With a strong economic base, a vibrant financial industry, and robust in-migration, Canada’s largest city is the envy of real estate entrepreneurs around the globe.?

Toronto’s real estate market is probably healthier than any other in North America, says Mark Noskiewicz, a partner and the head of the Municipal and Land Use Planning Group in the Toronto office of Goodmans LLP, a Canadian transaction law firm. “We’re in the 15th year of what was supposed to be a five-year condo boom,” says Noskiewicz, chair of Urban Land Institute Toronto District Council. “We’ve had 4 million square feet [372,000 sq m] of office built downtown after 15 years of no construction and it’s all taken.”

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Richmond Housing Co-opRBC Centre
RBC Centre

Noskiewicz says the Toronto market is healthy for a number of reasons including continued in-migration—a result of Canada’s liberal immigration policy. “We have 100,000 new residents settling in our city each year and lots of them choose to live downtown, filling up the new condos,” he continues. “We have one major new office building now under construction along Toronto’s waterfront—the 30-story Waterpark Place III by Oxford Properties. Royal Bank of Canada [RBC] announced that it would be the main tenant.”? Financial services are robust in Canada, agrees John O’Bryan, vice chairman in the Toronto office of CBRE Limited. “All of the largest banks are located here and the Canadian banks are particularly strong now compared to [those of] most other countries,” he says. “Canadian banks are also active throughout the world. The Bank of Nova Scotia is active in the Caribbean and South America, TD throughout the U.S., and RBC has a strong investment banking franchise throughout the world. One of the principal reasons downtown is doing well is because the banks and related financial services are doing well.”

When the 2008 global financial crisis hit, the market was extremely concerned that the 4 million–plus square feet (372,000 sq m) of office space in the pipeline would not get absorbed, O’Bryan adds. However, these fears were unfounded due to the robust financial services sector. “In addition, real estate developers have been constrained from speculative construction by stringent preleasing requirements,” he says. “It would be fair to say that Canada’s more conservative lending culture has helped restrain supply. Rather than the ‘build it and they will come’ philosophy they have in the U.S., Canada has a ‘fill it and you can build it’ philosophy.” ?

The Canadian real estate industry—particularly residential—is very strong right now, continues Robert Freedman, director of urban design for the city of Toronto. “Our condos are mostly slender point towers approximately 20 to 70 stories combined with a base building of four to eight stories, built to the lot line with ground-floor retail or other public uses to help define the street,” he explains. “The strong economy has also made it easier to insist on design excellence. Developers are hiring great designers from both Toronto and around the world, so we are getting great buildings and a very urban, well-designed public realm.” ?

All this new density is bringing a new pedestrian vibrancy to Toronto’s streets and increasing walking, cycling, and transit use, he adds. “Many new condo buyers don’t want a parking space,” says Freedman. “Or if they have a car, they just use it on weekends. We need to continue to add to our public transit system—but over time. Toronto is emerging as a true urban center. It’s very exciting to be here right now. The pace of change is phenomenal.”

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Left to Right: Telus House Toronto, RBC Centre, 18 Yorkville 

Anne Morash, vice president, development, at Toronto-based Primaris Retail Real Estate Investment Trust (REIT), an open-ended real estate investment trust that owns Canadian mid-market retail centers in major cities and dominant shopping malls in secondary cities, adds that the residential construction boom is unprecedented. “The city has something like 132 cranes building condominiums and the next closest city is Mexico City with about half that amount,” explains Morash, a member of ULI’s executive board. “Toronto has a buoyant, multinational economy with a vibrant downtown core.”

Primaris is bullish on Toronto and plans to continue to invest in the city. The REIT is exploring an investment of millions of dollars in revitalizing a midtown retail asset in an area that is experiencing gentrification. “We are excited about how we can redevelop this older, enclosed shopping center in an excellent location,” she explains. “It’s a fairly affluent area and we see quite steady growth. Our challenge right now is Toronto’s lack of available retail space. A number of new retailers want to come to the city and we wish we had locations to offer them. But Canada has a long and arduous entitlement process, and we can’t say with confidence that [we] will have a location ready in 2012 because it could take longer—sometimes much longer.”

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Salvation Army Harbour Lightbox 

Morash says she expects Toronto’s strong economy to continue in the near future. “Consumer confidence has its ups and downs, and the world economy often does summersaults as it is doing now,” she explains. “But people react and reflect on their own personal situation. People working in a fairly strong economy are prepared to live and spend.”?

Toronto is also seeking to accelerate the revitalization of its waterfront since the city is hosting the 2015 Pan American Games. “It will be a large gathering of athletes, and the athletes’ village—which will be turned into market-rate and affordable housing when the games are finished—is in the West Don Lands near the Don River, east of the financial district,” says Noskiewicz. “We’ve also had a number of new hotels built downtown as part of high-end condo/hotel projects—Four Seasons, Trump Towers, Ritz-Carlton, and Shangri-La.”

CBRE’s O’Bryan says currently there is a lot of capital chasing real estate deals in the city. “We’re seeing a lot of capital look at real estate and there is a lot of debt available for deals,” he continues. “But there isn’t a lot of product. Institutions, REITs, private money, and offshore investors all have pretty big appetites for real estate in Toronto. So we’re looking at a stable and improving market in 2012. If there is any shock, it will come from outside the local market.”