- Not seen In Years, Halifax Apartment Landlords Hang Out ‘The For Rent signs’
By Andrew Macdonald
For the last few years, if Halifax developers built new apartment buildings, those rentals were pre-leased even before occupancy took effect – pre-leased during a given building’s construction
In the last six months, pressures have created a perfect storm for new apartment landlords to begin putting out ‘For Rent’ signs at relatively new apartment complexes.
There is chatter that newer buildings are offering incentives to get tenants signed and leased up.
The class A apartment building, The Paramount, built in the last 10-15 years, put out a ‘For Rent’ sign recently. There is chatter of a slowdown in leasing out new Halifax rentals. (The Notebook).
The other week, a ‘For Rent’ sandwich board appeared at a relatively new building, owned by Maini Suissa. That sign appeared at the Paramount, near his Lord Nelson Hotel.
What is noteworthy is that the building was developed in the last ten to 15 years, considered a ‘Class A’ apartment building.
And, at a new building, which offered occupancy last year, at Portland Place, the landlord was discounting the rental price for a 600 square foot unit.
Leading apartment landlord, Killam Apartment REIT, addressed the need for rental incentives to entice tenants in its new buildings, during a conference call with analysts in February. See article in this edition on that fact.
Leading commercial real estate broker Bill MacAvoy says the rental market is seeing pressures on new rentals over the last six months.
Build it, and they will come was the mantra over the last few years.
But, in the last half year, governments have capped international students entering NS and Canada – a key cohort category of renters. Governments have also capped immigration – another key rental group.
Halifax Mayor Andy Fillmore has recently pronounced that the housing crisis is over – and that could be true.
Some landlords of new buildings are even offering a free month’s rent on a tenant’s signing of a 12-month lease.
Built 12-15-years ago, there are currently three or four vacant units at the Gladstone complex, in the Northend, built by Danny Chedrawe. Those vacancies were unheard of over the last few years.
Bill MacAvoy moved into the Modspace at Queen’s Marque, taking the office keys in 2023. So fresh was the move that he had not put up artwork when The Notebook took this picture. He is a commercial brokerage veteran with Cushman Wakefield Atlantic. (The Notebook photo).
To understand the pressures facing new apartment projects, I spoke to Cushman Wakefield Halifax’s broker Bill MacAvoy.
Notebook Question: Are you hearing about a slowdown in filling up new apartments?
MacAvoy: “Absolutely.”
He explains: “I think there are have been a lot of levers pulled in a lot of opposing directions from a policy standpoint in the last five years.”
“We opened up very aggressively in-migration, both Canadian and interprovincial, but also international,” and that helped to occupy apartments.
Then that stopped. “The hard stop on immigration and the changes in student visa rules came quickly. Real estate does not appear in an instant and does not go away in an instant. So, the supply train was well down the tracks. So, I do think we have a case the new construction is not getting absorbed as quickly as it has in the last five to ten years,” he explains.
“Simply because that demand has been close to saturated,” he adds.
“The other thing is the cost of construction has gone up appreciatively, which means the new start rent numbers have gone up, whereas you will hear constant conversation that affordability and wages have not moved with that,” he explains.
“I think people (renters) are getting very creative in where to find shelter and accommodation, which maybe to move to lower income buildings, co-locating in a primary residence.”
There are two leasing agents leasing up Richmond Yard. Landlords of new rentals are now offering incentives to sign up tenants. Danny Chedrawe is the Richmond Yard developer. (The Notebook).
The commercial broker says the mantra: “I think the five-year bull run we had, you build it and it is full before you finish, I think that is over for the time being.”
That means “landlords need to put in my work to get full, and whether that is inducements or price breaks is really a function of what their location is and what the product demand is,” adds MacAvoy.
“But, yes, it is a different ball game than it was six months ago.”
MacAvoy says the incentives could include breaks on utility costs, negotiated by individual landlords, on a case-by-case basis.
“We are seeing ‘For lease’ signs pop up in buildings, which we have not seen before,” adds the commercial broker.
“But, this is what happens. We have caught up to the demand, and now it becomes an open market competition, which is based on rent price, location, and amenities.”
“Tenants do have some choice, but it is not uniform. There are lots of choices in the newest and most expensive, and highest buildings, because there is more supply than demand. But it is not yet filtering down to the lowest rent point. I think at the lower rental price there is still high demand and folks are very much rent takers, so it would be highly variable by neighbourhood and by age of the building,” MacAvoy tells The Macdonald Notebook.
Notebook Question: Are we building too many new buildings now? Will there be a slowdown of construction starts?
MacAvoy replies: “I think where we are, I think at the end of the day it is always a business decision by a developer to hit the ‘go’ and sign that first contract to dig the foundation. Some of that conversation exists in the lending and underwriting community, so they are very much in tune with market rents, market vacancies and studying closer than a developer.”
“I would say there is a lot more consternation over the decision to go, and it also leaks back into design. Credit markets have changed and ultimately underwriting has changed, which means that the launch mode is a little slower,” adds MacAvoy.
“I think we were ready, fire, aim two years ago, I think there is a lot more time going into the mission planning before we are putting shovels up in the air.”
Danny Chedrawe’s 2011 build, Gladstone North, has three to four apartment vacancies. (The Notebook).
Danny Chedrawe’s Richmond Yard has two leasing agents. There is chatter of a slowdown in renting out new apartment stock. (The Notebook).
