There was a heavy emphasis on multiresidential projects when five experts weighed in on whether land buyers and sellers in Canada are starting to better align and where they see things moving forward during the first panel discussion at the May 27 Land & Development conference.

“Anyone who's got land, who isn't under pressure and isn't in distress is, for the most part, not selling it,” CoStar director of market analytics Ben Haythornthwaite said to open the discussion at the Metro Toronto Convention Centre. 

“On the land side, some would say it’s more of a controlled burn versus the early ‘90s, which was just fire sale everything,” said Colliers executive vice-president and panel moderator Steve Keyzer. 

“Lenders seem to be deleveraging the balance sheets on their loan books, taking quarterly loan loss provisions and getting in line with the market. There hasn’t been a lot of forced selling and not a lot of foreclosures.”

Some land deals are getting done, but they’re generally being re-priced downward from where they were at the peak of the market — and even 12 to 18 months ago — said CBRE vice-chairman Casey Gallagher.

Fiera Real Estate head of real estate development Kathy Black said land values shouldn’t be viewed in a silo when considering deals, but should be included along with such things as municipal fees and construction costs. 

She added, however, that a site came across her desk earlier in the week that was priced 40 per cent lower than it would have been a year ago.

Fitzrovia is bullish on purpose-built rental land

“If I look at the medium-term fundamentals, I've never seen a more attractive supply and demand story,” said Adrian Rocca, chief executive officer of Fitzrovia, which is focused on developing purpose-built rental apartments.

Fitzrovia’s leasing activity has been strong and it has dropped its concessions by 50 per cent, which is attributable to having quality product in desirable locations. Rocca noted that 10 per cent is a healthy benchmark for people who tour a building and then sign a lease in it, but Fitzrovia’s ratio for its existing apartments is close to 45 per cent.

Rocca believes Fitzrovia will see high single-digit or low double-digit rent growth for the next three to five years in Ontario if rent controls aren’t re-introduced by the provincial government. 

“If you look at how institutional capital is looking at the space, they're underwriting in a really tight box,” said Rocca. “They're not going to necessarily take big contrarian calls on this market, and we would say this is precisely the time you want to put a shovel in the ground. 

“If you look at 2022 peak pricing, your all-in cost basis is now down 34 per cent. The problem is net effective rents today are down 21 per cent. 

“But if you look through that underwriting and start looking at 18 to 24 months from now, we believe you’re going to see more downward pressure on costs and you're going to deliver in a market that's essentially going to be starved of new supply for three or four years. So we’re actually very bullish on it.”

Land transaction activity expected to pick up

Rocca said Fitzrovia should be considered a net buyer of land under today’s conditions, and Gallagher expects more to follow in those footsteps.

“I think you'll see a higher degree of land transaction activity 12 to 18 months from now because we're going to be that much closer to a different supply situation,” he explained.

“In poor quality locations, land pricing has been severely hammered,” Gallagher said later. “Whereas we're seeing core locations in Toronto — while it's not the beautiful years of the $250-per-foot buildable deals — where we're generally cresting comfortably above $100 a foot for well-located sites with good fundamentals where you can see the outcome of a strong rental growth profile in a building.”

Fiera has broken ground on four new projects over the past year because it wants to avoid competition by not delivering product at the same time everyone else is. The company is big on acquiring near entitled, shovel-ready sites from experienced companies it trusts.

“It's not that institutional capital isn’t available, we're just very patient and underwriting the operator as much as we are the asset,” said Black. 

Student and seniors housing

Both Fiera and Fitzrovia believe there’s strong potential growth in the student and seniors housing sectors, and Gallagher agreed that there are now more opportunities for those types of assets. 

“You’ve got to make the economics work, and sometimes it's a little more difficult for those alternates,” said Gallagher. “There are also different functional elements to seniors housing.

“With most sites you need service parking, a bigger land area, the right locations and right building type. There are a lot more things to figure out.” 

“Seniors doesn't really work downtown,” added Rocca. “It's not a highrise park. 

“You're looking at a one-and-a-half to two-acre lot and you're looking at eight to 10 storeys max. You need a bigger floor plate. You’re really shrinking the funnel as to what actually fits within that box.”