Quebec forum on rental housing

[IluvMTL]

https://renx.ca/quebec-forum-tackles-students-seniors-mixed-use-housing-issues/

Quebec forum tackles rental housing challenges

Danny Kucharsky | Property Biz Canada | 2018-03-01

An influx of affluent international students in Montreal is providing new opportunities to developers and forcing managers of student housing to up their game, says Jean-Marc Bélanger, vice-president of operations at Cogir Real Estate.

The Humaniti development in Montreal, by Cogir Immobilier, includes a hotel, condos, multi-res housing, office and retail. (Rendering courtesy Cogir Immobilier)

He was among the speakers at a session on trends in student housing, seniors housing and mixed-use developments at the recent Quebec Apartment Investment Conference in Montreal.

“In the last few years, we’ve noticed a major change in the student clientele and their needs,” Bélanger says. Cogir manages about $3.5 billion in real estate, including several student residences in Montreal.

Although Americans are still the No. 1 source for foreign students, “China is assuming its place in the sun in Montreal,” with a 187 per cent increase in the last few years at Cogir’s student residences.

More international students

Roger Côté, vice-president of services at Concordia University in Montreal, says there has been a dramatic increase in American and other international students in the last year to Canada and he attributes the increase to the election of Donald Trump as U.S. president.

Wealthy students from China as well as the Middle East are increasingly seeking value-added amenities such as games rooms, gyms and yoga spaces, Bélanger says.

Last year, Cogir installed a beehive at one of its residences serving McGill University students. Residents received training on the importance of bees and harvested and distributed the honey.

“It’s a small gesture” but it provided a feeling of community, he says. “People really appreciated it.”

While there are huge growth opportunities in a growing student market, there is a major short-term problem in the Montreal market, he says: Many owners of traditional multi-residential buildings have been offering promotions such as three months free rent to tenants. This has provided some developers with fewer incentives to build new student housing.

Bélanger says international students are good at paying their rent. For the most part, it’s their parents who pay the rent and students undergo exhaustive credit checks before being accepted as tenants. 

In addition, Concordia students have to pay their debts before they can graduate, Côté says.

However, high vacancy rates and significant turnover are major challenges when it comes to housing international students. Bélanger notes there is a 30 to 50 per cent annual turnover rate in its downtown Montreal student residences. 

That turnover does have benefits, though. It gives Cogir the opportunity to conduct major renovations, primarily during the summer, and to reposition its buildings.

Seniors also seek more amenities

It’s not only students who are seeking more when it comes to housing.

“What we’re building now compared to what we built 10 years ago is greatly different,” notes Michel Bouchard, vice-president, real estate at Le Groupe Maurice, which develops and manages seniors housing in Quebec.

Seniors want new housing, much larger common areas and better quality finishes, such as quartz countertops. They’re also more technologically adept than ever. A survey conducted by Le Groupe Maurice found 80 per cent of its residents aged 75 and over use tablets or smart phones.

Demand for seniors housing will remain very strong, says Bouchard, noting there remains 15 to 20 years worth of development potential to accommodate aging baby boomers.

Staffing an issue for seniors’ homes

However, he cautions undisciplined developers have created an oversupply of seniors housing in certain markets. “It’s not good for the product, it’s not good for the product’s image, it’s not good for investors.”

In addition, with unemployment rates currently low, it is a major challenge to find staff for seniors’ homes, he says.

Given that labour is the largest single expense in seniors’ homes, minimum wage increases have a major impact on operating costs. Bouchard says the difference in minimum wages between Quebec ($11.25 an hour) and Ontario ($14) can make it more difficult for senior homes bordering Ontario to find employees.  

One such seniors’ project, called L’Initial, is being built in Aylmer, Que., near Ottawa for delivery early next year. “How will we be able to find people and compete with Ottawa where salaries are higher? We’re looking for solutions.”

Mixed-use projects “are the future”

Bélanger says mixed-use projects “are the future” of development but bring with them problems both large and small that are not evident when they’re designed on paper.

He gives the “banal” example of a condo owner’s dog that does its business outside a multi-residential building sandwiched with condos. The condo owner doesn’t scoop up the poop. “Who cleans up the mess?”

While it’s the condo board’s responsibility, it ends up being cleaned by the janitor of the multi-residential building because “it’s our image” that’s at stake and it’s a common area. Small things like that put pressures on operating budgets.

Another Cogir property has 250 housing units and a 24-hour gym in the lobby that offers popular cross-fit classes at all hours. While the classes are appreciated by most tenants, the noise from the music and dropped weights can be a nuisance to others. The key to handling such situations lies in being flexible, diplomatic and listening well, he says.

Despite their complexity, mixed-use projects are well worth it and their benefits outweigh their negatives, Bélanger says. Cogir is co-developing the $200-million-plus Humaniti in downtown Montreal, which combines a hotel, condos, multi-residential housing, office space and retail.

“We believe very much in them,” because they can satisfy people’s needs all under one roof. “There are other mixed-use projects coming to Montreal, and I’m certain they’ll be successful.”

[Né entre les rapides]

Il y a 11 heures, IluvMTL a dit :

Given that labour is the largest single expense in seniors’ homes, minimum wage increases have a major impact on operating costs. Bouchard says the difference in minimum wages between Quebec ($11.25 an hour) and Ontario ($14) can make it more difficult for senior homes bordering Ontario to find employees.  

One such seniors’ project, called L’Initial, is being built in Aylmer, Que., near Ottawa for delivery early next year. “How will we be able to find people and compete with Ottawa where salaries are higher? We’re looking for solutions.”

(IluvMTL did not say any of it; this is part of an article he quoted.  Accordingly, my comment is not addressed to him personally)

Overall, an interesting article.  However, this part that I quoted is mind-boggling.  Here is why:  In the Ottawa-Gatineau CMA, at any given employer, such as the federal government but there are many others, employees are being paid the same salary, irrespective of their place of residence.  The fact that minimum wage is much higher in Ontario than in Quebec makes it obviously more attractive for an employee to seek a job where the pay is better,  but, and it's a big «but», nothing prevents this Quebec-based employer in similar circumstances from offering competitive salaries, even these happen to be above minimum wage.  

The key term to my argument is «similar circumstances».  In the example provided, this is about a local market (Ottawa-Gatineau) for a non-tradable service.  It's not like a good-producing company that has to compete with out-of-town rivals based elsewhere in Quebec or other provinces with lower minimum wages, for example in the food processing industry.  By contrast, an example of a low key tradable service would be call centers.

In fact, the argument extends much further than the mere question of minimum wage.  It is easy to observe that in regions where big employers, often in capital intensive sectors such as aluminum smelting, or where the government presence as an employer is substantial,  the general wage level is higher and, as a consequence, small/medium companies serving outside markets do not thrive as well as in regions  such as the Beauce. 

As an employer, you cannot expect to have your cake and eat it too.  You cannot enjoy the benefits of serving a comparatively richer market (and thus being able to charge higher rents), and yet pay non-competitive wages.  The same principle holds for hotels and restaurants: I am fully prepared to pay (much) more in Manhattan, central Paris and London, and many other places as well.