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Old Posted Oct 20, 2021, 5:55 PM
C. C. is offline
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Join Date: Jan 2014
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Quote:
Originally Posted by Crawford View Post
Weird. Why would anyone buy cash-flow negative RE when they could just put cash in a basically no-cost, nothing-to-manage index fund that generates averaged 10% returns forever?

RE returns are irrelevant unless you're constantly flipping, which sounds like an extremely dangerous game. And getting killed in the interim.
Because it's likely not true. I'm assuming investors are purchasing Toronto condos and renting it out because there is very high rental demand. The rental vacancy rate is well below what is considered a healthy market. Plus how many purpose build rental buildings are going up in Toronto? My guess is not as many as needed. So these condo investors are stepping in to meet that demand.

Secondly, unless these investors have very deep pockets, they able to charge enough on rents to cover carrying costs. Property taxes in Toronto are very low, so it's just debt service and condo fees. With interest rates below inflation, the government is practically begging people to borrow money and invest.

I'm making a couple of assumptions, so if anyone has any unbiased data on these topics, they would make an interesting read. Please post away.

Quote:
Originally Posted by Maldive View Post
Not to interrupt the perception of a sea of investor-driven condos u/c in Toronto (many of which are actually mixed-use), but a brief commercial for the office construction contribution to the downtown boom. Other than NYC, not sure how other NA cities are faring in the commercial sector, but a number of major office developments are u/c or nearing completion downtown.

Finishing touches are underway on the Wilkinson Eyre-designed CIBC Square Phase 1 (1.3 million square feet) and below grade construction for the slightly taller Phase 2 (1.4 million square feet) is progressing quickly.

The Well office tower (1 million square feet) is topped out, the AS+GG-designed TD Bank on Front Street (1.2 million square feet) is well into construction, and the 820,000 square foot Bay Adelaide phase 3 (ScotiaBank) is nearing completion.

Google’s 400,000 square foot local HQ at 65 King East and Menkes’ 690,000 square foot 100 Queens Quay Sugar Wharf office building are getting closer to completion. First Gulf’s 460,000 square foot EQ Bank Tower is climbing to grade. More office space will be coming online via mixed-use projects u/c such as WestBank’s 19 Duncan (includes 150,000 sq feet of office).

The 54 storey 11 Bay office tower near the waterfront has supposedly landed a major anchor tenant (yet to be officially revealed but likely Amazon) so we might see a start next year. More are in the development pipeline including a couple of supertalls (Oxford’s Union Park and 191 Bay Street). Westbank’s BIG-designed Union Centre proposal was recently bumped up to 298m but no news yet on an anchor tenant. No doubt the impact/longevity of WFH will likely stretch the timelines of new proposals moving to construction.
Is Toronto not seeing as much WFH as is happening in the United States? I ask because office vacancy rates, especially in secondary markets, are soaring. The next major financial crisis will probably be CMBS defaults as the office owners aren't able to pay the loans they took to purchase/develop the office buildings. Looks like Toronto's office market is weathering the pandemic very, very well. At least in the Class A space where offices are still going up.
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