Market Update: Greater Golden Horseshoe
Technology, Transit and Transitioning Millennials Creating Growing Opportunities for Condo and Office Development Outside of GTA
With the disruptive effect of changing workforce conditions and as younger, single millennials transition into young families, opportunities are emerging for some key regions on the periphery of the GTA to draw more investment in the residential and office sectors.
The dynamics of today’s workforce are evolving at a rapid rate. Technology has made communication more efficient and opportunities to work remotely – with more flexible schedules – increasingly possible. Many millennials who currently live in the Greater Toronto Area (GTA), among others, such some baby boomers who may be starting to wind down in their careers, place a higher value on flexible working conditions and live/work location being in close proximity in order to achieve a better work-life balance. This has created some shift towards a preference to live in accessible and walkable urban areas, which was a factor in the recent condominium boom in the GTA. However, with significant affordability challenges in the GTA, not only for single-family homes but increasingly for condominium apartments, along with tighter mortgage rules, prospective home buyers are now more motivated to look at other markets outside of the GTA within the Greater Golden Horseshoe (GGH). Since 2016, we have witnessed increased activity not only in new single-family homes, but also in new condominium apartments in several GGH markets.
New condominium apartment sales in Waterloo and Hamilton have gained notable traction as plans for expansions in transit move forward and regional concentrations of economic activity pick-up. In the next decade, Metrolinx is expected to spend $43 billion on transit capital expansion across the GTA and Hamilton area. The vision for Metrolinx is to “link communities across the region”, which may foster higher density development, making these outer GGH areas more viable for families while still being accessible to the GTA.
The Kitchener-Waterloo region is one of several regions within the GGH to undergo transformation, becoming a more affordable market for GTA residents faced with one of the priciest housing markets in Canada. In Q2 2018, Kitchener-Waterloo had lower average asking prices for new condominium apartments as well as a significant increase in new condominium apartment sales, in comparison to many other areas in the GGH. The momentum may at least in part be attributed to the wave of economic growth entering the “Idea Quarter” area. Local companies are now successfully competing for talent against the GTA market, helping to stimulate condominium development activity adjacent to these technology hubs. The shift is predominantly driven by start-ups and technology companies. Major companies like Shopify Plus are planning to neighbour up with more recent tenants like Stantec, OpenText, Auvik and Magnet Forensics, all residing alongside the Waterloo Tech Campus. There has also been interest in new condominium units being sold as investment properties, specifically to be rented out to young professionals due to their proximity to the hub. Similarly, increased activity and investment in Kitchener’s innovation hub followed when major tenants like Google expanded their presence, leasing 185,000 square feet of office space. At more than 50% sold, the entry of the Charlie West condominium apartment development in downtown Kitchener is a relatively more affordable option (compared to the GTA), with two-bedroom plus den units available at around the $500,000 threshold.
We expect Hamilton to become an increasingly attractive place to live for commuters, people who live and work in the city and, in particular, those who are able to take advantage of flexible working arrangements or are seeking an alternative to the GTA’s high condominium apartment prices yet still want to live in a walkable neighbourhood with access to public transit. In Q1 2018, Hamilton witnessed a spike in new condominium apartment sales largely attributed to Television City Phase I, a 30-storey tower released last May that has since reached 80% sold. Television City Phase II followed in March 2018, with over 50% of units sold by the end of Q2 2018. More recently, the region appears to be showing signs of a temporary cool down, in part due to the uncertainty of tariffs looming over the region’s steel industry. However, coupled with the attractiveness of Hamilton’s LRT expansion, which is key to revitalizing its downtown core and improving accessibility, growth in Hamilton’s technology sector (albeit in its infancy), may become another pull factor for a younger, skilled talent pool.
Boosted by more flexible working arrangements, a promising technology industry and the pursuit of more affordable housing options, we expect to see continued growth in interest in new condominium apartments in key GGH regions, such as Hamilton and Kitchener-Waterloo.
Altus Group took a deeper look into Q2 2018 figures to compare what buyers with a budget of CAD $500,000 could afford in the downtown areas of various new condominium apartment markets across the Greater Golden Horseshoe.
In Barrie, Brantford, Cambridge, Guelph, Kitchener and St. Catharines, a buyer could find two to three bedroom units over 1,000 sq.ft. for under $500,000. In the Toronto market, buyers would have to settle for a one-bedroom unit with only 521 sq.ft., or approximately half the space of the other markets.