Changing Sales and Design in Construction
Purpose built rental and condominium projects remain a popular investment for developers in most major Canadian markets, including Vancouver. Anticipating the future of these marketplaces involves an understanding of both demographics and lifestyle trends.
Future of Urban Living?
In the early days of the Covid-19 pandemic, some were quick to predict the decline of urban living. International students and tourists had disappeared, softening the demand for short term rental units. Meanwhile, the work-from-home crowd were unchained from geographical constraints and were looking for more space.
“The more apocalyptically-minded fled the cities because they were told would never, ever be habitable again given the chronic, future risks of infection,” writes Barbara Lawlor, CEO of Baker Real Estate Incorporated.1
As the world cautiously begins to move back towards some semblance of normalcy, it would appear that reports of urban demise have been greatly exaggerated. With a return to regular life comes a yearning to reconnect to the community and amenities that cities offer. Canada is also anticipating the arrival of two million new Canadians in the next five years,1many of whom will look to rent in urban areas before purchasing condos themselves.
Reasons to Rent
Tenants have a host of reasons to rent, many of them familiar. The overheated housing market has made home ownership unattainable for many, making renting, particularly with roommates, a more feasible option. A short term lease also offers an attractive level of flexibility, especially in an unpredictable economy.
“At this time, many potential purchasers are holding off on buying due to economic and financial uncertainty and are instead opting to commit to a lease as opposed to a mortgage, which is helping drive demand in the rental market,” writes Calgary-based real estate writer Mario Toneguzzi.2
While many will opt to rent condominiums from private owners, there is a level of insecurity involved in that as owners may ask them to leave with minimal notice, a problem rarely experienced by those leasing in purpose built rental units.
Are Purpose Built Rentals a Good Investment?
Some developers have traditionally shied away from purpose built rental projects in favour of condos and they are not without their reasons.
“Unlike rentals, condos offer quick turnaround for investors; you sell and then you’re done,” writes Torontonian Alexander Coney for View the Vibe. “There aren’t the same kind of long-term obligations that come with purpose-built rentals.”3
Money raised from pre-construction sales often make condos more feasible for developers that aren’t keen to pony up the capital required to get purpose built rental projects started.
Still, purpose built rentals are seen as a lucrative holding and a portfolio diversification for large developers. This, as well as anticipated low vacancy rates, have meant a steady stream of new projects in Vancouver.
“Since 2017, Vancouver has set records for PBR construction, with 2021 looking like it is heading for yet another record year with more than 10,000 units underway as of March,” reports the Vancouver Sun.4
Updating Vancouver’s Rental Market
63% of Vancouver’s current supply of purpose built rental units were built between 1950 and 1980.5 With millennials looking for new designs to support their evolving lifestyles, an opportunity exists for developers who understand modern needs.
“When we start to look at rental projects from a functional perspective, we can introduce floor plan layouts that expand our living spaces,” notes Rize in a recent assessment of Vancouver’s rental market. “Is there a desire for compact private living with expansive common areas? What about shared patios with neighbours? How many roommates can be in a single unit without losing equitable living space? This is the conversation we need to have, by challenging the status quo we can create impactful and thoughtful spaces.”6
Modern Rental Unit and Condo Features
The pandemic has brought to the fore somewhat of a contradictory set of consumer demands. People are craving community and are therefore looking for access to walkable amenities, recreation facilities, and shared common spaces such as dog parks and outdoor theatres. On the other hand, Covid-friendly features like touchless elevators and in-suite laundry are sought.
Work from home arrangements have made work stations, photocopiers, and so-called ‘Zoom Rooms’ popular as well.
“We’ve all discovered over the pandemic how important the home is, but we have a lot of people who cannot afford amplified homes or individual spaces dedicated to working, especially if there’s two people working from home,” says Adele Rankin, managing principal of B+H Architects’ Vancouver studio.7
Climate control, air and water purification, and green features such as geothermal heating are also in favour.
Designing for the Modern Lifestyle
Baker Real Estate Incorporated believes that people’s real estate preferences offer a glimpse at their life goals.
“In essence, as a future resident selects their layout, countertop, shower-head, fixtures, and the like, they’re envisioning their future life — and all that entails. The choices buyers make, whether they’re end-users or investors, are as diverse as their dreams.”8
Developers who are able to read and respond to future lifestyle trends will be well-positioned to ride high in a future rental market that seems poised to be lucrative.