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Further Interest Grows in Apartments Amid
Weakness Seen in Other Housing Formats
Projects being repositioned to meet rental demand. Weakness in Montreal’s for-owned condo market, especially in pre-construction sales, prompted many developers to begin repositioning projects as purpose-built rentals. Though this has received some pushback from investors – as for-owned condos recover upfront capital at a faster rate – the metro’s ongoing rental supply-demand imbalance makes it an attractive alternative. At the same time, many larger players are beginning to focus on retail densification projects outside downtown Montreal. While these investors are looking to capitalize on robust demand dynamics, they also see an opportunity to add much-needed housing supply to the metro. These factors, combined with the lower cost of capital and new city zoning plans calling for higher density, led construction starts to resume their upwards trend in 2024 and are likely to support further activity in the years ahead. Some risks are present, however. Apartment demand could soften by more than expected over the longer term amid recent changes to Canada’s immigration policies. A revival in building intentions could also cause construction costs to spike once again, eating into investor returns and hindering the profitability of planned projects.