Pre-Construction Market Outlook
Executive Notes In the opening quarter, Toronto’s pre-construction market saw steady, continued growth as buyers and investors continued to purchase new inventory across the GTA and in the core. As anticipated, record-breaking condominium sales are already being reported as freehold inventory dropped; and prices reached all-time highs – increasing an already wide price gap that many buyers cannot bridge. Looking at Toronto’s current trends, it’s evident that rising interest rates are having an impact on the market. The initial result of these increased lending costs has been a slower sales absorption of new projects over the last several weeks, in conjunction with a steady stream of new launches at the beginning of the year. With a large portion of new inventory slated for the second half of 2022, the market appears as though it may be able to keep pace with 2021, though only time will tell. Considering this exceptionally active market, and with so many developments competing with each other, we were keen to investigate how marketing and advertising play a role in these busy times and, even further, to discuss how each of these factors have evolved over the last few years. What makes some developments more successful than others? Which techniques are affecting buyer behaviours? Which media platforms are the most effective? These questions are essential for those looking to successfully reach their target audience. When asked which project campaigns were the most attractive to buyers, we found that the developments that provided comprehensive marketing packages received more attention, creating a strong story around the community and providing ample resources for customers to interact with. Early access to marketing assets was celebrated by brokers who stated that receiving such information in advance helped them to be more successful in selling the respective developments. Delving into these marketing packages, we also evaluate the importance of physical vs digital collateral. Although some may prefer more tangible media, the industry has shifted towards an online environment – where everything is immediately and continually accessible. In fact, over 90% of developers and sales teams use social media as a marketing tool to advertise their projects. This is a considerable source of passive warm lead generation for brokers.
Increasingly, digital marketing is at the forefront of the industry, getting assets in front of people quickly and efficiently while promoting buzz and engagement through powerful platforms like Instagram and Facebook. Additionally, we investigated the buyer mindset, assessing which messages were most important for them. Price per square foot, location and developer reputation have always been some of the most important elements when deciding where to invest, but we wanted to know which of these is perceived as the MOST important by our prospective purchasers. Considering this particularly active market, it was pivotal that we explore what developers were doing to effectively stand out and stay ahead of their competitors. Conveying the right story and a project’s positioning both remain a powerful way to connect with purchasers, while social media, digital marketing and ample marketing materials help them to go that extra mile to secure sales. This intermingling of message, media and sales teams has yielded tremendous results, and many are still hoping to dial into that winning combination. This artful balance is something we at Austin Birch love to craft with the intention of helping our clients achieve their goals. We look forward to sharing these insights with you today in the hopes that you will find these opportunities equally stimulating.
Eric Kuzuian
Jamie Sarner
PARTNER
PARTNER
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By The Numbers By Neil Hughes
THE REPORT
WHAT ARE WE SEEING FROM CURRENT STATISTICS AND ACCUMULATED MARKET DATA? SOURCES: URBANATION
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By The Numbers By Neil Hughes
Residential Development: Q1 Launches and Sales
31 6,070
New development projects launched in Q1
8,253
Pre-construction units sold in Q1 (highest Q1 on record!)
33,747
12-month rolling sales of pre-construction units (Record high cumulative sales over the past 12 months, up 87% compared to Q1-2021)
Pre-construction units launched in Q1 (81% of these launched units were sold, raising total market-wide absorption to new high of 94%)
The widely-adopted use of vaccines, along with recently less severe variants of COVID-19, has allowed the market to rebound over the last year, raising buyer confidence to all-time highs which, in turn, has been complemented by low rates that have maintained until as of late. Buyers have expanded their search parameters into municipalities surrounding the downtown core, encouraging investors to take note of these neighbourhoods. Much like a stock, purchasers and their agents are placing a higher level of importance on the numbers - achieving a lower entry-level price. So, for the fourth straight year, the 905 sees the highest absorption rate for new launches at 87% vs. 80% in the downtown core.
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By The Numbers By Neil Hughes
Residential Units: Q1 Launches and Sales
656
SQ.FT
Average unit size, at launch, in GTA
$858K
Average unit price at launch, in the GTA
81%
Of new condos that launched for presale in Q1 2022 were sold
In total, 6,070 pre-construction units were introduced to the GTA marketplace, making Q1 of 2022 one of the highest levels of activity on record. A record high 81% of the 6,070 new units released were sold by the end of the first quarter, along with a significant amount of the remaining inventory that was previously launched.
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By The Numbers By Neil Hughes
Pre-Construction Condo Prices & Percentage Growth
SOLD GTA AVERAGE
$1,341 PSF SOLD TORONTO DOWNTOWN AVERAGE
$1,570 PSF
Interest in the downtown core remained strong even as prices increased at a rate not seen before. It was as if there was a reset in January, with a new price point seemingly created out of thin air based partly on soaring construction costs from resource constraints and supply chain delays. Due to buyers’ undeniable love of the big city and a lack of inventory – despite a record number of units launched in the GTA – the downtown core has once again seen the strongest increase in price for new projects released this quarter.
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By The Numbers By Neil Hughes
Remaining Pre-Construction Condo Prices & Percentage Growth
UNSOLD GTA AVERAGE
$1,309 PSF UNSOLD TORONTO DOWNTOWN AVERAGE
$1,452 PSF
The demand for pre-construction inventory outweighed the number of new units being introduced to the market this year by approximately 4,000 sales. In 2021, there were over 30,000 units sold in the preconstruction market, but only 26,000 were new units launched to the market. This means that a record number of previously unsold inventory was absorbed.
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Word On The Street By Tannaz Taghizadeh
THE REPORT
WE CONNECT WITH OUR NETWORK OF BROKERS TO GAIN INSIGHTS INTO THE CURRENT MARKET.
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Word On The Street By Tannaz Taghizadeh
How important is a development’s name to your clients?
26%
Very Important
53%
Somewhat Important
21%
Not Important
Buyers like simple, relevant names when it comes to developments. Although this probably won’t dissuade a purchase, names that are easy to pronounce and connect with the project stay top-of-mind - important when considering that projects were being launched, on average, every 3 to 4 days last quarter.
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Word On The Street By Tannaz Taghizadeh
Which development’s branding campaign was the most attractive to buyers last year?
Verge
By RioCan Living
Maverick
By Empire Communities
Brightwater By Kilmer Group, Dream, Diamond Corp and Fram + Slokker
Festival Condos By Menkes and QuadReal
Developments require clever, comprehensive and dynamic marketing campaigns to reach their target audiences, connecting with those customers in a significant way. By understanding the buyer mindset, we can create a story around the community that is not only memorable but impactful – encouraging buyers to engage with the brand. Additionally, w i t h m u l t i p l e to u c h p o i n t s provided through ample collateral, customers have the opportunity to further interact with and understand the selling points of the development, moving them along the buyer journey.
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Word On The Street By Tannaz Taghizadeh
What do clients find most important: Developer Reputation, Average Price Per Square Foot or Location?
61%
Average PSF
30%
Location
9%
Developer Reputation
Price remains paramount to the final decision for owners and investors alike, as this variable can be easily compared against other projects and allows for calculating potential ROI. However, location was mentioned often, as certain sites will encourage buyers transact at a higher price point. And, though buyers appreciate the confidence that comes with an established builder, price and location reign supreme in the current environment.
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Word On The Street By Tannaz Taghizadeh
Do you decide how many projects you will be working on each year ahead of time? If so, how many?
5%
1-5 Developments
16%
5-10 Developments
42%
10+ Developments
37%
I don’t decide ahead of time
Brokers stated that this was a careful balancing act, as they want to meet the demands and needs of their client base, providing them with as many opportunities as possible while ensuring that they take the necessary amount of time and energy to commit to every project. It appears that casting a wide net throughout the year is perceived to be the best approach.
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Word On The Street By Tannaz Taghizadeh
Which commission structure do you prefer?
21%
1/3, 1/3, 1/3
79%
50/50
This was an interesting response as almost 80% of realtors preferred a quicker payment of commission at the outset of a project, as opposed to 66.6% of commission being paid by the project’s commencement of construction. The key factor is that most developers are unable to offer this aggressive structure as it can require an injection of capital that may not be feasible for some.
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Word On The Street By Tannaz Taghizadeh
How important is it to have a physical project brochure?
5%
Very Important
42%
Somewhat Important
53%
Not Important
Although some clients may prefer something more tangible and tactile, the industry has moved to an online environment where everything is immediately and continually accessible. This creates a perfect opportunity to put our specially-curated development story in front of our audience quickly and often. In this way, we build a deep understanding of each project that resonates with the customer, providing them with all the information they need to make an educated decision.
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Word On The Street By Tannaz Taghizadeh
What percentage of leads are coming from online marketing compared to existing relationships?
45%
Online
55%
Existing Relationships
Although online marketing is a valuable tool in a broker’s arsenal, many agree that nothing quite beats referrals and repeat buyers. Although there is an element of trust that is conveyed through faceto-face contact, online leads are always capable of becoming lifelong clients when vetted, cultivated and communicated with effectively.
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Word On The Street By Tannaz Taghizadeh
How effective do you find social media in marketing a development?
42%
Very Effective
53%
Somewhat Effective
5%
Not Effective
Over 90% of developers and sales teams use social media as a marketing tool to advertise their developments. Increasingly, digital marketing is at the forefront of the industry, getting assets in front of people quickly and efficiently while promoting buzz and engagement.
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Word On The Street By Tannaz Taghizadeh
What social channels do you prefer when marketing a development?
1
ST
2
3
TikTok
ND RD
4
TH
Many brokers find that social media is a tool that must be used correctly to harness its effectiveness. These platforms can be a considerable source of passive warm lead generation when the powerful targeting metrics are used. Brokers have begun to get creative with these channels by creating educational video campaigns and promoting their access to certain projects ahead of the broader market.
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Who We Are At Austin Birch, we provide Toronto and GTA developers with a comprehensive service that encompasses all aspects of the sales process for their pre-construction projects. Working closely alongside your team, we offer innovative, custom strategies to help you accomplish your sales goals.
BILD 2021 Winner Best Sales Team Mid-Rise & High-Rise
40+
20+
Developments represented to date.
Award-winning developments, including 3 prestigious awards for BILD Project of the Year.
$8 Billion+
15+
In new development sales.
Years of experience in pre-construction sales.
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What We Do Working For You Our integrated, collaborative sales approach means we’re with you every step of the way, helping to support and guide you through the pre-construction sales process. When you work with Austin Birch, our team is at your service, assessing your individual needs, ensuring results and helping you unlock your development’s full potential. This is how we
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Unthink real estate.
Contact us to discuss your upcoming project austinbirch.com 647.953.4335 info@austinbirch.com 1 Eglinton Avenue East, Suite 701 Toronto, ON M4P 3A1
Copyright © 2022 Austin Birch The information contained herein is general in nature and is a guide only. The data has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their own independent advisors prior to acting on any of the material contained in this report. It does not take into account your individual circumstances. The principals and its agent will not be liable for your failure to verify the information or seek appropriate advice.