Sep 24, 2020
Are the Days of the Downtown Toronto Condo Boom Over?
There have been many articles written and opinions expressed on the supposed long-term change in the desire of millennials to live in downtown or mid-town Toronto resulting from COVID-19. Millennials are in large part the driving force behind the robust 416 rental market. As well, the investor market is driven by the same Toronto millennials who rent the bulk of the new condominiums being built and sold to investors.
The Ontario Home Builders Association Magazine recently put out an article which interviewed a number of builders and residents claiming that COVID-19 has made downtown living unnecessary because of the ability to work from home and also undesirable because of the lack of activities and the lack of space (and health risks) within the condominiums. Similarly, the Financial Post put out an article yesterday https://tinyurl.com/y64tdgx4 indicating that there was a significant uptick in the housing market in Hamilton with people from Toronto moving out to Hamilton. Correspondingly, people from Hamilton were leaving Hamilton because prices were rising there and moving to Niagara Falls and southwest. And the third domino effect, people in Niagara Falls, St. Catharines and Welland were then moving out to Fort Erie, all seeking cheaper housing.
There is no doubt that the COVID-19 pandemic has changed people's views of lifestyles and highlighted the need for space, both for living accommodations and green space outside. Moreover, the mass relocation of office staff from downtown office towers to home offices in downtown condominiums or homes elsewhere, has created the sense that we are going to be in an environment where the downtown will be a ghost town and everyone will be living in suburbs and small towns.
There is no question that for the next 6 months or even a year, downtown Toronto will be a much quieter place. With financial institutions telling their staff that they will not be returning before the New Year, and winter coming which will effectively close down outdoor patios, work life and entertainment life in the downtown core will be very limited. It will be inevitable that the rental housing market in 416 is going to continue to suffer and sales of new 416 condominiums will also be affected. But is it realistic to expect that all the millennials who don't have cars, who don't want to travel to work and who crave the multitude of attractions and restaurants in downtown and mid-town, will really start moving out to Hamilton, St. Catharines and Niagara Falls?
For the moment, smaller towns have become extremely attractive to GTA dwellers. For instance, the City of Stratford, which has economically suffered tremendously by the loss of its main employer and the Stratford Theatre Festival, is also having a housing boom. When I was there this summer, I was told that even though tourism was non-existent, houses for resale remain on the market for only a couple days and even newer condominiums were selling quickly. And yet, the 416 housing market remains vibrant.
The CEO of KingSett Capital, John Love, has predicted that there will always be a need for office and commercial space, notwithstanding the pandemic. It may be that the space will be reconfigured to allow more distancing and that may only result in further office space being required or with a splitting of people working at home and working in the office, the existing office requirements for most firms could be readjusted with better spacing. There is no question that a world of people living and working in their homes may be attractive to some, but from both a social and work functioning perspective, it is not a long-term solution. People need social interaction as part of their lifestyle and team work at offices need face-to-face interaction. We are not islands and cannot live by Zoom alone.
It is one thing to have 20 people on a Zoom call; it is another to have them sitting around a table, facing each other. One of the things I have learned about Zoom is that people communicate not only verbally, but also through body language. Zoom and its contemporaries, do not project that body language. This results in 2 problems. Firstly, people get tired in Zoom meetings because their subconscious is constantly looking for those body language clues without success. Secondly, the manner of communication is much more limited without that body language.
My sense is that for the next year, there will be a fair bit of uncertainty and turmoil in terms of where people want to live, how they want to work, what places will open, etc. Much will depend on rapid testing and vaccines for COVID-19. But this crisis shall pass. At the end of the day, the attraction of Toronto to both immigrants and millennials will not end and our 416 condominium and housing market will continue to thrive.
It is not yet time to give the last rights to downtown and mid-town Toronto.
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