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GTA development land getting more scarce, more costly
1/5/2022 | SHARE
Posted in Commercial Real Estate by RENTEX Realty| Back to Main Blog Page
Development land is getting harder and harder to find in the Greater Toronto Area (GTA) and investors are willing to pay a premium for it, especially if the property has already gone through the approvals process.
Transaction activity is spread out across the GTA, according to Mike Czestochowski, vice-chairman of CBRE's Land Services Group. He said the current definition of a hot spot would be anywhere developable land can be found.
"The lack of supply and the demand of homebuyers and industrial users are pushing our development community further afield," Czestochowski told RENX.
Condominium builders are interested in sites where they can sell units for more than $1,000 per square foot, according to Czestochowski. He said the biggest development land deals used to involve large downtown Toronto condo sites, but deals worth more than $100 million are now taking place in the 905 area code in municipalities surrounding the City of Toronto.
"You're limited to where you can get that in the 416 and 905, and that's where people are looking. In those areas where they feel they can't get it, people are looking at those sites as more of a hold for now."
Land in the 905 region is coveted
Anywhere in the 905 region where large tracts of land are available is now coveted.
Czestochowski said Durham Region at the far eastern end of the GTA has opened up and still has land available, but it's getting more difficult to find. He cited a recent transaction he was involved with, a $165-million deal in Oshawa which will lead to the development of a residential subdivision with more than 800 units.
Greater Golden Horseshoe markets that are within a relatively easy drive of the GTA are also increasingly becoming an expansion area for residential developers.
"To live in Barrie or Innisfil and work in Vaughan or Brampton isn't bad," said Czestochowski.
Barrie and Innisfil are growing municipalities about 30 to 40 minutes north of the city along the Highway 400 corridor. They're also now linked to both Vaughan and downtown Toronto via a GO Train connection.
"With the growth of the employment sector in the 905, people are willing to go a little further afield for affordability and get that bigger home if they work in the 905."
Value of development land deals increases
The scarcity of development land available means the value of deals is increasing. Prices for industrial and single-family housing land in the 905 area code that are part of an official plan have experienced tremendous price increases over the past year. While a $100-million deal might have been very unusual 10 years ago, it's not anymore.
Czestochowski said 2021 was CBRE's best year ever in terms of dollar volume for land trades at north of $1.3 billion.
"Canadian institutions and private Canadian families are 95 per cent of our buyers. We are not seeing an influence from outside the country to any great extent."
Of those Canadian investors, Czestochowski said three-quarters are families he's dealt with previously over his 37-year career. The other quarter is comprised of pension funds, real estate investment trusts or life insurance companies which are either buying on their own or partnering with a developer.
The lack of available industrial and residential development land across the GTA should ensure that prices at least remain stable, if not increase, according to Czestochowski.
"I think we're going to see some increases for approved sites for single-family and high-density residential, especially if it's approved for high-density residential that's grandfathered out of inclusionary zoning. I think you'll see those sites being difficult to get and their prices increasing."
While not many large retail sites traded during 2021, Czestochowski said gas station sites with a couple of pads and grocery-anchored retail sites are still in strong demand.
"A lot of people are waiting to see what happens. Retail is one of those sectors that's always changing. They will adjust and pivot and we'll see that come back."
More development land, tradespeople needed
Looking forward, Czestochowski thinks governments need to release more land to bring affordability back to the market.
He also believes the federal government needs to open Canada's borders to skilled tradespeople from around the world because the country has a shortage that's hindering construction and development.
"We always want to be welcoming to everybody, but I think we have to be strategic," said Czestochowski.
"This country was built by immigrants that came in the 1950s and '60s from Europe and built our buildings. We need to do that again.
"We need those trades."
Source: RENX
Commercial Real Estate, Commercial Real Estate Investments, GTA Commercial Real Estate, Land Investment, Residential Land Investment, Residential Land Sales, Toronto Commercial Real Estate
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