Building & Buying For The Long-Term

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The latest issue of Canadian Apartment Magazine contains an interesting article which I recommend reading. Here’s a link to the article:

https://www.reminetwork.com/articles/purpose-built-rental-pro-formas-under-pressure/

The article quotes from Paul Morassutti, a CBRE executive, who comments on the findings of a report on construction costs made by another consulting firm, Finnegan Marshall. Morassutti’s quotes are interesting since he describes and comments on recent trends in rental housing construction and demand among institutional buyers for multi-unit rental housing properties. In essence, with ever-increasing construction costs, rental housing developers and buyers are finding that big payoffs are unlikely in the short-term, so builders and buyers need to focus on long-term payoffs. Morassutti expects rents to rebound as the pandemic weakens and demand for rental housing will increase as aging homeowners cash out. The last paragraph in the article quotes a great summary by Morassutti:

“When you speak to most of the capital that’s moving into that space, they will tell you that you can’t look at those developments as a one-off development with a going-in yield that’s going to be a homerun,” Morassutti recounted. “They are executing on the strategy, not necessarily the individual deal. I think they all feel confident that they are creating brand new rental product in a sector that they all want to be in. Ten years from now, 15 years from now, they will own great quality product with rents that will have grown, and they’ll be in a very good space.”

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