Unpacking the real-estate boom

Given the current interest in real estate across Canada — both as a subject of discussion and a matter of investment — it should come as no surprise that the real-estate minor is the fastest-growing minor program at John Molson, says the centre’s director, Michel Deslauriers, BComm 85.

The need for such a centre at Concordia was never in doubt, adds Lavallée. “Real estate is way more complex than most people think, and it affects everybody,” she says. “It also employs people in many more fields than most of us realize, so the kind of training the Wener Centre and John Molson made available was invaluable and in high demand.”

What’s surprised some industry observers is how the real-estate industry in Canada has responded to the COVID-19 crisis. “The industry was booming and growing pre-pandemic, and that trend has not abated,” says Deslauriers, a full-time lecturer in finance at John Molson and a strategic advisor to real-estate development firms in Montreal.

“It’s a fun industry to be in and a fun time to be in it. It’s one of the big, thriving industries that will never disappear.” Real estate draws people hoping to be agents and brokers, entrepreneurs, investors, investment analysts and more. These broad possibilities have the Wener Centre’s brain trust looking to future growth, with talk of developing a major program and, later, a graduate program, perhaps all within five years, Deslauriers says.

“We think there’s an appetite for the major out there,” he adds, noting that Ontario’s University of Guelph offers one of the few in Canada. In Quebec, both the Université du Québec à Montréal and Université Laval have real-estate programs. Concordia’s is the first such offering in English. The industry has made its needs clear, Deslauriers says. “‘Give us people who are passionate about real estate,’ they told us. Our advisory board has provided us with good insight to help us advance our students.”

A market with winners and losers

Emerging trends and markets can change on a dime. Deslauriers, for example, is seeing a boom in the construction of rental housing right now to meet the needs of millennials who find home ownership beyond their immediate reach. The additional supply will be most welcome, Lavallée says, noting that multi-family dwellings are one of the three hottest areas of global real-estate growth, the others being warehousing and distribution centres, and data centres.

Changes in real-estate markets aren’t always universally popular. Not only has the cost of home ownership risen sharply in recent years, according to Statistics Canada, but the cost of rentals is rising as well. While this may be good for sellers and landlords, would-be buyers and tenants are frustrated at best and panic-stricken at worst.

Housing prices rose in Canada by 11.9 per cent between June 2020 and July 2021, far outpacing the 3.7 per cent increase in the Consumer Price Index over the same period. And in Montreal, where many apartments operate under some form of rent control, the average rent on a two-bedroom apartment rose from roughly $760 per month to $903 per month, Statistics Canada reports. In Vancouver, that two-bedroom apartment rose from $1,375 to $1,799 over the same period, while in a small city like Peterborough, Ontario, the average rent for a two-bedroom rose from $955 to $1,183. Lower vacancy rates mean higher rental rates, and that doesn’t help people in lower income brackets, where the housing crisis is much more acute.

Inspired to ‘grow within the industry’

Being part of the Wener Centre has been an eye-opener for some students. Anmole Singh, BComm 21, who joined the centre’s advisory board as an undergraduate intern, graduated in May.

“Before my first class, I had only a very general understanding of the subject,” she says. “Then I learned how big this industry really is. I loved how much impact it has on the world and on people. There’s an importance and permanence related to real estate that’s truly inspiring.”

Singh now works as a junior financial analyst with Werkliv, a Montreal-based development firm that specializes in student housing in Montreal and in the Maritimes.

“There are so many fields within real estate, and they all connect,” she adds. “Each day brings new challenges and experiences that push me to continue learning and growing within the industry.”

Greater interest in rental housing isn’t the only shift occurring. “One of the hottest topics is transit-oriented development,” says Deslauriers. “That’s the creation of communities around transit hubs.” The construction of Montreal’s new Réseau express métropolitain (REM), slated to open in part by summer 2022, might be the kind of variable that could displace a chunk of the population from downtown to the outer suburbs, where single-family homes with backyards hold some appeal.

If the REM can help eliminate commuting time, it could prove to be a tipping point. Initially, it will primarily serve existing communities; long-term growth could expand its reach to encourage the development of new communities in the Montreal hinterland.

Jennifer Khairallah, MEng 18, is a senior associate in infrastructure and capital projects at Deloitte. Prior to joining the company, she worked on two major Montreal projects: the CHUM “superhospital” and the REM. “The aim of the REM is to have people go in both directions,” Khairallah says, not just from downtown to the suburbs or vice-versa.

“People will have the best of both worlds,” she adds, with easier access to major downtown entertainment and cultural venues that will not be duplicated in the suburbs. Downtown will retain its unique opportunities. The big plus, she says, is that with 26 initial stations and high-frequency service, “there’s going to be an increase in transit ridership that will make it easier to get to the downtown core.”

The flip side is that it will also make it easier for people to live farther from the city centre — especially for those working from home — which will lead to higher demand for housing in the suburbs. Some developments near REM stations are already underway and are being adapted to take advantage, Khairallah says.

‘Supply has never been able to keep up’

Changing demographics play a big role, especially in the most expensive housing markets, according to the Canadian Real Estate Association. “While older parents moving in with their children is the most common generation combination, families purchasing homes together — whether siblings or with extended family like cousins — is also part of the growing phenomenon,” the association notes.

It shouldn’t come as a surprise that housing and affordability were significant issues in the recent federal election, says Michelle Schreck, BA 14, a commercial real-estate broker in Montreal who also holds a residential real-estate licence. “Lack of available inventory was a huge reason for the increase in housing prices.

Compared with the years before the pandemic, the number of homes on the market is extremely low, so anything that does come onto the market is automatically going to be more expensive or induce bidding wars.” The lack of supply has been an issue in Canada since the 1980s, adds Schreck. “Canada’s housing supply has never been able to keep up with its population growth.”

‘The hype follows the times’

Other changes confronting the industry lie on the commercial side and have been largely pandemic-driven. As more companies discovered the economic and productivity benefits of having a large number of employees working remotely, they have in many cases reconsidered their need for high-rise office space.

Rising vacancy rates in commercial real estate are leading prospective, or even existing, tenants to be more aggressive in negotiating rents and facilities, Deslauriers says. At the same time, the pandemic has spurred a demand for larger office spaces in some circumstances, so workers’ cubicles or desks aren’t jammed together. Today, Schreck — who studied history at Concordia and was headed for law — is a commercial broker with Core Consultants Realty in Montreal, specializing in the restaurant and retail sector. She says things are looking brighter. “There was definitely a severe slowdown in retail, restaurants and offices due to lockdowns, personal-distancing measures and so on during the pandemic.

“Now, we are seeing an upswing, with businesses reopening and people inspired to start new restaurants. We already see a shift back into offices very slowly, and we’re seeing alternative uses for traditional office spaces, including micro-gyms and photo studios.”

Other recent changes in real-estate patterns triggered by the pandemic include a sharp rise in the demand for second homes, including cottages, country houses and vacation properties. Given strict global travel restrictions in place around the world, Schreck wasn’t surprised. “I think people felt suffocated in their own homes. While it was a spur-of-the-moment thing, COVID-19 isn’t over yet, and neither is the country-house hype,” she says. “It has slowed down, but prices remain high. The hype follows the times.”

For those who get a rush from not knowing how the story will turn out, real estate is the place to be. The recent past shows just how many changes could lie on the horizon, notes Deslauriers. “I have a sneaking suspicion that we’re only going to see the real effects of the pandemic in a year or two,” he says. “Our programs emphasize the fundamentals of real estate. It’s a firm grasp of these fundamentals that will help our students deal with the peaks and valleys to come.”