Condo boom puts Toronto atop Crane Index ... again

  4/13/2020 |   SHARE
Posted in Commercial Real Estate by Vanguard Realty | Back to Main Blog Page

The booming Greater Toronto Area has again taken top spot on the North American Crane Index, with the region hosting an astounding 27 per cent of the cranes counted in 14 of the continent’s largest and most active urban markets.

The Q1 2020 report, compiled by international construction services firm Rider Levett Bucknall, presents a “simplified measure of the construction industry in 14 key markets.”

Toronto’s crane totals dwarf those of any other North American city. Los Angeles placed second with just 10 per cent of the total.

In actual numbers, that’s 121 cranes dotting the Toronto skyline compared to 47 in Los Angeles — which has a metro population of about 19 million, compared to the GTA at about six million.

Perhaps even more surprising, Calgary placed third with 37 cranes, just ahead of Seattle at 36 and San Francisco at 33. New York had 26 cranes.

“It’s the highest it’s ever been,” said RLB principal Terry Harron, who heads up its Toronto office. “Probably the biggest driver, out of the 121 cranes that we counted in January of this year in Toronto, 88 of them were on residential buildings; most of them were condominiums.

“There are some rental apartment buildings beginning to be built in Toronto, but it’s almost entirely driven by the condominium market.”

Last year, Harron said Toronto’s crane count was 120.

Immigration driving residential demand

Harron said Canada’s immigration policy, which allowed about 350,000 new residents into the country during 2019, is driving the growth.

Of that influx, about 118,000 people settled in the GTA, he said, quoting StatsCanada data.

“There has not been a lot of commercial in Toronto in the past 10 years. There has been some, but it’s almost entirely driven by the residential.”

As an example, he cited the huge downtown multi-use project The Well, which alone accounts for eight of the cranes.

The joint venture between RioCan REIT (REI-UN-T) and Allied Properties REIT (AP-UN-T) includes six high-rise towers and will comprise more than three million square feet of space for apartments, condominiums, offices, retail and other uses.  

“There are a number of other towers, commercial towers, that have been announced (for) the next few years, particularly along the rail corridor. We are starting to see an uptick in commercial,” Harron said.

Despite the COVID-19 outbreak, which could push the continental economy into recession, Harron doesn’t foresee a dramatic downturn in Toronto’s high-rise construction activity — at least not for the near- or mid-term.

Thousands of pre-sold condos

“I read on Stats Canada . . . I believe 70,000 residential condominium units have been pre-sold in the Toronto market and have not been built yet,” he said. “That’s a staggering number.

“That will lead to a very healthy market for a number of years to come. I believe the absorption rate right now is between 20,000 and 30,000 units per year, so that will give you an indication of where the market might be.”

What could impact growth down the road would be a downturn in immigration – and that could arise from the pandemic.

“The only proviso I would add to that is one of the major things driving the residential market in Toronto is immigration to Canada,” he said.

“With all the restrictions currently in place for travel now, and probably for some time to come, I have to imagine (immigration) will experience a huge drop this year.

“Now, will that then create less demand for the market and maybe a slowdown? Who knows.”

A slowdown, however, could also ease pressure on construction costs. In turn, that could make more projects economically viable, because there has been dramatic upward pressure on materials and labour costs in recent years.

“There have been a number of projects cancelled in the last 12 months in Toronto,” Harron acknowledged.

“I believe on about 20 condominium towers, the developers either could not get numbers from subcontractors and trades, or the numbers were coming in much higher than they had in their business plans and suddenly the project wasn’t economically feasible.” 

Other markets in Crane Index

In Calgary, where 37 cranes were visible on the skyline, activity was also being driven by the multires sector. Harron said despite the current economic woes in Alberta, builders believe the Western economy will rebound.

“There’s definitely a lot of activity and again, that’s residential-driven,” he said. “There are developers in Toronto who have now decided that they believe in the long term for Calgary.

“They are starting projects now that they hope, when the economy turns around in Western Canada, that there will be demand for this product.”

Across North American, the Crane Index survey found:

• residential and mixed-use projects combined accounted for 70 per cent of all cranes counted;
• cranes dedicated to healthcare projects dropped 33 per cent from previous counts;
• hospitality projects experience a decrease in active cranes of 50 per cent.

“The majority of locations included in the Crane Index are clustered near or at the top of the construction-cycle curve, meaning they will begin to enter a phase of decline in the coming years,” said Julian Anderson, president of RLB North America, in an email to RENX.

“This, coupled with the likely recession triggered by the coronavirus pandemic, shapes the short-term outlook for North American construction as a period of contraction.

“Further out, 12 to 24 months, we are anticipating that the industry will continue to recover from the COVID-19-induced recession.”

Source: Renx.ca

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