Condo Investment Insights

How can real estate in the GTA keep appreciating? Get to know the ABCs – Artificial Intelligence, Blockchain and Cannabis – these companies are driving the TSX, Bay street earnings they are creating high paying jobs, filling the office space and their highly paid employees, executives are buying and renting the condos.

For our entire careers as real estate investors, the question about pricing has been the same. As condo prices moved past $400 per square foot (psf), then past $500 psf and now past $1000 and on the way to $1500 a sq ft in the downtown core, what is driving it and can they keep going?

In past blogs, we have highlighted economists and experts who felt the answer is no and so far they have all been wrong. So today, we will focus on one of the big questions, what is driving it?

Many people thought it was cheap money. But interest rates have been increasing and lending rules have tightened dramatically over the last year and still the market continues up. Yes, there have been pauses in some areas, but in the core of the city, the market continues to appreciate. We believe it’s high quality job growth that’s driving this and it looks just like a whole new Stock Exchange, it’s the ABCs;

• A.I. (Artificial Inteligence),
• Blockchain (cryptocurrency) and
• Cannabis.

Let’s start with Cannabis. With legalization on October 17, 2018, Canada becomes the first Group of Seven country to legalize pot and has emerged as a global leader. An American federal ban however, has made Canadian exchanges the default for raising capital and going pubic.

There are now 90 publicly listed companies in Canada with a market value of about $31 billion.

 

That’s created tremendous wealth and not just for the entrepreneurs and investors but also Bay Street bankers, lawyers, and all types of service providers that have been cashing in.

It’s not just pot. Cryptocurrency pioneer Anthony Di Iorio bought the unfinished penthouse condo in the St. Regis (former Trump Tower), for $28 million without a mortgage.

Di Iorio was one of the founders of Ethereum that came out of Toronto’s blockchain scene, the group that put together Ether is the second most valuable cryptocurrency next to Bitcoin. He is currently diversifying of out of cryptocurrency with real estate, making multiple investments throughout the city.

Anchored by the MaRS Institute, the Toronto region has over 500 AI companies making it the highest concentration of AI companies in the world. PwC reports that there was 191 million in AI investment in 2017 and is tracking to be 88% higher in 2018.

The Trump administration announcing to rescind the International Entrepreneur Rule that allows immigrants to remain in the U.S. for up to five years as they grow their business, has helped push international applicants up over 50% at Canadian AI companies. Other international companies are also tapping into Toronto’s startup ecosystem. Uber has their only non-U.S. facility in Toronto.

For the second year running, Toronto is North America’s fastest growing tech market according to CBRE’s 2018 Tech Talent Scorecard and 4^th overall

Ottawa, Montreal and Vancouver also scored very well. So did Kitchener -Waterloo for smaller cities as part of the technology corridor.

With over 241,000 tech workers, Toronto is up 51.5% in the last five years accounting for 36% of downtown office space pushing office vacancy down to 2.9% to the lowest of any city in North America and a historic low. 2/3 of all office construction in the country is happening in the Toronto downtown core. We aren’t just experiencing a condo boom, there is also an office boom.

Even with this low vacancy, according to the CBRE report factoring in both real estate and talent, Toronto is still the 2^nd cheapest city in North America to operate in. .

What does the future hold?

Microsoft’s recent announcement of a $570 Million investment and the creation of a new Headquarters is only the most recent in an influx of international and local investment like Google’s Sidewalk smart city project. We won’t even speculate on our odds as finalists for Amazon’s HQ2. As the global war for tech talent continues, our low total cost, inviting immigration laws and strong ecosystem, growth will continue.

So to answer the question “can it keep going”?

Yes, as long as bright and creative minds want to keep making Toronto their home.

Sources:

https://www.adweek.com/digital/how-toronto-became-a-global-powerhouse-for-artificial-intelligence-for-startups-and-giants/

http://mapping.cbre.com/maps/Scoring-Tech-Talent-2018/Analyzer/

http://www.cbre.ca/EN/mediacentre/Pages/Toronto-Rises-to-4-in-CBRE%E2%80%99s-Annual-Tech-Talent-Scorecard.aspx