian average of 52%.

When the discussion moved towards rent control, several panelists shared how they are already underwriting 2-2.5% in their proformas conservatively, so the proposed rent controls will not stop them. However, they do not believe this approach will necessarily work for everyone as rent control is more likely to affect individual condo investors than institutional players. The importance of amenities to renters was also touched upon by Michael Tsourounis, broken into those that initially draw buyers but are infrequently used (i.e., swimming pools) and those that are more functional/integral to resident’s daily habits and needs (i.e., gyms, home automation, parcel storage). 


GTA HOUSING MARKET: HOW ARE BUILDERS AND DEVELOPERS MAKING SENSE OF THE OPPORTUNITIES AND RISKS?

Moderator:
Phong Ngo, Director, National New Homes Research, Altus Group

Panel:
Sasha Cucuz, Chief Executive Officer, Greybrook Securities Inc.
Rizwan Dhanji, Vice-President, Sales & Marketing, Canderel
Stephen Diamond, President & CEO, Diamond Corp.
Ben Myers, Senior Vice President, Market Research & Analytics, Fortress Real Developments
Steven Weisz, Principal, Executive Vice President, Paradise Developments

With such a rapid uptick in GTA housing prices in recent years, it’s no surprise that this panel was standing-room only as some of the industry’s leaders discussed the major drivers behind the market’s surge. Sasha Cucuz contributes the increase in prices to an imbalance between available supply and the significant demand to transact in this environment, from both foreign and domestic capital sources. Other panelists attributed immigration, low interest rates, Toronto’s growing status as a global city and higher government related costs for the market’s current state.

Ben Myers shared his concerns regarding the increase in investors in the low-rise market, who are likely buying on capital appreciation and not for rent when purchasing a house for $1.45 million, while Steven Weisz expressed frustration with the red tape and government intervention on the free markets, and how development approvals are also constraining. One effect of rent control that Stephen Diamond identified is how it may limit the amount of family-sized units offered in new condominium developments as turnover of units is critical for these projects to be viable, and family oriented units have low turnover.

Other topics touched upon were how land prices are becoming more difficult to peg with land costs, the emergence of new players entering our markets with new capital sources, and tighter registrations in Toronto with respect to zoning and planning. 


THE ONGOING EVOLUTION OF THE CONDOMINIUM MARKET: WHAT MAKES A CONDO SITE DIFFERENT THAN A MULTI-RESIDENTIAL SITE?

Moderator:
Mike Czestochowski, Executive Vice President, Land Service Group, CBRE Limited

Panel:
Devon Cranson, Founder & President, Cranson Capital
Jared Menkes, Vice President, High-Rise Residential, Menkes Developments Ltd.
Ben Rogowski, Executive Vice-President, Canderel
Daniel Winberg, Principal, The Rockport Group

There is a distinct lack of supply across the board in the GTA market, previously more pronounced within low-rise developments but now affecting condominiums. Daniel Winberg discussed how the Rockport Group’s mid-rise projects are focused on end users, keeping people in the neighbourhoods they love.  Jared Menkes predicted that we will see more inventory in the periphery markets (e.g., Markham, Vaughan, etc.) and less in the Toronto core in the future, due to tighter regulations from the City on how developers can build and the scarcity of sites which are not challenging to zone for development. Devon Cranson believes there are still significant opportunities as more developers are focusing on several smaller mid-rise and townhouse projects instead of one large-scale condominium development.

There was a general sense of frustration from the panelists regarding the recent government measures as the Fair Housing Plan only addresses demand-side issues without addressing how increasing supply would improve affordability. Buyers are expected to continue looking outside the downtown core to transit-driven communities in the GTA, which are predicted to experience the same absorption rates. Panelists with purpose-built rental developments will proceed as planned and see how the market evolves.

A few industry trends were highlighted by the panel, including the emergence of more informed buyers and investors, younger people expressing interest in getting into the industry, and a longer-term approach to products (i.e., higher quality developments). 


LOW-RISE HOUSING: WHERE DO OPPORTUNITIES STILL EXIST AND HOW ARE ESTABLISHED BUILDERS GETTING CREATIVE IN THIS SECTOR?

Moderator:
Mark Emery, President, Weston Consulting

Panel:
Andrew Brethour, Chairman & CEO, PMA Brethour Realty Group
Larry Kotseff, Senior Executive, Land Development, Fusion Homes
Gary McIlravey, Manager, Market Research, Empire Communities

“Drive until you qualify” is the name of the game according to panelists who all saw this phenomenon in their developments. Gary McIlravey shared stats from an Empire project in Brantford which saw ten times more demand from downtown Toronto-based purchasers than the year before. In fact, locals from Brantford were almost entirely eliminated due to the pricing of the development, as GTA buyers are willing to drive further to find affordable low-rise homes. As new sites become harder and harder to find, the panelists predicted that we will see more infill and brownfield sites under development to accommodate demand. 


EXECUTIVE ROUNDTABLE: STRATEGIC THINKERS: AN OUT-OF-THE-BOX LOOK AT WHERE RESIDENTIAL AND COMMERCIAL DEVELOPMENT IS HEADING!

Moderators:
Richard Diamond, Senior Vice President, Canderel
Lisa Lafave, Senior Portfolio Manager, Real Estate, HOOPP

Panel:
Jeff Hull, President, Hullmark Development Ltd.
Brian McCauley, President & COO, Concert Properties Ltd.
Peter Politis, Chief Executive Officer, Greybrook Realty Partners, Partner, Greybrook Capital
Stephen Price, President & CEO, Graywood Development Ltd.
Jim Tadeson, Founding Partner, Carttera Private Equities Inc.

A more casual conversation regarding real estate development, this panel covered a myriad of topics related to development today, beginning with the ultra-luxury segment. Some panelists like Jim Tadeson expressed concern about the depth of the ultra-luxury market and its sensitivity to downturn, while Peter Politis sees opportunities within this market, which Greybrook is already exploring through developments like 101 Yorkville, 140 Yorkville, and 1 Scollard. When asked what they would do with $1 billion to allocate, most panelists would continue to focus on the markets they know and the areas that they do best.

The panel agreed that land prices in the GTA will increase by 20% over the next year, with Politis predicting an estimated 10% increase in condo prices. The Fair Housing Plan and its limited impact was touched upon once again, in particular, the foreign buyer’s tax, which some panelists believe to be more politically motivated than a practical solution as it affects such a small percentage of the buyer pool. Reform of the OMB was another point of concern with panelists, with Jeff Hull asserting that unzoned land would decrease in price due to the challenges of having it zoned.

Looking to the future, the panel stressed the importance of municipalities keeping up with the times to allow for more innovation and technological advances, such as accounting for less parking due to the advent of driverless cars and improvements in transit infrastructure. The lengthy approvals process can impede both progress and competition, which is something the panel would like to see municipalities be more nimble and progressive with in the future.

Visit the Land and Development Program Website for more information regarding the speakers, panels and presentations.

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