The Austin Birch Report Vol. 3 by Austin Birch

THE REPORT

Life in Toronto’s central core is coming back in a big way. Volume 3

Executive Notes Life in Toronto’s central core is coming back in a big way. The market, having withstood the exceptional challenges of the past year, is showing remarkable resilience with increased launches and a fourth quarter that’s shaping up to be even busier. In Volume 2 of The Austin Birch Report, we examined the shifting perspective felt throughout the real estate market as a whole, covering commercial, retail and residential trends, determining what this meant to pre-construction developers throughout the GTA. Compiling exclusive insider insights from top developers and unique perspectives from experts in the retail and office market, we showed that, despite some disconcerting numbers, information surrounding the downtown core was misunderstood and actually signalled this area’s continual growth. For Volume 3, our attention turns back to downtown Toronto as we follow the confident return of developers and buyers to the core. In fact, for the first time since the pandemic, we are seeing downtown project launches that exceed $1500 PSF. Despite the wary concern that often accompanies this pricing, the market is eagerly absorbing the inventory. Buyers have returned with gusto, and they’re purchasing suites that span all price points and locations. As such, Toronto isn’t the only city that has been enjoying this surge of attention. Massive urban centres are the draw, and therefore, Mississauga and Vaughan make for close runnersup in launch activity – achieving record sales and prices over the last few months. This quarter, we uncovered rare insights pulled from the unique perspectives of our network of top GTA realtors. These industry professionals are fully connected to what is happening in the market and act as a conduit for us to find key information that we can use to inform powerful strategic planning.

We are thrilled to take this opportunity to delve into the re-emerging market, presenting you with a clear view of the industry, buyer behaviours and realtor mindsets. In this report, we take you through the most significant aspects of what investors and end-users expect, what they’re looking for in new projects, and what they need to get into the market. Additionally, we give you a rare behind the scenes look at realtors, discussing what makes them promote certain projects, how they’re overcoming new industry hurdles and what launch tactics have been the most successful. Again, we find ourselves in an exciting new phase of growth within the market and are excited to see the cumulative action and re-emerging interest in the core. With this level of attention, we anticipate the market will remain strong for the rest of the year, continuing into 2022 – which may see the volume of suites released return to traditional levels. We would like to take this opportunity, once again, to thank everyone for their contributions to this edition of the Austin Birch Report. With your input, we have created a uniquely informative piece that provides real estate professionals with a comprehensive overview of our ever-shifting industry.

Let’s uncover how fall 2021 is trending. Eric Kuzuian

Jamie Sarner

PARTNER

By The Numbers By Saraya Yen 4

THE REPORT

Volume 3

WHAT ARE WE SEEING FROM CURRENT STATISTICS AND ACCUMULATED MARKET DATA?

Sources: TRREB, Urbanation, CMHC, Move Smartly Report, Rentals.ca.

By The Numbers By Saraya Yen

Residential Development: Q3 Launches and Sales

New development projects launched in Q3

Projects launched in downtown core (Incl. Etobicoke, Midtown and Scarborough)

Projects launched in 905 (Milton, Vaughan, Mississauga, Oakville, Hamilton and Oshawa)

9,700

Units launched (up 16% from 8,253 in Q2)

3,635

New condo units sold in Toronto’s CBD

7,775

New condo units sold in the GTA

Source: Urbanation

Q3 has brought a lot of the investor attention back to the downtown core. And, although Toronto is where we have seen the majority of launches, massive urban centres, in general, are the draw. Mississauga and Vaughan are close runners-up in launch activity, having achieved record sales and prices over the last few months and a 15% price differential between the 416 and 905 – representing a new record low.

By The Numbers By Saraya Yen

Residential Units: Q3 Launches and Sales

LAUNCH ABSORPTION REACHES RECORD HIGHS

656 SQ.FT

Average unit size, at launch, in GTA

$730,000

Average unit price at launch ($662,000 in the 905, $835,000 in the 416)

80%

Of new condos that launched for presale were sold (by the end of Q3)

Source: Urbanation

New launch inventory is being absorbed quicker than ever. Units introduced in the last couple of quarters (across the GTA) were priced at an average 656 sq.ft. and $730,000 or $1,115 PSF. Absorption of this inventory reached a new record high, with approximately 80% of all inventory released in the last couple of quarters also being sold in the same period.

By The Numbers By Saraya Yen

Pre-Construction Condo Prices & Percentage Growth

SOLD GTA AVERAGE

$1,262 PSF – 8.8% Y/Y Growth SOLD TORONTO DOWNTOWN AVERAGE

$1,420 PSF – 5.7% Y/Y Growth SOLD CITY OF TORONTO AVERAGE

$1,285 PSF – 3% Y/Y Growth Source: Urbanation

Toronto’s high-end condo sales are also reaching new record highs. Q3 saw an 80% increase in condo sales within the $1M $1.5M range (compared to Q2 2019), representing a record 8% market share, compared to 2% share in 2016. Following close behind, condo sales are up 45% for units priced above $2M. This increase in high-end buyers is translating into the preconstruction product , with several projects launching in Q3 with inventory averaging (and absorbing at) close to $2,000/PSF.

By The Numbers By Saraya Yen

Remaining Pre-Construction Condo Prices & Percentage Growth

UNSOLD GTA AVERAGE

$1,198 PSF – 9.5% Y/Y Growth UNSOLD TORONTO DOWNTOWN AVERAGE

$1,481 PSF – 7% Y/Y Growth UNSOLD CITY OF TORONTO AVERAGE

$1,299 PSF – 6% Y/Y Growth Source: Urbanation

The success of the recent launches stands as proof that confidence in Toronto’s downtown core is back and that the pandemic-migration fad is coming to an end.

By The Numbers By Saraya Yen

Resale Numbers

155%

Increase of resale condo sales in the GTA

26%

Representing condo share of total GTA resales in the last year

$1,070

Resale Toronto average

12%

Y/Y increase in average prices in the GTA

10%

Price gap between new sale and resale condos narrowing, likely to prompt a rise in new condo prices

PSF

Source: TRREB

The price growth we’re seeing in Q3 continues to be driven by the low-rise market segments, including detached, semi-detached houses and townhomes, with the strongest growth between $1.5 - $1.75M. However, competition between buyers for condos has picked up markedly over the past year, specifically in this busy Q3 fall market. This is leading to an acceleration in price growth, particularly in condos priced from $800 - $899K as first-time, end-user buyers re-enter the ownership market.

By The Numbers By Saraya Yen

Rental Numbers at a Glance

14,437

Approx. leases available in Toronto

57%

Annual lease activity growth in Toronto

$2,337

Average lease price in Toronto

42%

Annual lease activity growth in 905

$3.31

Average lease price PSF

Vacancy rate in the GTA

$2,304

Average lease price in GTA

4.1%

Vacancy rate in the downtown core

13,989

Lease transactions in the GTA

1.6%

Vacancy rate in 905

Sources: TRREB, Rentals.ca, Move Smartly Report, CMHC

As condominium lease activity continues to recover (and grow) to new highs, the volume of listings during Q3 dropped by 27% yearover-year — the first annual decline in over three years. As a result, the strong inflow of renters, driven in part by the return of postsecondary students ahead of fall classes, pushed the quarterly ratio of leases-to-listings to 82%, matching the pre-COVID level in Q3-2019 and exceeding the 10-year Q3 average of 80%. Remarkably, the downtown core went from having the weakest ratio of leasesto-listings throughout the pandemic to having the tightest ratio in Q32021 at 84%, signalling a swift change in market power from tenants back to landlords in the downtown area.

By The Numbers By Saraya Yen

New Rental Construction

3,956

New rentals started construction in 2021

3,726

Purpose-built rental completions

14,511

Total purpose-built rental construction across the GTA

1.8%

Annual decrease in purposebuilt rental PSF

94,070

Total proposed purpose-built rental units

$3.30

Average monthly lease for a purpose-built rental unit

Over

Total units under construction and planned in the GTA

100,000

Sources: CMHC, Urbanation

PSF ($2,389)

In Q3, the purpose-built rental market experienced similar growth to the condo rental market. Vacancy rates dropped, and rental absorptions reached new record highs. However, when excluding the number of recently completed, higher-priced, newer buildings, purpose-built rentals were down 1.8% annually.

Word On The Street By Tannaz Taghizadeh 20

THE REPORT

Volume 3

WE CONNECT WITH OUR NETWORK OF BROKERS FOR UNIQUE INSIGHTS INTO THE CURRENT MARKET.

Word On The Street By Tannaz Taghizadeh

What were the most exciting launches this past quarter?

North Oak

Verge

Purchasers are eager to find homes in the connected, heritage-focused Oakville, with its classic European aesthetic and beautiful lakeside views.

RioCan Living is a big name with a lot of clout. This, along with Verge’s price point, has created a lot of excitement for the Etobicoke community.

The Mason at Brightwater

Crest at Crosstown

The Mason is part of a massive Brightwater community in Mississauga that brings a prized sense of safety and protection for younger families with children.

Crosstown’s newest addition, Crest, presents purchasers with a boutique living option in North York at a very reasonable price.

Alba

WestLine

Located in downtown Mississauga, Alba is strategically located on Hurontario Street, providing stunning connectivity and spectacular views extending to Lake Ontario and downtown Toronto.

WestLine rises beside Sheppard West TTC station in North York, just a short walk from GO transit. Additionally, amenities like York University and Yorkdale Shopping Centre are mere minutes away.

The top five launches from our surveyed realtors spanned five different neighbourhoods throughout the GTA. This is something often overlooked about being in a world-class city. The entire area continues to be attractive to purchasers, with each creating its own specific draw to future real estate values.

Word On The Street By Tannaz Taghizadeh

What projects did you consider a good investment, and why?

Alba Compared to other sites in the Mississauga area, Alba had fair pricing and shows great potential for pricing increases in the near future.

Verge One of the newer pre-construction projects in Etobicoke, Verge will be launching among several new projects in the area in the next four years, showing incredible value on return in that time.

W h i l e d ow n t ow n i s o f t e n the preferred choice, some buyers are limited by availability and cost. Realtors are now steering purchasers towards areas beside the core, showing them as lucrative investments that offer comparable benefits at a more approachable price.

Word On The Street By Tannaz Taghizadeh

Which projects did you feel were priced higher than expected, and why?

Prime Many realtors stated they didn’t expect Prime’s pricing to be as high as it was, considering the Jarvis St. location in downtown Toronto. However, the project is now completely sold, and construction is underway.

North Oak - 2nd Release Realtors stated that, when compared to the community’s first release, the pricing for Oakville’s North Oak 2 increased more than expected.

WestLine Despite its exceptional marketing, many didn’t expect WestLine’s pricing because of the North York location.

The pre-construction industry continues to thrive through recessions, pandemics and rising costs — built on new projects pushing new prices. There are always questions when projects push the comfort of pricing but, six months later, they almost always end up sold and new cranes continue to rise.

Word On The Street By Tannaz Taghizadeh

What projects provided the most effective launch strategies?

Verge Verge created lots of excitement with Verge Hype House, an incredible outdoor in-person event for realtors. Alongside this event, the project launch video was exceptionally innovative and informative, garnering lots of attention. Both built considerable buzz, which spilled over into the sales centre during signing weekend.

Le Sherbrooke Originally this was expected to be a virtual project launch but, instead, realtors spent three days in Montréal enjoying good food, good company and a wonderful atmosphere – which felt like a long-overdue gathering of like-minded individuals getting “back into the swing of things.”

While technology promotes efficiency, in-person events continue to provide an energy that is unmatched. Launch events and signing events that provide an opportunity to be face-to-face always promote incredible project confidence and allow realtors to bring clients to the site – a big plus.

Word On The Street By Tannaz Taghizadeh

Where are you advising clients to invest currently, and why?

LongTerm

Downtown Toronto is still the safest investment.

ShortTerm

905 communities have shown great returns, focusing on areas surrounding the core because of pricing. Townhomes are the most desired product outside of Central Toronto.

Certain neighbourhoods or areas outside the city always have their boom times. Whether due to different factors such as lack of inventory or public investment in infrastructure in the core, there are always secondary neighbourhoods that provide amazing returns on investment.

Investing falls into two distinct categories: If you’re playing it slow and safe, the downtown core of any major city is a logical choice. If you’re looking for a quicker appreciation that may not excel with the same trajectory as the c o re, t a rg e t i n g a f f o rd a b l e neighbourhoods right outside the core seems to make more sense.

Realtors’ Pulse 32

THE REPORT

Volume 3

Realtors’ Pulse As the downtown core surges back to life, it’s important to take a moment to reorient our thinking and see what purchasers and realtors are looking for as they return. We want to ensure that we can stand out from the crowd – presenting new development projects that are perfectly tuned to reach our audiences and succeed.

The city is extremely resilient and continues to draw attention in greater and greater numbers. As such, it is pivotal that developers work to stay ahead of this curve, anticipating the needs of buyers and realtors alike as they return in force. Buyer needs and behaviours have shifted during the pandemic and, as people return, we must be cognizant to connect with them in the right ways. Realtor mindsets have also shifted, adapting to the changes of the past year, and it is essential to note their current and changing behaviours as well. With lots of attention and a myriad of launches returning to the city, it is imperative to discover what important criteria attract realtors to specific projects. Connecting with our expansive network of elite realtors, we explore their unique one-on-one experiences with investors, end-users and the sales process as a whole. As such, we provide an unfettered view into the buyer and realtor mindset – revealing hidden opportunities and perceived pain points.

Realtors’ Pulse What is the most important criteria for your clients when investing in pre-construction?

Location

Buyers are eager to know everything about the location of their future investment: Is there proximity to transit? What and where are the surrounding amenities? What is the view like? These questions help them ensure that they’re buying in developing locations.

Investment Value

The investment value of a community is a big consideration, as buyers carefully consider the equity in growth areas. Whether an end-user or an investor, buyers want to ensure they will benefit from solid returns and an appreciation in value.

Deposit Structure

Savvy developers are lowering payment structure options from 5% to 2.5% by adding more deposit dates. Some even offer multiple structures to choose from, providing muchneeded flexibility. To encourage buyers towards the traditional 5% deposit increments, some developers provide incentives such as a free locker or something similar.

Most buyers are driven by the same motivating factors that they have always been. Developers must position themselves to highlight those factors as superior to their competition and the market as a whole. However, this also extends to the reputation and overall brand of the developer, as buyers are looking for the confidence that comes from dealing with a well-seasoned builder. This is why Austin Birch works tirelessly on this research. We highlight how and why a buyer with endless choices in our city should gravitate towards our developments.

Realtors’ Pulse Do you advise your clients to invest in certain projects, or do they approach you with their interests?

80%

I ADVISE MY CLIENTS

20%

A MIX OF BOTH

Most buyers have agents who steer them in one direction or another, educating them on projects. However, the 20% of clients who visit or call the sales office directly fall into two camps: external buyers and local buyers. External buyers are intrigued by the developer ’s reputation or marketing and rely on the sales team to highlight the neighbourhood’s benefits and growth. Local buyers come from the neighbourhood itself and need the sales team to educate them about the developer and building details.

Realtors’ Pulse Other than access, what attracts you to sell one development over another and why?

Builder reputation is crucial

The reputation of a developer directly impacts buyer confidence. It conveys a developer’s ability to deliver and complete a project without cancelling and assures that the project that was promised is the project that will be delivered.

Relationship with sales and marketing team

Realtors tend to promote projects for the teams they know and trust. With strong relationships in place, they are assured that the developer can and will deliver the product that they are selling to their clients.

TIMING OF IMPORTANT PROJECT INFORMATION

AMPLE ALLOCATIONS INSTILL CONFIDENCE

Receiving early access to project information allows realtors to prepare clients well ahead of time, ensuring they are knowledgeable and ready to commit by the time the project officially launches. As such, the client will be fully knowledgeable on the project and ready to sign.

Guaranteeing allocations ahead of time is usually preferred rather than ‘going in blind’ and submitting worksheets. This brings a confidence to the project that everyone, buyer included, can connect with – ensuring smoother purchasing journeys.

Properly educating realtors and buyers early is key in our busy market. Outlining benefits such as neighbourhood characteristics, access to transit, amenity packages and the investment story early on helps realtors successfully educate their clients, connecting with them well in advance so buyers feel confident and ready to execute when a launch takes place.

Realtors’ Pulse How do you overcome perceived hurdles in the industry when selling new projects?

Pricing and Sticker Shock

Although initial pricing can create a shock to both realtor and client, communicating early helps alleviate concerns and creates understanding for why pricing is where it is. This also helps realtors as they can lend less weight to the pricing – instead, presenting the project’s future appreciation.

Virtual Selling Tools

New technologies are beneficial as these fully integrated systems allow the developer and sales team to share information about new projects efficiently. Although helpful when selling, some realtors prefer downloadable assets when communicating with buyers, as these virtual tools can be overwhelming for some. Simple-to-use systems help both realtors and buyers, highlighting only pertinent information and, thus, encouraging sell through.

As sales prices continue to rise, the traditional investment model of positive cash flow no longer stands as the overarching goal future appreciated values are now a key selling point. Additionally, we see that building pricing should be presented more clearly as sticker shock seems to happen when actual pricing is higher than the pricing promoted in marketing leading up to the actual project launch.

Realtors’ Pulse What are the key mandates for ensuring a successful project launch?

Timing

A: Strategic timing is a key mandate for positioning a project in the market – allowing you to stand out from the competition while telling the story.

B: Developers should allocate enough time between a project’s information release and signing date to allow clients ample time to become familiar with the details of a project.

We want to make sure timing from the official launch date to signing remains relatively tight as clients can lose focus if they wait too long to sign after suite allocation.

Collaboration

When there is full collaboration between the different trades involved, a foolproof plan can be developed and executed around a site. This allows for success and builds trust throughout the project lifecycle – encouraging a well-positioned final product.

Floorplans

Thoughtfully laid-out floorplans are key to a successful project. Buyers will notice a project immediately when a sales team has been brought in early, as all their needs have been carefully considered and accommodated.

A properly marketed project should sell well outside of environmental factors beyond control. As long as the developer, sales, architectural and creative teams work together, a project has no choice but to succeed. When collaborating early, these teams keep their finger on the pulse of the market, launching with precise strategic timing and with units that are perfectly crafted to attract buyers.

Realtors’ Pulse Which suite design factors are the most important to your clients, and why?

Thoughtful Floorplan Layouts

The highest and best use of sqaure feet was, by far, the most important factor. Size isn’t as important anymore; buyers want defined spaces and will look for the right scale for their unit type.

DESIGN FACTORS BUYERS MENTIONED:

/ / / / /

Kitchens separated from living rooms An actual defined living space Outdoor space No long hallways/ limited hallway space No obstructed views (such as columns in the living space)

As average unit sizes get smaller, thoughtful layouts are more important than ever. At Austin Birch, we’re heavily involved in the process of curating floorplans with our clients to ensure suites fit the project and accommodate buyer needs. Kitchens, living areas and den sizes should always be studied by measurement as opposed to conforming to a marketed furniture layout. In fact, product type should never be the driving factor for a unit’s size. Sometimes a larger onebedroom lays out much better than an awkward one-bedroom plus den.

Realtors’ Pulse What launch tactics have shown quick success?

EARLY ACCESS TO INVESTMENT INFORMATION

Highlighting future growth, the investment story, project details, etc.

LIVE, IN-PERSON EVENTS

Still the best way to generate excitement.

EFFECTIVE MARKETING

Creative incentives and events that push boundaries not only tell the project story but also draw interest to the site itself.

VIDEO CONTENT

In today’s mobile and distanced market, a digital presence is more important than ever, and video content has been extremely helpful in connecting with agents and clients.

CASH BACK INCENTIVES

These draw a lot of attention both from realtors and buyers.

Launches are by far one of the most exciting parts of our responsibilities, and it’s vital to ensure you stand apart from the rest to truly captivate a busy audience. Creating a memorable launch can allow you to push the boundaries of the industry in phenomenal ways, but you need to ensure you can always circle back to highlight the benefits of the project and tell the story. We always encourage bold tactics and unprecedented ideas while providing information that realtors and buyers need.

Realtors’ Pulse How important is the developer’s reputation to you and your clients?

100%

F REALTORS RESPONDED THAT O REPUTATION IS A TOP PRIORITY.

WHAT HELPS YOU GET BEHIND A DEVELOPER WITH NO EXPERIENCE?

If the developer has limited experience, confidence can come from the relationship with the sales and marketing company. Realtors rely on these teams because of the established level of trust that sales teams work relentlessly to maintain.

Austin Birch works with developers of varying degrees of experience and reputation. We are aware that, to present these clients in the best light, every point of contact in the marketing and sales process must relate positively back to them. Everything from how information is distributed to the way the team greets realtors and buyers must be meticulously crafted to ensure it reflects well on the developer.

Realtors’ Pulse How important is a project’s marketing in aiding client decision-making?

98%

OF REALTORS RESPONDED THAT THIS WAS A TOP PRIORITY FOR A SUCCESSFUL LAUNCH

Strong marketing material is absolutely essential throughout the development journey. Buyers have so many choices available to them that it is now more important than ever to break through with bold concepts and powerful messaging. We know that collaborating as part of the marketing team from conception to execution is pivotal to sales. This combined effort results in compelling marketing material that helps highlight and separate a project, ensuring its success.

Realtors’ Pulse Are there certain factors that lead to higher or lower rescission rates? HIGHER:

HIDDEN CLOSING COSTS

It’s much better to have more closing costs built into the purchase price so that buyers can finance a high percentage. In our experience, buyers do not appreciate surprise costs on closing.

PRESSURE/ APPREHENSION

Sometimes buyers are securing units very quickly and under pressure in fear of losing them. As such, we tend to see them drop off sometime between allocation and signing. Providing buyers with the time they need to acquaint themselves with the project details instills confidence, making it unlikely they’ll change their minds.

LOWER:

TRANSPARENCY IS KEY

Providing important information early helps educate realtors and buyers throughout the process, allowing them to know that they are buying the product they expect.

WORKSHEET FLEXIBILITY

With more flexibility, realtors can switch the wavering buyer of an allocated suite to another buyer who will be more likely to firm up the deal.

It is extremely important that buyers feel there is transparency and fair terminology to ensure that no part of the process or the documentation can potentially turn them off. At Austin Birch, we provide a detailed review of all marketing material, documentation and legals for purchasers and their lawyers. This straightforward approach results in some of the lowest rescission rates in the industry.

Realtors’ Pulse What factors are most important during a project’s signing process, and why?

EASE AND EFFICIENCY

Organization and communication help avoid confusion regarding scheduling when deposits are due and when contracts need to be signed.

HONOURING BOOKED APPOINTMENTS

Clients want a process that is efficient and painless – the less waiting around, the better. This is true for the signing process as well, which should be expedient and streamlined.

SALES CENTRE ACCESS

It is helpful to allow a client to see what they are buying when they sign (especially new clients).

SALES TEAM/ DEVELOPER INVOLVEMENT

This gives the client further confidence in their decision and adds exceptional value when answering their questions.

The average time that a buyer spends signing their deal should ideally range from 7-10 minutes. We use only best in class technology and make sure our staff is well trained in using these tools to curate an enjoyable signing process. These technologies include calendar booking systems, digital e-signing tools and Blackline project portals - allowing for an easy preview of project information.

Who We Are At Austin Birch, we offer a comprehensive service encompassing all aspects of condominium sales. Founders Eric Kuzuian and Jamie Sarner provide years of specialized experience and a track record of $8 billion of prime real estate sold in the Toronto marketplace. Our focused team of passionate professionals enables us to provide an unrivalled level of service that you simply won’t find elsewhere. At Austin Birch, a fresh, innovative approach is matched by our proven knowledge and expertise in the sector, making us your strategic partners for real estate marketing and sales in Toronto.

25+

10+

Award-winning projects, including 3 prestigious awards for BILD Project of the Year

Over 10 years specializing in development marketing and sales

$8B

35+

In new development sales

Projects marketed and sold

What We Do Positioning real estate developments for the marketplace is an extremely complex business. Our hands-on approach encompasses the entire marketing and sales process. We understand all the different elements required to make a project successful and therefore have developed a highly attuned methodology that guides our clients every step of the way.

Unthink real estate.

Copyright © 2021 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.