WILL TORONTO BECOME NYC?
Welcome to the typical New York City apartment that now costs over $4,000 per month on average and is now too expensive for the average New Yorker.
Rents are rising faster than wages in New York — and that means locals are breaking the bank to call the Big Apple home.
Not even Covid-19 could slow New York down. As the city bounces back from the pandemic's economic toll, residents are returning to NYC and it's pushed rents to new highs.
In the last six months, rents in Manhattan have surpassed historical highs, but in May they reached a new milestone — median rent soared to $4,000, according to appraisal firm Miller Samuel for Douglas Elliman.
"New leases increased 48% from 2021 levels - at the same time, the vacancy rate remained below 2% for the sixth consecutive month."
For New Yorkers earning the city's median income of $52,409 a year, that average rent works out to nearly 92% of their pre-tax pay. Needless to say, that's way above what financial experts recommend budgeting for housing.
"New York City has rebounded beyond anyone's expectations," Brown Stevens, CEO of Bess Freedman, told Insider. "Even though prices have ticked up and interest rates are higher, people feel safer because of the high vaccination rate and the new Mayoral administration."
In May, the median rental price in Manhattan grew 25.2% from the previous year. The increase was driven by record demand from the city's prospective buyers. During the month, the amount of new leases increased 48% from 2021 levels. At the same time, the vacancy rate remained below 2% for the sixth consecutive month.
Although the city's housing boom has helped to stimulate the local economy, it's bad news for renters grappling with affordability.
That's because New Yorkers are becoming increasingly cash strapped.
"For many New York workers, the minimum wage has been capped at $15 an hour since the end of 2018 and – as prices have gone up with inflation – the economic squeeze impacting working families has worsened," Latoya Joyner (D-Bronx, 77th AD), chair of the Assembly Labor Committee, said in a press statement. "As a result, New York's low-income workers have been increasingly trapped in a cycle that pushes them further down the economic ladder and into poverty."
To address the issue, a coalition of workers, labor unions, community organizations, and business leaders have launched a campaign to increase New York's minimum wage. Under the name Raise Up NY, the groups have introduced legislation that "answers the demands of working New Yorkers who need and deserve better compensation."
"Now, more than two years into a pandemic-related economic crisis, rent, inflation, the cost of gas and groceries, and billionaires' wealth have all gone up," Sen. Jessica Ramos, sponsor of the bill and the chair of the Senate Labor Committee (D, WF – SD13), said in a press statement. "The only thing that hasn't kept pace is our wages."
WHAT IS YOU RISK MANAGEMENT STORY?
CANADIAN APARTMENT - Sarah Thompson
Regardless of portfolio size, owners of multi-residential rental properties will need to demonstrate best-in-class risk management and maintenance to secure even baseline coverage in 2022. Pandemic measures are easing, but the real estate sector has yet to achieve that “return to normal” it’s been striving toward. As such, the year will continue to be about how real estate owners and operators can position themselves to maximize opportunities while still coping with the impacts of COVID-19 — and the most critical piece may be the ability to tell a risk management story that paints a picture of a “good risk” to insurers.
In 2022, the real estate industry can expect to see the following trends and challenges:
- Pressure on the multifamily housing market
Multifamily housing coverage (for both high-rise and and low-rise developments) will remain problematic in 2022, although insurance capacity is expected to increase in some sectors. A long-standing rise in the frequency of claims, often due to water damage, will continue to affect multifamily portfolio owners. As a result, many mainstream carriers are only offering coverage with reduced limits, requiring multiple insurers or layering of policies to meet baseline coverage needs.
The pressure continues in 2022, with underwriters scrutinizing every detail — from loss history to electrical and plumbing updates. It is estimated that in the habitational and residential real estate market overall, rates will rise 20 per cent or more. As such, owners and portfolio managers are securing coverage on the spot when they receive an initial quote, without shopping around.
The risk management story has become critical. Real estate owners and operators who take the time to paint an accurate picture of their risk management measures will be more successful at securing appropriate coverage for their properties.
- Importance of reassessing valuations
Anyone considering renovations or reconstruction knows that costs are increasing. Statistics Canada recognized a record increase in the spring of 2021, when costs had increased by 7.5 per cent in the second quarter alone. Exacerbated by shortages of supplies and labour, not to mention the dramatic ups and downs of material prices, the cost of construction has become a major concern over the last several months. The lumber shortage is just one much-talked of example: futures per thousand board feet were US$610 in early November, down from a record US$1,711 in May, but still far up from about US$250 in April 2020.
With prices so volatile, it wouldn’t be surprising if a catastrophic incident led to a need for reconstruction that far exceeded typical policy limits. That’s why it’s critical to determine how much your property is worth now. Obtaining an updated valuation can help to ensure your policy limits are still appropriate so you’re ready to manage your risks and mitigate losses.
- Growing reliance on catastrophe modelling
Catastrophe (CAT) modelling is crucial when it comes to helping property owners understand the extent of their risk, estimate policy limits, and secure their coverages accordingly. Underwriters are beginning to require CAT modelling and other predictive tech for large portfolios. And with CAT losses in the first half of 2021 reaching $42 billion— of which $40 billion was related to natural disasters — real estate owners are beginning to rely even more on CAT modelling and other tech tools.
That said, low-tech risk solutions and controls, such as water mitigation and disaster recovery planning, will never go out of style. It’s still a good idea to provide proof that risk mitigation plans are bespoke to the facility, to train staff to engage those plans, and conduct frequent on-site inspections.
- Continued repurposing
Most have heard of empty big box stores or anchor mall tenants finding new life as warehouses. But some unusual locations — even empty apartments — have been known to become restaurant spaces, ghost kitchens, or even small entertainment venues. Repurposing will continue to gain popularity in 2022, as interest rates are expected to remain relatively stable.
It’s important to remember, however, that when a building’s purpose changes, so does its assessed risk. Not only does the space need to be designed for the new purpose, but it may take on a whole new set of risks the owner hadn’t considered. It’s critical to discuss these issues with a broker before repurposing.
The real estate market won’t be easy to navigate in 2022. Owners and operators looking to reduce their risk will need to rely on both old and new tricks to get the best results. Yet the key to success may be managing your risk story to demonstrate both care and resilience in order to secure sufficient protection.
For details on how to reduce the impacts of leaks and floods in your apartment building please contact Nando Presciutti at Watrtek. This company has unique and ground breaking systems to monitor and protect against damage from leaks and floods. This will go a long way regarding Item 1 above and water damage and insurance.
He can be reached at firstname.lastname@example.org or 416-451-7838.
MAKING MONEY FROM YOUR DOOR KEYS
The Apartment Group
Apartment buildings generate income through rent, parking, lockers and laundry. Over the years other income generating things became available: roof top cellular and cable revenue sharing are some examples. Now there is a "new kid on the block" - Grata.
Grata is a Multifamily Apartment focused PropTech out of Toronto, Canada that has created a Smart Living System (Resident Smartphone App, Property Manager Portal, and more) that integrates with existing building hardware systems and Property Management softwares to create resident tenant engagement north of 10+ visits per day, ultimately unlocking a new substantial revenue stream (from National & Local Advertisers), and increasing operational efficiencies for the Multifamily Portfolio Owner.
Over the last 2 years, Grata has built a differentiated Smart Living System with multiple software products for all the users within Multifamily Apartment Living (Resident, Technician, Property Manager, & Asset Manager).
Coupling that with integrations into many Smart Lock & Access Control technology, an Ad Engine & PM Software integration library they have built a fully holistic ecosystem that digitally enhances the resident experience first, leading to a substantive monetization model, while fully abiding by all Data Privacy and Cybersecurity legislation. Most importantly, Grata leverages the hardware as a sales strategy to embed the Grata Smart Living System (Software) into Apartment Buildings for 5-10+ year contracts with a given building.
Upfront hardware costs for Smart Locks + Access Control upgrades for Apartment Portfolio owners is a NON-STARTER which is why many PropTech Multifamily Companies (Latch, SmartRent, etc.) haven't had much success penetrating the Existing Apartment Market (60MM+ Units). Veritas (San Fran PropTech Leader) mentioned they haven't seen a product in the market with as "clean a User Interface & as many features to enhance the resident experience than Grata."
Grata charges a fee of min. $5 per Door per Month to the Building Owner which is a guaranteed fee for 5-10 year duration of the contracts. On top of the fee, Grata will generate substantial revenue through National & Local Sponsors & Partners through its Deal section of the Resident App where Grata & the Asset(s) Owner enter into a revenue share on all gross revenue generated in a building. National Sponsors already include Telus, Sobey's Hub Insurance & more.
For the Greater Toronto Area, they have agreements & pipeline to launch in 10,000+ doors by Q3 this year. Portfolios include, Westdale, Killam, Oxford, and more. For USA East Coast, we are in finalizing a plan to launch with Harbor Group on the East Coast USA (70,000+ Multifamily Doors here); we are in the process implementing a GTM strategy in SoFlo and Philadelphia with a cluster of 2500+ units in each location respectively (5,000+).
In essence, all doors in the building will have locks converted over to digital devices which can be accessed by the app on the tenants phone. The app will be integrated into the existing buildings network and tenants can use the app to: book the elevator for moves; book the party room; submit work orders; etc. The app can also be used by management to keep tenants in the loop as to what is happening in the building - what the status of their work orders are - water shut downs etc. The software also can allow access to certain rooms in certain times (like the laundry room).
Grata is predicting that once this rolls out that the income from this will be the 2nd or 3rd highest source of revenues for apartment buildings. This income goes directly to the NOI and will increase the value of apartment buildings immediately.
There is so much MORE. So if you want to know more contact Grata directly.
Francois Cote 905-599-2694 email@example.com
5 GLENAVON ROAD - TORONTO - $5,150,000 / $285,000 Per Suite / 3.25% Cap Rate
This is a house form frame building on a quiet residential street in Parkdale. Most of the building has turned over and the suites and common areas renovated to a high quality. Low maintenance building with 4 suites still to turn. Mostly bachelors but well designed and functional suites. This great for the first time buyer who wants a headache free building. Contact - firstname.lastname@example.org
1454 BARTON STREET EAST- HAMILTON – $1,350,000 / $225,000 Per Suite / 4.00% Cap Rate
Attention FIRST TIME BUYERS.... this is a purpose built 6 plex - well maintained in East Hamilton. The building is concrete with brick exterior, double windows and flat tar and gravel roof. It has larges suites and great suite mix with surface parking and strong rental upside. Building is always full and close to retail and shopping. Contact - email@example.com
150 HEIMAN STREET - KITCHENER - $10,250,000 / $285,000 Per Suite / 3.5% Cap Rate
This rental apartment investment is located 4 blocks from downtown Kitchener in an improving location. The large site include 2 walk up frame rental apartment buildings with mostly large two bedroom suites. This asset is CONDO TITLED and the units today are worth north of $360,000 per suite. About 80% of the suites have been renovated and updated. The more recent renovation are high quality. Existing mortgage on the property of about $5MM at below market rates with another 9 years to run. Contact - firstname.lastname@example.org
113 EMERALD STREET - HAMILTON - $17,340,000 / $255,000 Per Suite / 4.10% Cap Rate
This is a collections of walk up rental buildings in a single family areas know as Stinson. It is about 4 blocks from downtown and is a desirable residential neighbourhood. The buildings have been well managed and maintained with over 65% of the suites being totally renovated. Over $1.7MM has been spent on the buildings since 2019. Tenants pay their own hydro (HWG heating) and there is surface parking only. There is still rental upside. Mostly one and two bedroom suites. Low maintenance building (no elevator, underground parking or balconies).
2622 KEELE STREET- NORTH YORK - $5,489,000 / 4.35% Cap Rate
This property is a 3 storey concrete rental apartment building containing 11 suite north of Toronto. Built in the 1960's the building is in excellent condition for its age. In fact, the owner just painted the exterior and did landscaping upgrades and have renovated to a high level 9 of the 11 suites. The owner has installed eclectic PTAK units in each suite (provides heat and air conditioning). Tenants pay their own hydro. This building is well located to: Highway 401, shopping and the Eglinton LRT. This is a high demand rental area and the owner just renovated 4 suites and had them leased out immediately. He is working of the remaining 5 and will deliver the building with 9 renovated suites and rented. This is a great building for the first time or passive investor who is looking for cash flow.
THE APARTMENT GROUP
Together the team has completed over 1,500 transactions and has sold over $7.0 billion in apartments and development land. Put us to work for you and see the results. NO ONE has sold more buildings then our group. Experience, knowledge and professionalism will insure you get the right deal or the highest price if you are selling.
The Apartment Group is a dedicated team of professionals specializing in the sale of multi-residential investment properties. With over 40 years of combined experience, the team brings together their strengths including strong negotiation and sales skills along with highly technical market analysis and appraisal methods.
We are a boutique Brokerage but have the capabilities of the larger houses without the overhead. We have: an internal database of over 10,500 active apartment and land Buyers; a list of all apartment building owners in the Greater Toronto Area; our web site gets over 50,000 hits a month; we highlight properties for sale through our newsletter which reaches 10,000 investors monthly.
President & Owner,
LORENZO DIGIANFELICE, AACI
Broker of Record, Owner