Death of Cities? More Like a Rebirth, Two Real Estate Empire Founders Say.
Heads of Allied Properties, Westbank See Urban Centres Coming Back Strong
By Garry Marr, Costar News
The pandemic hasn’t meant the death of cities and, with COVID-19 cases declining, two of Canada’s prominent real estate executives said they are now seeing the rebirth of urban cores.
“That’s because we know what we have lost,” said Michael Emory, president ofToronto-based Allied Properties, speaking at Canadian Real E state Forums’ Land and Development conference.
Emory and Ian Gillespie, the founder of Vancouver-based Westbank and a key partner of Allied, were the subjects of an interview session with Nurit Altman, director of RBC Capital Markets Real Estate Group.
With Allied and Westbank development partners in Canadian urban centres, they have a lot at stake in cities such as Toronto and Vancouver, where they have projects underway.
“Initially, the thinking was the pandemic was going to reverse the intensification of cities as we had known it to date. People were going to flee the cities to live elsewhere. Workers would work from home or more remotely,” said Emory, who published a thesis on the future of Canadian real estate back in April on his real estate investment trust’s website.
“While the pandemic was at its worst, there was no way to contradict that point of view. There was no data. None of us had any data. What we are seeing now is clearly the opposite of what was expected. People are clamouring for dwelling space in the inner city to the point where prices are approaching almost unhealthy levels. And it’s purely a function of demand in relation to supply.”
Home Prices Rise
The Toronto Regional Real Estate Board reported this month the average selling priceacross all home types was up by 28.4% in May from a year ago. While the suburbs show strong price appreciation, Toronto saw its average sales price climb from $955,722 in May 2020 to $1,111,736 last month.
Average condominium sale prices in the suburbs were up 21.4% during the period to $603,555, but city condo prices also jumped 6.3% during the period to a $716,976 average.
Emory’s thesis is that the pandemic will add “significant impetus to city -building,” and he’s now seeing it play out, even if it’s too early to predict an office market recovery where millions of square feet of sublet space still exist.
“We haven’t seen any decline in demand for distinctive urban workspace,” said Emory, whose REIT was founded in 2003 with a distinct office type known as “brick and beam” where old industrial buildings are converted into office space, which soon was in demand among a younger, urban workforce.
‘Back With a Vengeance’
Emory said as the pandemic subsides, urban intensification will increase because Canadians have been “domestically enslaved” for about 18 months.
“We are going to come back with a vengeance,” said Emory, adding people he speaks with in New York and London said cities have been like rubber bands – almost stretched to the breaking point but now bouncing back. He even suggested more office development might start to emerge.
“Six months ago, I would never imagine we might see a new development and demand cycle immediately after the pandemic. I’m still not convinced we will, but it’s a possibility,” said Emory, pointing to Toronto, Montreal and Vancouver. “I wouldn’t assert that categorically, but we would be wrong not to watch for it.”
Gillespie, who noted he runs a private company and can speak more freely, said Emory was right.
“We will see an acceleration within Toronto and Vancouver. I know Montreal less well,” said Gillespie. “We are feeling it.”
He and Emory have stayed in contact throughout the pandemic and described reports of city declines as “noise” in the media, with the two remaining confident.
“Thousands of years of humans coming together have proven when humans are working together, they are more productive,” said Gillespie. ”A 15-month pandemic is not going to change a thousand years.”