Small buildings fill a need -for buyers and developers -while the market settles

Let's get intimate
Consider, for a moment, a toe dipped into a frigid pool.

For Toronto developers, the new-condo market at the beginning of the year might have been that inhospitable body of water. Given those conditions, jumping in just to make a splash might not have been the best thing to do. While massive master-planned condo communities are under construction all over the city, market conditions since the beginning of the year have kept many developers from going ahead with plans in 2009 for anything but the smallest of sites.

Which means that, even as the market changes, those small buildings still reign. They'll test the temperature for the bigger projects expected to return by next year.

"You're going to see some big land deals happen," says broker Brad Lamb, of Brad J. Lamb Realty. "But there won't be big projects this year -- it takes too long to start them up."

Even that is a shift in perspective, though. Just a couple of months ago, Mr. Lamb didn't expect anything but the smallest of buildings to hit the market. Now, Mr. Lamb, who is also a developer, has plans underway for some big projects of his own for 2010. He also still has a small building on the market, too: Lamb Development Corp., in partnership with Harhay Construction Management and Niche Development, is in the middle of the 104-unit project, Parc, at King West and Strachan.

But the new-condo market is almost back to 2006 levels now, Mr. Lamb says. That means developers are feeling more confident that the market might be able to handle more volume. It will just take some time to see those changes result in new projects, so, in the meantime, buyers should expect to see small buildings; buildings that have represented less risk to developers and given them the chance to test those waters.

After all, for developers, smaller buildings mean there are fewer suites to sell to get to their all-important sales numbers, requiring what's generally about 70% of units to be sold pre-construction to put financing in place. For buyers, that means less of a wait for construction to start. Some, as well, simply prefer the smaller, more intimate environment that a mid-rise building offers.

"The good thing about small buildings is -- in order to get your presales -- 70% of 54 units is a lot easier to achieve than

70% of 500 units," says Jeanhy Shim, sales and marketing consultant for boutique developer Streetcar Developments. "Definitely from that perspective, it's better. You don't have the pressure to have to sell 300 units in six months. And from the construction loan perspective -- with the global financial crisis and the credit crunch -- certainly the smaller buildings are interesting because the size of the construction budget is a lot smaller."

Streetcar specializes in smaller buildings, and while it will release fewer projects this year than its norm, it will be introducing the 53-unit 2 Gladstone, at Queen Street West, in addition to continuing with its Corktown District site, both in partnership with Dundee Realty Corp.