What is the ideal unit mix for landlords and the properties they own?
It’s an important question to consider as units in the marketplace range from studio apartments to one, two and three bedroom homes.
Location is the key.
For downtown properties, they will typically have a small percentage of studios with one and two bedroom units. In some cases, the studio apartments have to be very central and in a very good location to make those units work in the market.
As one gets further out of the core, the studio apartments become less of an appeal for tenants as they want more spacious units to live.
Three-bedroom units can be a challenge. There’s not many of them available in the inner-city as there’s not much demand for them from tenants who want to be either in the downtown core or near it. Some are located in older buildings but landlords struggled to get the rents for them. They’re just too big. They’re not economically viable. And if a tenant wants an apartment of that size they obviously have the money to go into a house instead.
Even in the suburbs, landlords have to be leery of the three-bedroom units. Also property owners tend to shy away from studio apartments in suburban locations. They too simply don’t do that well.
But most people who are out in the suburbs, and perhaps are forced to rent there because of higher rents in the inner city, they want the space. They are going to pay for bigger units such as one and two bedrooms.
A tenant in the suburbs will more likely want to spend more time in their apartments. Hence the need for bigger space. However, a tenant living in the downtown or neighbourhoods close to downtown, such as Beltline, Eau Claire, Mission, etc., will likely spend more time out and about experiencing the vast amenities literally at their doorstep. So for them, a smaller space to call home is the right fit. For them, it’s almost like being at a hotel. More of a place to sleep than one to live.
According to the latest Housing Market Outlook by Canada Mortgage and Housing Corporation, the rental market in Calgary will continue tightening in 2022 onwards, as rental demand continues to return to the city.
The federal agency says vacancy rates have decreased amidst significant rental universe growth and as employment conditions strengthen and workers shift back to an in-person or hybrid format, rental demand will grow for locations around the downtown core.
While these developments come into the market, the average two-bedroom rent will continue to increase at a modest pace. As rental demand returns, it’s likely that the supply of more affordable units will be taken up first, especially in inner city locations, added the CMHC report.
Chris Chornohos has a passion for real estate and helping his clients reach their business goals by providing Real Estate Investors and Owners with the first class valuation and advisory services to close more deals. Chris is also an investor, builder and developer. Reach out to Chris today to help with your Real Estate needs.