A new study suggests that Real Estate Property located closer to key transit spots is worth more money.
Per Garry Marr | November 26, 2015 National Post:
Commercial real estate company Avison Young looked at buildings sold in Toronto’s downtown core from 2012 t0 2015 and compared their sale price, dividing them up into two categories: buildings less than 500 metres from a subway station and buildings outside that range.
What the company found — probably no surprise to developers across the country who clamour for lots close to transit — is the towers closer to the subway station sold, on average, for $475 per square foot, a full 30 per cent more than the buildings more than 500 metres away from stations.
“This puts a value to property that has changed hands close to a subway, people have alluded to properties having lower vacancy rates and perhaps higher rents. We wanted to introduce another element, the value of the buildings,” said Bill Argeropoulos, a principal at Avison Young.
The demand for proximity to stations starts with workers, specifically millennials, who want to be near transit because they often don’t have car. The companies who employ those millennials then seek office space near transit. The owners of buildings want high occupancy rates, which drives higher rents and ultimately a higher valuation for their property.
It’s a trend Argeropoulos thinks will move across the country and is likely already happening, although his company only studied the Toronto market. “I think it is a national story. You can look at what stakeholders are doing who have land near transportation links,” he said. “They are salivating over the land that they own.”
The study found the downtown overall vacancy rate in Toronto is now 6.2 per cent. In buildings less than 500 metres away from a subway station, the vacancy rate was 6.1 per cent, compared to 9.7 per cent for buildings 500 metres or farther from a subway station.
“More and more we are receiving requests for proposals for (buildings and tenants) and 500 metres seems to be the measure,” Argeropoulos said. “I think that’s about the average distance that people are willing to travel.”
Construction in Toronto has focused around subway stations and Avison Young found eight of the 18 buildings that have been or will be constructed from 2009 to 2017 are less than 500 hundred metres from a subway station. Of the 13 buildings in downtown Toronto scheduled to be completed by 2018 or beyond, eight will be less than 500 metres from a subway station.
Brian Johnston, the chief operating officer Mattamy Homes, said there is no question it’s a national trend, and it’s also applicable to the residential market.
“As the road system becomes more congested, the value of transit, not buses — they are another form of a car that gets stuck in traffic — (goes up),” said Johnston, referring to land near key transit links.
A study from the Urban Land Institute in 2013 found residential properties in five major U.S. cities were worth 41.6 per cent more than property further away.
Johnston said part of what drives that market is residents have more money to buy property near transit because they don’t have to budget for a car. “Even parking can cost $40,000 or $50,000 per slot,” he said.
Paul Finkbeiner, chief of GWL Realty Advisors which manages about 300 properties across Canada and is also an active developer, said his company tends to target transit notes.
“Our view and our clients’ view of the future is that things are going to be more transit-oriented and you need to be at a node. It’s very important. Over the years, what you have found is if you have a building that is isolated, it doesn’t lease,” Finkbeiner said.
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