Population increase, job growth and rising home prices are usually the main aspects that impact the multifamily market. In some Canadian markets, these factors have led to skyrocketing housing demand that may produce a significant deficit, if development activity doesn’t pick up. At the same time, fast-paced technological and environmental changes transform how people live and work. This pressures property managers to respond to new requests and focus more on residents’ needs, as well as implement green initiatives to protect the environment.
Lucy Gouveia, director of marketing at Greenwin Inc., provides insights into how a property management company can stay relevant in Canada’s competitive multifamily environment and what strategies are efficient in order to attract and retain residents. She also touches on the firm’s green initiatives.
What drives demand in Canada’s major multifamily markets and how do you see things playing out in the years to come?
Gouveia: Rental demand in Ontario has reached multi-decade highs, driven primarily by population growth, job creation and a decline in homeownership affordability. Demand for renting purpose-built and condominium apartments in Ontario is projected to average 34,000 units annually in the coming decade, leaving a supply shortfall of over 6,000 units per year under the baseline development outlook. The delayed increase in required rental development to offset demand could result in an annual supply gap reaching over 10,000 units within 10 years. Without any changes in the supply outlook, a cumulative deficit of 62,500 rental units is expected to be amassed in the coming decade, according to research by the Federation of Rental-Housing Providers of Ontario and Urbanation Inc.
One of the key concerns for Canada’s real estate industry are, same as in the U.S., interest rates. How will a new rise in interest rates impact the multifamily market? In your opinion, how likely is a new rise?
Gouveia: Rising interest rates often signal a healthy economy—assuming that inflation is stable—which usually is good for the real estate industry. If interest rates continue to rise and lenders sense the need to protect themselves against a potential decrease in property value, they could eventually tighten lending standards further and require more equity from borrowers as they seek to increase their loan-to-value ratios. However, the government has released a new CMHC New Home Buyers Incentive Plan for new construction homes, which means improved affordability for new home buyers.
What are the main Canadian multifamily markets to watch this year? Why?
Gouveia: The province of Ontario is the fastest growing in Canada for rental market/new purpose-built along with Alberta. Aside from Toronto, the following cities in Ontario are experiencing largest growth:
- Barrie can attribute much of its growth to that of Toronto, 90 kilometers (approximately 55.9 miles) south. Rental vacancies dropped 43.8 percent in 2011, and with minimal additions to the rental stock, there is severe rental demand for this market. Tenant demand should continue to boost rents as affordability is a concern for new home buyers in any market, particularly in Barrie, as there has been a surge in home sale prices. Many would move further north and commute to the city to afford a home. This is not so much the case now within the Barrie market, as supply of homes has increased substantially.
- Belleville’s industrial base is complemented by proximity to CFB Trenton and several post-secondary and penal institutions in Kingston. It’s an hour’s drive east from Toronto and boasts demand for rentals.
- Beautification of the Lake Ontario waterfront has boosted the livability of Cobourg, which is located between Toronto and Kingston with good highway access and other transportation connections. Cobourg’s Innovation Centre focuses on environmental technology companies, which has increased employment for many, along with increased rentals needed.
- Vacancies in the Kitchener-Cambridge-Waterloo metropolitan area average 1.8 percent, a 30.8 percent drop from last year. Research and development activities, manufacturing and academic institutions anchor the region’s economy. Government-funded research programs and auto parts manufacturer Linamar is the city’s single-biggest employer, helping keep the local unemployment rate among the lowest in Canada. It is also close enough to allow commuting to Hamilton, Mississauga and Toronto. Waterloo’s student population helps explain, in part, why there is an increased demand in this market. There is massive repositioning and development well on its way within the City of Waterloo/University.
- Schooling and manufacturing keep Peterborough running. Home to Trent University and plants belonging to Quaker Oats and General Electric, vacancies in the city remain low.
In Toronto, for example, home prices increased in the past months. How do you think this will impact the rental market?
Gouveia: When people can’t afford to buy, they rent. This, in turn, reduces supply. Many landlords have increased rents due to the lack of supply and higher demand. As a result, many Torontonians can’t afford to live in rentals in the city, predominately within the downtown core of Toronto.
Landlords are looking at market trends and with increased vacancies and exposure coming into effect, there should be consideration to decrease these market rents. This will keep the rental market competitive with the home buyers’ market now that home prices are going through a slight decrease.
For example, there are one-bedroom rentals within the beaches—Kingston/Queens—in the $2,000/month price point, which is comparable to a one-bedroom downtown. Understanding that landlords would like to saturate the market with these higher market rents, there will be considerable upcoming vacancy if we follow this trend.
Greenwin’s multiunit project near the University of Toronto will include more than 200 affordable units. In what stage is the project now? What other developments is Greenwin planning?
Gouveia: The project at 27 Grosvenor and 26 Grenville, which is near Yonge and College streets, has just entered the approvals process with the submission of a combined rezoning and site plan application to city staff. This is the first submission with likely significant revisions still to occur in the future. Greenwin is also planning four mid-rise buildings across North York and Scarborough, all of which will be rental. 1750 Ellesmere in Scarborough is a 100 percent affordable housing project under the Open Door Affordable Housing Program and will feature 150 affordable units.
How does a property management company stay relevant in today’s competitive environment?
Gouveia: Property management has now evolved to not only managing an asset/building for our clients and residents. Property management includes making a good home for our residents along with providing our clients with a powerful engine for revenue with a higher return on rental rates with the increased value add/customer service given to our residents. Staying relevant is to always provide the best customer experience for our residents.
Home includes all facets from the beginning stages of being a prospect prior to a resident, which in my opinion is providing the best customer experience from all stages. This requires a fundamental rethinking of how our rental buildings are programmed and how they integrate with the larger community.
What strategies have proven to be efficient for attracting and retaining residents?
Gouveia: Property managers need to be in the business of building relationships between the property, their residents and the community. Residents who feel that they are not just listened to, but also cared for, are residents who want to stay. This doesn’t just mean customized move-in blankets although that is a start. As property managers, part of our role is to bring the outside community into the building, both to engage the interests of our residents but also to support our external communities and create an overall customer experience for residents.
In order for this to be successful, it needs to be relevant to the residents, therefore we do data collection along with research development on our buildings demographics, and property managers need to connect with their residents on a personal level by getting to know their wants, their interests, their hobbies and habits, even their pets’ names or grandchildren etc.
Assembling property management teams that are very relevant to the resident demographic is extremely important because every interaction that they have with those residents will set the tone for the lifetime of their residency with us. There is nothing more personal in someone’s life as their home and their family. When you are in residential, you touch both.
What green initiatives does Greenwin implement for its properties?
Gouveia: Environmental initiatives are rooted in our company’s core values. Across both our owned and third-party managed assets, we pride ourselves in reducing emissions and operating costs through energy consumption and energy management measures. These measures include:
- Identifying savings opportunities through full building energy audits.
- Implementing suite electricity submetering to complete retrofits of lighting systems.
- Installing low flush toilets—3Lt, low flow shower heads/aerators.
- Re-engineering building heating systems, complete with automated system controls.
We strive to be at the forefront of new technological advances and their potential property management applications and economic feasibility, including wind and solar energy, cogeneration and geothermal systems.