J
aime McKenna, president of Fengate Real Estate, believes the Toronto residential development industry has overcome significant challenges over the past two decades. However, she remains cautious about the condo sector's future.
Launching a new condo project in the next 18 to 24 months is not feasible for Fengate due to the current inventory glut. McKenna warns that the condo market collapse will exacerbate the housing crisis by reducing both sales and rentals, which account for half of all condo units built.
Fengate has diversified its portfolio to mitigate this risk, with a pipeline of 25,000 residential units over the next decade. The company is pivoting towards multi-family, seniors', and student rental developments, which offer more stable returns than condos. These projects provide decent development profits while generating cash-flowing assets in a consistent demand market.
In 2025, Fengate will break ground on five projects in the Greater Toronto Area, with a primary focus on multi-family rentals. The company aims to include at least 20% of affordable units in its midtown development, with the possibility of increasing this percentage through government programs like the CMHC's Apartment Construction Loan Program.
McKenna notes that shifting from condo to rental development is not straightforward, as it requires significant upfront costs due to the lack of deposits on unit sales. Fengate has reserved equity and capital to adapt to changing market conditions, allowing it to pivot towards rentals when necessary.
The housing crisis will worsen if many developers pause or abandon projects due to interest rates, lack of equity, and other issues. McKenna emphasizes that even with reduced immigration levels, Canada faces a massive housing gap, particularly in the Toronto area.
While timelines for project development can be lengthy, all three government levels are exploring ways to reduce costs and streamline approval processes. McKenna encourages young women entering the real estate industry to focus on their work and speak up around the table, as diversity of thought is essential for making informed decisions about homebuying strategies.
