Discussing Development Hurdles And Opportunities At Bisnow's Sept. 25 Toronto Event

The Greater Toronto Area’s rental housing market is heading toward a shortage of 235,000 units due to factors such as delayed or scrapped projects and escalating costs.

 One company looking to step in and address the need for more housing is real estate builder and operator Clifton Blake, which focuses on mixed-use developments that feature multifamily rentals. Clifton Blake President and Chief Investment Officer Wes Myles, who is also CEO of real estate development and management company CB Wilkinson, predicts that while the market may be heading for a supply imbalance, opportunities still exist for developers.

“Starting in 2027 and likely lasting past 2030, there's going to be little supply of any kind of housing in any meaningful way for a while, so there's an opportunity there to fill that gap,” he said. 

Commercial real estate professionals can learn more by attending Bisnow’s State of Toronto Construction and Development event on Sept. 25. Industry leaders, including CB Wilkinson President Jeff Wilkinson, will address construction and development trends, cost- and time-efficient building practices and offer an update on local projects.

Click here to register and purchase tickets. 

In a conversation with Bisnow, Myles shared his insights on the Toronto building market. 

Bisnow: What trends in development are on your radar?

Myles: In the Greater Toronto Area, approved condo sites are starting to slowly convert to purpose-built rentals. However, I think this may be overly forecasted, as the percentage of the net operating income divided by total cost of development, construction and land cost is quite low still. We're hoping to see the percentage get higher in the future.

We've also seen in previous cycles that prices for well-located sites tend to stabilize early, and we believe that’s what we’re seeing now.

Another trend is that there is more emphasis on what end users want, which are larger, more livable types of units designed for more longer-term renters.

Bisnow: How has Clifton Blake been navigating high construction and development costs?

Myles: Part of our push has been to close the gap between construction management and development management.

For the past couple of decades, there's been a growing disconnect between the two functions, leading to a decline in investment returns. The motivation for some construction managers in a tight labor market was to emphasize their relationship with their subcontractors versus their development clients, which led to a natural misalignment of goals. On the flip side, development managers who were not paying attention to the quality of deliverables on the consulting and design sides exacerbated that problem even further. 

Our first step to address these misalignments was to vertically integrate the functions and change the way we engage key consultants. This allowed us to save anywhere between 5% to 8% and speed up our time to market. Since we're in the purpose-built rental game, we're heavy on equity, so they need to get to our takeout financing as quickly as possible. 

Bisnow: What opportunities are on the horizon in Toronto?

Myles: We see an opportunity to convert some condo sites to purpose-built rental, especially in the mid-rise sector, as well as deliver high-quality retail that is essential to the community, something that we already do. Dollarama, Shoppers Drug Mart and Bank of Montreal are examples of our retail tenant roster. Delivering these mid-rise residential rentals is our value proposition that also provides stable cash flow to our investors. 

Internally, we also see an opportunity to develop our people from the head office all the way down to site personnel in a more robust and vertically integrated format, given that we're forecasting higher demand for our end product starting mid-to-late 2027 and lasting for several years beyond that. 

Bisnow: I understand that Clifton Blake is both horizontally and vertically integrated. What is the advantage of that?

Myles: We understand the financing and capitalization of the projects in a deep way. There’s no misunderstanding about what the goals are or what the end game is from a holistic point of view. 

That allows me, in some instances, to help train our employees throughout the entire process about how their job impacts a financing and investment decision. When they have a better understanding of it, they have a better chance of being successful in their own job, which translates to the company’s success. 

Click here to learn more about what to expect at Bisnow’s State of Toronto Construction and Development event.

This article was produced in collaboration between Studio B and Clifton Blake. Bisnow’s editorial staff was not involved in its creation.

Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.