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1. The multi-family market is heating up
The multi-family market has been heating up in Ottawa. The 2019 average unit price was $201,733 for existing product. We are seeing appraisals come in between at $300,000+ per unit for fully renovated, and new rental product, in and around the core.
2. Average unit prices rising
As long as the economic engine of Ottawa keeps going, and jobs growth continues, the average unit price will continue to rise.
3. Multi-family and condo units construction
There are 2,200+ multi-family & condo residential units in construction right now, and more in the approval cycle.
4. Rent increases
Our rents in the current portfolio has increased approx. 10% YOY on unit turnover.
5. Rent per square footage
Rents on new, or fully renovated in transit-oriented properties, renting in the $2.00-$3.50 psf.
6. Capital Rates
2019 average (large and new) multi-family downtown cap rate have remained low hovering around 4.25%-5% for stabilized assets. This varies between on type, size, and value-add opportunities.
7. Value Add Opportunities
Older and small product transact slightly higher cap rate. Value add opportunities, transact in the low 4% even in the 3% bracket.
8. Positive IRR
The big players are continuing to buy, irrespective of lower cap rate, because they can still make a good IRR, after repositioning the asset with good rents.
9. Construction Costs Dramatically Increasing
Altus reports, that the total construction cost has increased between 70% to 95% for building up to 6 storey, in the last 4 years from 2016 to 2019. The construction (hard) cost for new builds is now exceeding $320 psf (parking cost included). That’s a 20%+ increase in trade cost YOY. Budget your new builds accordingly.
10. Permit Approval Timelines
Expect permit approval timeline challenges, to get at the City of Ottawa.
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Building Investments Inc. is a real estate development and investment firm that buys, builds, rents, and manages multi-family and commercial buildings in the Ottawa market. For our clients, we act as the Project Managers for their Major Renovation, New Construction, of their Rental Building.