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Real Estate

Toronto Housing Bubble Shrinking Talent Pool

I recently hired two people to join my team, which is domiciled in Toronto. Both of my new employees live miles and miles away from the GTA. One jetted to Montreal when the pandemic started, and honestly I don’t know if he’s coming back.

Who can blame them? These are well-paid individuals, but who can afford to live in Hog Town? Certainly not people in the early stages of their career.

And those that do live in the GTA require a premium to make it all work. Wage growth overall has fallen behind housing price increases, but those in demand can hold out for higher wages. Want a highly-skilled Toronto employee? Then better be prepared to pay Toronto wages! Of course, it doesn’t work that way for all. Low-skilled workers are sharing apartments and living with their parents, as Toronto is now a city that is only accessible to the wealthy.

It’s a sad state of affairs. But one to which employers must adapt.

Highly skilled people are moving further and further away from the Big Smoke, simply because – even with decent wages – they can’t afford to live in Toronto.

If Toronto is to remain a business hub, three things must happen: 1) housing stock must increase to dampen housing price appreciation, 2) demand from speculators and money launderers must be squashed, 3) regional transit must improve to allow suburban dwellers to quickly commute to the city, 4) companies must embrace remote working beyond the pandemic, 5) companies must decentralize head office work by setting up offices across a wider region and 6) companies must raise wages to attract talent that is leaving for cheaper cities.

Hiring skilled employees is a highly competitive marketplace. If a prospect has multiple options, they will go with the company that is more flexible and willing to let them work from a location that doesn’t put them in debt for several lifetimes or pays them a premium for coming into a Toronto office.

Many companies are dealing with this problem by shoving their heads in the sand. Executives don’t realize how big this issues is because they tend to hire more senior employees earning $150,000+ salaries who have been on the property ladder for 10+ years.

For middle-managers and supervisors in the trenches, the prospect of hiring a junior-level employee for $55,000 is laughable. Anyone willing and able to accept that salary either lives with their parents or lives 100 miles away. And when a business is able to hire someone at this level – knowing the housing situation at hand – that person will quickly seek to move up the ranks. That means far less loyalty from junior employees than what companies might have seen in the past.

Due to the housing bubble, the war on talent in Toronto has evolved dramatically over the past year or two. Businesses that ignore the problem will lose talent. Businesses that embrace the challenge will become attractive places to work.

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Real Estate

The Death of Toronto’s Middle Class

The middle class in Toronto is dying. Some would argue it is already dead.

With the average home price in Toronto flirting with $1 million, most Torontonians have zero hope of ever affording a home. Nope. Real estate is now the sandbox for the rich and their heirs.

A Millennial or Gen Z with a top 10% income and aggressive savings plan will never afford a home.

Over the past decade, the average annual price increase has been over $51,000. This will only worsen as prices rise at an exponential rate. Indeed, over the past 12 months, the price of an average home in Toronto rose by over $81,000. This means if you didn’t save more than $81,000 over the past 12 months your ability to buy a house hasn’t improved.

Even with an astronomical 50% savings rate, a couple would need to have a gross income of $220,000 ($110,000 each) just to keep up with rising house prices. And they’d have to save/earn considerably more to put a dent into their proportional down payment.

This is next to impossible for families in Toronto – the median family income in Toronto is $86,600, according to Statistics Canada.

Nobody but the ultra rich are able chase home prices, and this real estate reality is spreading throughout Canada. Frankly, this is disgusting and will have a huge impact to the quality of life and stability of Canadian society.

Toronto homeowners are now made up of three classes of people. 1) True middle-class and working class people who bought their house decades ago. 2) The moneyed class. 3) Foreign speculators and money launderers.

Eventually, legacy homeowners will die off or sell their homes to fund retirement and we’ll be left with a housing stock fully owned by the rich. Where will the average person live then? Who the fuck knows.

Working class and middle class people lucky enough to have bought a house decades ago likely have a lot of equity. You’re probably thinking they should just take out a second mortgage and give their kids a couple hundred grand towards a down payment. This is what many people do, but it’s not without massive downside. Effectively, it simply spreads the cost of home ownership across generations. Moreover, it puts people who are approaching retirement severely in debt. The initial intent is that the kids repay their parents, but that’s highly infeasible while they still owe the bank $800,000. Giving the money back to parents might take decades, by which point their parents are working themselves to death to repay their second mortgage and afford retirement. So not only is the middle class collapse hitting Millennials and Generation Z, it’s impacting Generation X and even younger Boomers, who can no longer retire (a component of the middle class dream).

None of this takes into consideration that this massive pile of mortgage debt is balancing on a knife’s edge of low interest rates and presumed real estate price appreciation. Canadians are so indebted that the slightest reversal of these two assumptions can collapse the Canadian economy.

This is everyone’s problem. The middle class – citizenry with a decent paycheque and a decent quality of life – is the glue that holds society together. If the most basic necessity (shelter) is unobtainable – or only obtainable by taking massive risk and to the detriment of every other part of dream – there will be no middle class.

Fairness, justice, economic prosperity, social stability all require a solid middle class (and vice versa). The further stratification of society into a rich minority and poor majority will only lead to a mass population with nothing to gain…and nothing to lose.

Categories
Real Estate

List of Starbucks Imminently in Closing Downtown Toronto

Many of these locations previously had lineups 9-5, Monday to Friday (or at least during the peak times [morning and mid-afternoon]). What does it say about the long-term viability of downtown commercial real estate when dozens of Starbucks locations are willing to abandon prime locations?

Is Starbucks closing all these Toronto locations because it realizes office occupancy won’t recover for at least several months?

Or because it believes office occupancy will never fully recover?

Hard to say.

Still, one could argue that Starbucks had too many locations to begin with. However, the company is not known for being reckless with its real estate footprint. I would think this retreat is not caused by simple redundancy. Rather, I assume Starbucks believes the strategic long-term viability of its downtown presence has changed.

When we’re past Covid-19, life might look very different. And not just because your local coffee joint is gone.

Below is the full list of Toronto Starbucks locations that are closing imminently:

  • Bathurst and Fleet (600 Fleet St.)
  • Bay and Elm (686 Bay St.)
  • Bay and Grosvenor (37 Grosvenor St.)
  • Bloor and Bathurst (494 Bloor St. West)
  • Bloor and Gladstone (1090 Bloor St. West)
  • Church and Gerrard (66 Gerrard St. East)
  • Davisville and Yonge (1909 Yonge St.)
  • Dufferin Mall (900 Dufferin St.)
  • First Canadian Place (Sat)
  • Front and Jarvis (81 Front St. East)
  • Hillcrest Mall (9350 Yonge St.)
  • King and Peter (370 King St. West)
  • King and Sherbourne (251 King Street E.)
  • PATH Concourse, Royal Bank Plaza – closing Sunday
  • PATH Concourse, Richmond Adelaide Centre – Closing Sunday
  • Promenade Mall (1 Promenade Cir.)
  • Queen and Ossington (2 Ossington Ave.)
  • Queens Quay and Lower Jarvis (132 Queens Quay E.)
  • Scotia Plaza (40 King Street West) – closing Saturday
  • St Clair and Bathurst (504 St. Clair Ave. West)
  • Wellington and John (224 Wellington St. West)
  • Wellington and Simcoe, RBC (155 Wellington St. W) – Closing Saturday
  • Wellington and University (55 University Ave.)
  • Yonge and Wellesley (8 Wellesley St. East)
  • Yonge and College (450 Yonge St.) – Closing Sunday
  • Yonge and Queens Quay (1 Yonge St.)
  • York and Bremner (25 York St.)
  • York Mills Centre (16 York Mills Rd.)

List source: Blogto