January 5, 2022
Who’s Buying Multifamily in Calgary?
The multi-family real estate asset class has experienced intense interest over the past five years from various buyers.
The buyer profile is a mix of publicly-traded Real Estate Investment Trusts (REIT) and large regional private syndicators such as Avenue Living and Nicola Wealth.
In Calgary, for example, sellers have benefited from strong buyer interest and primarily private owners or developers selling to the REITs who are eagerly pursuing deals.
The strength of the multi-family market is evident across the country. The sector has withstood the worst of the pandemic for the past two years and remains a much sought-after asset class even in the challenging times – the challenging economic times – that continue to dominate the marketplace due to the ongoing COVID-19 health crisis.
The multi-family asset has become attractive to investors for a number of fundamental factors.
There has been strong rental rate growth in Western Canada and in Calgary specifically in recent years.
The REITs are always looking to buy as they’re in the business of owning and managing and acquiring real estate for many years. For other financial advisors, real estate, specifically multi-family, has become an alternate asset class that provides diversification away from the stock market.
The strong rental rate growth is a key indicator of the strength of the market and investors are also confident in the future and how rates will continue to climb.
Interest rates have been very, very low which is an incentive to grow their portfolios.
Demand is also important. Put simply, more Canadians these days are being attracted to renting their homes as opposed to owning them. It has become a lifestyle choice for many, fueled in certain parts of the country by the high cost of home ownership.
The demographics have also played into the demand factor. Natural population growth continues to add a pool of potential renters from younger generations. An expected return to additional immigration to Canada creates more people seeking rental accommodation as they first move to this country and set up their new lives. There’s also an expected return of more international students in the future as well.
Calgary-based Avenue Living and Mainstreet Equity are examples of real estate companies who have pounced on the opportunity to grow their portfolios and their investments in markets, particularly in Western Canada. The strategy for both is similar. Purchase older properties, add value to them by renovating them, giving them the potential to raise rents depending on the market. The residential rental units also become more attractive to prospective tenants seeking a home.
These two companies, and others, are buying older assets that have not seen a lot of love and care from previous landlords over the years. They can go in and spruce up the units, making them more enticing for people. Because they are such big operations, they have economies of scale for their operations, allowing them to reduce their expenses. They are able to add significant value for the asset over a short period of time.
Even though cap rates are low and there’s lots of competition out there for these assets, there’s still opportunity for yield by following their strategy. That’s how they get their yields.
Also for investors, there is no lack of supply in older residential rental properties across the country. Many of these older properties are attractive to investors because of their central locations within a city.
Alberta and Calgary have also become areas of interest for investors outside of the province due to the overheated markets in Toronto and Vancouver, particularly, because they can get good yield here. There’s smaller private investors, or smaller syndicators, that have been active in this market.
Canada also overall has a shortage of housing. That lack of inventory has weighed heavily on potential homebuyers as they’ve seen prices in all markets rise considerably, especially in major markets such as Toronto and Vancouver, and that environment will continue to make the multi-family market an attractive one for both residents and investors alike for years to come.
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.
E: Chris.Chornohos@nmrk.com W: www.chrischornohos.com
*Image Source: https://sidinggroup.com/8-ways-to-make-your-multifamily-units-curb-appeal-stand-out/
