Innovation

The New Condo Dwellers You Should Be Targeting

Developers were once loathe to build three-bedroom condos. But now they're seeing demand from young families priced out of other forms of housing in major cities

Written by Michael McCullough

The next generation of Canadian children may come to relate all the more to Holden Caulfield, teenaged protagonist of The Catcher in the Rye, growing up as he did in a Manhattan apartment building. Increasingly priced out of major cities’ single-family housing markets, families with kids are opting for condominium living, driving demand for what was once a rarity: the three-bedroom condo.

Until now, developers included these larger units in their projects reluctantly, and usually at the request of municipal planners bent on providing a range of housing for all types of households. Condo marketing was targeted at single adults and childless couples. But developers in Canada’s hottest housing markets are willingly redrafting their plans to include more family-sized units, owing to a number of factors are combining to make it more comfortable for families to adopt condo living. Furniture retailers are catering to small spaces, cities are building schools downtown, and investor demand is cooling, forcing developers to find a new type of buyer.

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At The Empire development in Vancouver, which will be ready this fall, all of the three-bedroom units sold out before construction began. “People kept coming to us wanting three-beds and we were out of them,” says Shaadi Faris, vice-president of Intergulf Development. “We ended up taking 30 one-beds and combining them to create 15 three-beds.” Now, he says, all the adjacent projects going up along the city’s Cambie corridor feature a sizeable number of 1,000-plus-square-foot apartments in their original plans.

And while many of the buyers at this particular location are in fact empty-nesters cashing out of larger houses nearby (but still demanding extra rooms for visiting children and grandchildren), real estate professionals in Vancouver and Toronto are noticing a growing acceptance of the idea of raising kids in high rises as an alternative to commuting from distant suburbs.

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“If people want to be in the most desirable parts of [the region], they will have to adjust their expectations” away from the single-family home, Faris says, echoing recent pronouncements of “condo king” Bob Rennie, who contends the ultimate answer to the affordability problem lies in rezoning the entire city to multi-family housing.

Evidence is mounting that they are doing just that. While still in the minority, the number of families with kids on the downtown peninsula—where virtually the entire housing stock is multi-family—doubled between 2001 and 2011, to 4,545, according to the Downtown Vancouver Business Improvement Association. A recent report by Ernst & Young for the Vancouver School Board found that while 37 schools on the East Side, home to most of the city’s single-family houses, were operating at less than 80% capacity, the board is having to build and enlarge schools to accommodate soaring enrolment downtown and near high-rise communities at the University of B.C. and the Fraser River waterfront.

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Moreover, contrary to laments by some of the region’s employers and housing advocates that Vancouver is becoming a resort for rich retirees, a recent Bank of Montreal report shows the proportion of Metro Vancouver residents in their 30s has been rising steadily since 2004, hitting the highest level since the mid-1990s.

It’s not just a West Coast phenomenon, either. Broker Ara Mamourian of Spring Realty Inc. has been noticing the same uptick in interest in the three-bedroom condo in Toronto over the last couple of years. At first it was from investors, who found they could reap the same or better rents per square foot leasing to multiple roommates close to post-secondary campuses. But now there seems to be a wider acceptance of condo living among families, especially in more stable, community-oriented locations. Developers are responding by building family-friendly units in mid-rise buildings close to—but not inside€“the downtown core, he says, pointing to a proposed seven-storey project by The Daniels Corp. on Queen Street.

Moreover, he thinks it’s a societal trend that will continue even after the current housing boom is spent: “The suburban house with the sprawling back yard is not so desirable any more,” he says. “We’re growing a generation for whom smaller spaces have become cool again.”

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Is your business ready to sell to condo-dwelling families? Tell us how you’re preparing for the coming urban migration of consumers using the comments section below.

Originally appeared on PROFITguide.com