2021: The State of Real Estate Development in Ottawa

As the world continues to recover from the previous year of lockdowns, there are many aspects of daily life which are likely to remain changed forever. Working from home, for instance, is unlikely to go anywhere. A recent survey by Gartner CFO found that 74% of companies plan to shift at least some employees to remote work on a permanent basis. Now that companies have discovered that a high level of productivity can be maintained out of the office, they plan to use working from home as a way to reduce overhead costs, improve employee retention, and generally remain competitive in a changing landscape.

While this trend has created a fog of uncertainty for many office building owners who are continuing to see rising vacancy rates in downtown Ottawa, the residential real estate market has been a different story altogether with historic growth across the housing sector. Developers who understand the drivers behind current trends in real estate development in Ottawa will continue to be well-positioned for significant gains by catering to this new normal.

Average Home Prices in Ottawa

With more and more workers facing the prospect of working from home on at least a part-time basis coupled with pent-up demand, low housing inventory, increased personal savings, low interest rates, and many other economic factors, homeowners are seeking out more living space like never before. This is one reason why home prices in Canada’s eleven major cities rose by 9.36% during 2020, the strongest price growth since 2016. Out of all the major cities, Ottawa recorded the highest average year-over-year price growth in 2020 at a whopping 19.69%.

The market has not slowed down going into 2021. In April of this year, residential homes in Ottawa sold for an average price of nearly $743,000, a 42% increase over April 2020. The average condo went for nearly $430,000, a 30% increase over the prior year. In a recent article by CBC, a local realtor describes how buyers often have to offer tens, or even hundreds of thousands of dollars over the asking price for their offer to even be considered:

“There’s a small townhouse… in 2018 I had it listed in the low $300s. It took us a while, but we finally got it sold in the low $300s. In the last couple of months, it went on the market in the low $400s. It sold in the high $500s.” – Debra Wright, Ottawa Real Estate Board President (CBC News)

New Build Price Trends in Ottawa

New construction for residential properties has also surged in Ottawa-Gatineau over the last year, which according to the Canada Mortgage and Housing Corp. has been driven largely by large multifamily development projects and developers struggling to keep up with surging demand. The Ottawa Business Journal noted that builders began work on 1,718 new housing units in May 2021, up from 1,020 in 2020. This was the third month in a row that the number of new housing starts nearly doubled year over year.

The majority of these new build starts were in multi-unit projects, which rose 91% year over year. Single home construction starts also showed a strong increase year over year at 22%. The most significant increase was in multifamily projects kicking off on the Ontario side of the river, which spiked 117% between May 2020 and 2021.

Capitalizing on the Real Estate Boom

With all of the dramatic price growth in Ottawa, many investors want to know how they can cash in on this gold rush. What many are quickly realizing is that due to the intense competition from other buyers, it has become extremely difficult to purchase existing properties at a discount. Anyone who’s worked in the real estate industry knows that you make your money when you buy, and with purchase prices being so high the profit margin simply isn’t there for most long-term rentals. Add local regulations which prevent landlords from raising prices on existing units and a tedious eviction process for tenants who stop paying rent, and the current market is actually quite risky for the individual investor.

The most reliable strategy to take advantage of the current market is to partner with a developer who understands the local market conditions for real estate development in Ottawa, isn’t reliant on buying existing homes, and is able to provide prospective buyers and tenants with the features they’re looking for in a post-pandemic world. Not only will this result in a higher cap rate, but this hands-off approach will require less effort as the entire process will be managed by professionals with an intimate knowledge of the industry. Working with a developer can provide opportunities through both large multifamily projects which generate long-term rental income, as well as high-end residential home builds which can be sold for profit in the short-term.

Real Estate Development in Ottawa – a Case Study

Investors who provide amenities that tenants are looking for in a post-pandemic world will be well-positioned to maintain low vacancy rates and higher rents going forward (or higher sales prices if the property is being sold). Amenities which have become more important to buyers and tenants include things like: more living space; layouts which accommodate a productive work-from-home setup; coworking spaces; high-end finishes; and nearby attractions which allow for living, working, and playing within the same area.

300 Tremblay is a TCU Development project that is currently underway in the Ottawa Trainyards area, which is known as Ottawa’s first centrally located shopping complex with over 150 stores including: sportswear, brand name fashion, groceries, fitness centers, coffee shops, and restaurants. The building itself is a 73-unit, 52,676 square foot complex with a mix of one- and two-bedroom units. 300 Tremblay will offer high-end finishes in the units, a coworking lounge, indoor bike parking, and first floor retail space that will be easily accessible to tenants. The urban location appeals to both the local surrounding community as well as the greater inner-city community given that the building is within a short walking distance to major transit and bike paths that connect throughout the city. This building perfectly caters to a work-from-home employee who wants to live, work, and play without having to drive to different parts of the city.

Our residents, colleagues and partners are at the heart of all we do. When you invest with us at TCU Development Corporation, you’re not only investing alongside us, but you’re investing in our incredible team, who work tirelessly to deliver results. Whether you’re a first-time investor or seasoned real estate expert, we’re here to maximize your portfolio, while making a positive contribution to the community. Contact us to learn more.