Why We See Opportunity in the Workforce Housing Market

With climbing inflation and rising interest rates dominating headlines, the housing market has become top-of-mind for Canadians from coast to coast. Ensuring adequate affordable supply is a complex problem with no easy solution, and tackling it requires input and action from all areas of the housing industry, as well as various levels of government. From our inception, Avenue Living has focused on providing safe, well-managed housing at affordable prices — a focus that has allowed us to weather several economic challenges, and one that we know is a key part of the housing spectrum, now and in the future.  

For investors, there is potential opportunity in existing supply, especially in assets that serve the workforce housing demographic — the focus of our Core Trust. This group, which makes up approximately 40 per cent of the private rental market, is anticipated to seek more affordable solutions as inflation and rising interest rates delay or disincentivize homeownership. Several external factors continue to bolster the strength of the workforce housing market, from population growth to the geopolitical and economic environment. Here, we explore those factors and their impact on our model. 

Inflation 

The conversation around housing supply often raises the need for new builds. But with inflation at 6.8 per cent in April, and supply chain challenges making project plans unpredictable, construction of new buildings is not an immediate answer to the housing affordability problem. Avenue Living is in a unique position, as we acquire and refurbish existing housing stock to create safe, comfortable, and affordable homes for renters. As the cost of new builds continues to rise — and take rents with them — renovating existing property becomes a quicker, more efficient way to inject appealing inventory into the market at a reasonable price point. Renovations require an investment of approximately 10 to 15 per cent of the asset value, mitigating the risk of rising costs and allowing us to continue to provide safe, comfortable homes at an affordable rent, on a shorter timeline — and to potentially generate more immediate returns for our investors. 

Affordability 

Housing affordability is top-of-mind for residents, as the cost of home ownership has risen out of reach for many. The Canadian Mortgage and Housing Commission (CMHC) dictates that for housing to be considered “affordable,” a household must “spend less than 30 per cent of pre-tax income on adequate shelter.” Avenue Living residents, on average, earn $56,000 per year and spend roughly 23 per cent of their income on rent — which is significantly lower than the affordability construct from CMHC. 

Immigration 

The government of Canada has an ongoing plan to increase immigration levels, as a way to increase our workforce and help the country recover from the economic challenges of the pandemic. This plan aims to attract over 400,000 people to Canada a year through 2024. In 2021, we welcomed a record number of newcomers — 401,000 people made Canada their home, the largest influx ever. Alberta is consistently one of their top destinations with Calgary and Edmonton as the fourth and fifth most popular cities among newcomers to Canada. Many newcomers rent when they arrive in Canada and fit into our target demographic, with the median pay for those arriving in Canada in 2018 sitting at $31,800. 

Changing Resident Preferences 

The pandemic changed how individuals view their homes, but beyond that, people are making space a priority, a trend that is becoming increasingly evident in rental patterns. We have seen more interest in suburban locations with larger floor plans — especially townhomes — across our portfolio, as inflation and rising interest rates cause people to put off home ownership and opt for more spacious rentals. Our experience as active property managers also tells us residents are seeking institutional-quality service, something rarely paired with affordability, but that we are committed to delivering.  

Labour Market Shortages 

The construction industry has been struggling with labour shortages for several years, and in the past year, those shortages have become more extreme. The 2021 BuildForce Canada report suggests the construction industry could be short as many as 81,000 workers by 2030 as it tries to keep up with retirements and increased demand — especially for housing. Avenue Living’s strategy of purchasing built assets and making capital improvements shields us from much of the risk that comes with that labour shortage.  

Opportunity in the Workforce Housing Market

Our focus on multi-family residential, and particularly the workforce housing demographic, has historically shown opportunity for investors interested in real estate; a trend we believe will continue. As inflation and interest rates compel people to consider renting long-term, Avenue Living continues to set itself apart through strategic acquisitions, value-add capital improvements, and an unparalleled focus on the resident experience.  

This commentary and the information contained herein are for educational and informational purposes only and do not constitute an offer to sell, or a solicitation of an offer to buy, any securities or related financial instruments. This article may contain forward-looking statements. Readers should refer to information contained on our website at https://www.avenuelivingam.com/forward-looking-statements for additional information regarding forward-looking statements and certain risks associated with them. 

Private Rental Target Markets: A Comprehensive Spectrum

Throughout our 16 years in the residential rental space, we’ve gained a deep understanding of our customer base and we use those insights to guide our decision-making and drive our organization’s growth. Since our inception, we’ve focused on the workforce housing resident and made it our mission to create a business model that serves their specific needs. Our operations and acquisition strategy are truly built around the preferences of this vital demographic we serve.  

Our CEO and Founder, Anthony Giuffre, is actively involved in the academic side of the real estate industry and uses research and literature to explore the diverse demographics we serve and how we can continue to enhance our best-in-class customer experience.

In collaboration with Grant A. Wilson, Ph.D., and Assistant Professor in the Faculty of Business Administration at the University of Regina, this article illustrates a rental housing spectrum that goes beyond classifying renters by their length of tenancy and identifies lifestyle, demographics, and value propositions. Through this research, we have identified six distinct groups and the driving factors behind the type of rentals they choose.

Read more on our peer-reviewed findings, published by the International Real Estate Review: 

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This commentary and the information contained herein are for educational and informational purposes only and do not constitute an offer to sell, or a solicitation of an offer to buy, any securities or related financial instruments. This article may contain forward-looking statements. Readers should refer to information contained on our website at www.avenuelivingam.com for additional information regarding forward-looking statements and certain risks associated with them. 

Mini Mall Storage Appoints William Harlan as Director of Acquisitions to Help Continued Growth 

Following a year of more than 50 storage facility acquisitions, Mini Mall Storage Properties announced today the recent appointment of William Harlan as Director of Acquisitions to support the company’s continued growth strategy across North America. 

With over 10 years of experience across the technology space and half of that time focused on providing software to self-storage owners at G5, a predictive SaaS technology platform for real estate marketers, Harlan will use his knowledge to help Mini Mall enhance predictability in the buying and selling process. 

“I’m excited about the rapid growth trajectory that Mini Mall Storage is on and the solid foundation that has already been set,” says William Harlan. “I have always had an interest in commercial real estate and I see tremendous opportunity to enhance our U.S. portfolio and help our company become a leader in the industry.” 

As Mini Mall Storage places a higher focus on implementing trusted and unique technologies to the self-storage industry, Harlan’s experience directly supports this ongoing effort. “With our strong team and continued plan to use and deploy new technologies within the class B and C self-storage space across the U.S., William’s background in tech and his industry contacts will help us elevate our brand and improve our customer experience,” says Raheem Amer, President of U.S. Operations. 

By adding new talent to the acquisition team, the company is looking to organically foster more relationships with prospective acquisitions.“Our current acquisition approach is weighted heavily on broker deals, but those can often be costly,” says Harlan. “Given our track record of closing deals quickly and easily, I see an opportunity in garnering interest in off-market deals and developing better processes for our team to attract new sellers.” 

 

This commentary and the information contained herein are for educational and informational purposes only and do not constitute an offer to sell, or a solicitation of an offer to buy, any securities or related financial instruments. This article may contain forward-looking statements. Readers should refer to information contained on our website at www.avenuelivingam.com for additional information regarding forward-looking statements and certain risks associated with them. 

April 2022 Market Commentary

As inflation and interest rates are making daily headlines, recent economic developments are generating increased interest in alternatives. In our April 2022 Market Commentary, we discuss the performance of private real estate during periods of rising interest rates and inflation, the dynamics of real estate markets, and the connection between interest rates and cap rates.

 

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