Developers and apartment dwellers alike are shifting Canada's housing focus toward an ever-expanding, purpose-built rental industry. According to market reports, in the second half of last year alone, about 24,000 rental units were under construction across the country. As developers and investors see an increasing demand for new, modernized rental properties, it's important for those involved to understand why purpose-built apartments are more than just a passing trend.
Generational shifts and changing priorities
Purpose-built rental properties are developed with the sole intent of offering each unit as a rental home instead of a home for sale. In decades past, these types of apartment buildings decreased in popularity as dwellers searched for more permanent places to live. However, in recent years, the purpose-built rental industry has seen sharp increases in demand from new, younger dwellers in search of a more flexible housing option.
As the millennial generation grows and earns an increasing amount of disposable income, the housing market is being continually affected by this younger generation's purchasing power. As a group, millennials typically live more transient lifestyles, and generally are not as concerned with "settling down" as their parents and grandparents. In addition, as baby boomers mature, many are realizing the benefits of downsizing to sophisticated apartments that require less upkeep. Meanwhile, all generations can enjoy easy access to apartment managers and convenient amenities.
Developers meeting the demand
Developers are recognizing these societal shifts, and are rushing to meet dwellers' purpose-built rental needs. Many developers and investors who were previously constructing condominiums have switched their focus to apartment buildings virtually overnight, teaching themselves about purpose-built rental management along the way. Such changes in development and investing are not limited to one part of Canada, but rather reflect an overall shift experienced throughout almost every major urban environment in the country.
Affordability for all parties
Purpose-built rental properties offer significant financial advantages to both sides of the industry. For developers, these types of properties typically offer low initial interest rates for construction and the potential for high returns. Investors are also keen to claim a stake in this thriving industry, as apartment complexes—unlike condominium units, which are sold—can generate decades' worth of continuous revenue. Those involved in the construction process have noticed that, once a project is complete, resident retention rate is typically high.
Meanwhile, for residents, new purpose-built rental properties offer affordable housing without sacrificing comfort, convenience and quality of living. Apartment buildings provide dwellers with an urban community that offers instant access to downtown businesses and bustling metropolitan culture.
Through this mutually beneficial, booming industry, it has never been easier for developers and renters to achieve their property goals. It's clear that, when it comes to housing in Canada, purpose-built rental properties will continue to hold value for everyone involved.
By: Adrian Schulz, ACCI