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A wise investment: Constructing new rental housing worth the initial cost
November 2010
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| Brian McCauley, President of Concert Properties Ltd. |
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By Clare Tattersall
With the aging of Canada’s rental housing stock, many apartment landlords are faced with the decision to either retrofit their existing buildings or build new.
Brian McCauley, President of Concert Properties Ltd. says constructing a new building is well worth the investment.
“The cost that you can buy existing assets at today is so competitive that we can take a lower initial rate of return (in the early years) to build brand new apartments . . . (because) we have an asset that will appreciate over time,” he says.
McCauley explains that the benefits of constructing new are plentiful. Landlords can design a new building specifically for their anticipated user. As well, they can build to the highest green standards.
But, at the same time, there are risks involved in building new rental housing.
“Not all locations will work,” says McCauley.
“In Vancouver today, with the land values, construction costs and rents being where they are, the economics of building new rental residential is very challenging,” he continues. “(But) in Toronto, the land values and construction costs are reasonable enough that you can make the economics work.”
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