Six Canadian cities are among the top 10 in North America for the number of high-rises and skyscrapers being built, a finding that illustrates just how far the construction markets in Canada and the United States have diverged.
Toronto tops the list by a margin that has widened over the past year. Canada’s most populous city now has more than twice as many tall towers under construction as New York City, which takes the No. 2 spot, according to a study that will be released this week by German data-provider Emporis.
The ranking looks at construction of all towers, including offices and hotels, but the vast majority under construction are condominiums. While Toronto’s condo boom has been a well-known headache for policy makers in Ottawa, the study shows that Montreal has more towers under construction than Chicago, and that Calgary is tied with Miami.
A small but notable portion of Canada’s strong showing comes from a new wave of office construction. A soon-to-be-released study by real estate firm Jones Lang LaSalle says the new office projects that have been announced or are under construction in Toronto, Montreal and Vancouver represent the most significant uptick in new construction in a decade or more. Toronto, which had 69.7-million square feet of office space and a vacancy rate of 5.1 per cent at the end of the third quarter, is expected to add nine more buildings totalling 5.6-million square feet. Colliers International released a study Monday showing that the average asking rental rate for office space in the Greater Toronto Area jumped 13 per cent from last year, to $17.83 per square foot, bringing rents back to the levels they were at prior to the recession.
And “the extremely low vacancy rate in downtown Calgary has recently prompted a new wave of development in the market,” Jones Lang LaSalle said.
Construction has been a major source of fuel for Canada’s economic growth of late, with the bulk of that coming from housing, while the U.S. housing market is just now starting to show signs of emerging from its protracted downturn.
Figures released by the U.S. Commerce Department last week show that new construction starts of multi-family homes south of the border rose 25.1 per cent in September. But the U.S. housing market continues to struggle under the weight of a slew of existing homes that cannot find buyers, and construction is still far below the levels it topped out at more than six years ago, before the subprime mortgage crisis brought the nation’s housing market to its knees.
Canada’s housing market, in contrast, experienced a relatively minor slump at the height of the crisis, but recovered so quickly that policy-makers and economists here began fearing that a bubble would form. Finance Minister Jim Flaherty has sought to cool the market by tightening up the country’s mortgage insurance rules, making it harder for a number of buyers to obtain a mortgage, and has cited Toronto and Vancouver’s condo markets as sources of particular concern. His fear had been that low interest rates might have been spurring more construction than the market could absorb without a large drop in prices.
Prices for new condos in Toronto have recently been falling, while resale prices are flattening out, and Mr. Flaherty has suggested that he’s become less concerned.
According to Emporis, Toronto now has 147 high-rises and skyscrapers under construction, compared to 72 in New York City. Vancouver ranked third with 21.
While the number of towers under construction in Toronto has risen from a year ago, New York has seen its number decline, Emporis said.
The fourth spot in its ranking went to Montreal, which had just one fewer towers under construction than Vancouver. Next was Chicago, with 17, followed by Calgary and Miami, which were tied at 13. Both Ottawa and Richmond, B.C., also made the list with 12 apiece.
In making his policy decisions, Mr. Flaherty has sought to balance the need to bring house prices and mortgage debt under control with the need to keep the economy humming.
Housing starts in Canada were trending at 224,419 units on an annual basis in September, according to Canada Mortgage and Housing Corporation. “A correction to 180,000 starts by 2014, still a generous level historically, will entail a nearly 20 per cent dive in activity in the sector, representing a roughly one per cent point hit to Canadian GDP growth by 2014,” Canadian Imperial Bank of Commerce economist Avery Shenfeld wrote in a recent note to clients. “Here’s hoping that by then, better global times will allow exports to pick up that slack.”