Another major announcement was just made this week. Oxford properties will be building a mega-development right in the heart of downtown Toronto. This is going to be a 3.5 billion dollar project (that’s billion with B!), with over 4.3 million square feet of space being created. For some context of how large this project really is, The Well by Tridel was going to have 3.1 million square feet of space – that’s almost 40% MORE space for the new Oxford Properties mega-development!
Here is a rendering of the proposed project below:
This project is going to consist of half office space and half residential rental located just north of the Rogers Centre. Here is an aerial view of what the proposed site will look like from up top:
The existing buildings below with the yellow overlay will have to be demolished in order to make way for the project:
There are 4 critical things that I noticed with this announcement that I want to point out to you
1) Residential Rental Confidence
50% of this project is intended to be residential, but not your standard condo building with units for sale. The residential offering will consist of rentals. Yes, you read that correctly – there will be more purpose-built rentals coming to the market now that rent control has been lifted. Rent control was never going to be a good thing and with the removal of it, we are slowly starting to see institutional money get into the market.
2) Office Tower Intensification
I’ve talked about this in another Insight Article before.
We’re basically seeing a huge movement of global companies coming to Toronto to have easier access to the amazing talent pool that our local universities are producing year in and year out (plus many other perks such as lower costs of labour). Many office towers have been pre-leased even before construction, and I’m expecting no less for Oxford’s latest development.
3) Pension Plan Money
It has become increasingly more and more common for pension fund money (Oxford Properties is owned by OMER – Ontario Municipal Employees Retirement Systems) to be invested in the residential rental market. Pension funds have all migrated into the rental market in order to fund the expected monies that are owed when the largest population of workers, the baby boomers, retire in the next 10 years. It is reported that Oxford has seen 35% capital growth in the last 5 years resulting in $7.5 billion dollars (i.e., 7% per year increase) in their real estate portfolio. If institutions such as OMERS is confident in the Toronto real estate market, specifically downtown, you can understand why I am so bullish as well.
4) Tear Down & Rebuild Phase
We’re in the phase of Toronto’s growth where we are out of prime corner parking lots to turn into tall towers. We’re resorting to tear downs and rebuilds now. The existing building north of the Rogers Centre, as you can see in the last photo above, is roughly 5 stories high, at a prime intersection. Builders are now having to resort to finding land by rebuilding existing buildings. Ultimately, this means higher downstream cost because it’s no longer a vacant land on which to build. Higher cost means a higher price to you and I (i.e., builders will factor into their prices the cost of demolition and rebuilding). In any case, if builders are still tearing down and redeveloping, then you know they have a massive amount of confidence in the city as a whole.
The Wrap – I hope this project gives you some excitement as to why I am so bullish on the downtown condo market right now. The best time to plant a tree was 20 years ago and the next best time is now. This is the same for investing. If the fundamentals make sense, which they do according to Oxford Properties, then it is worth the investment.
Until Next Time, Happy Real Estate-ing,