Development segment in a prolonged shift to alternative financing

Development segment in a prolonged shift to alternative financing

Development segment in a prolonged shift to alternative financing

In its latest analysis, the Altus Group uncovered clear indications of a long-running shift in financing preferences among real estate development companies, gradually moving away from traditional models.

The study – which polled more than 400 executives across the globe – found that 82% of high-level managers in development firms favoured the use of at least one alternative financing source, compared to the 46% still using traditional or institutional channels.

“Many alternative lenders and private funds have actively positioned themselves toward the space of traditional lenders, with investors increasingly seeing real estate as an income source as well as an opportunity for premium returns on the equity and joint venture structure side,” according to the Altus analysis.

Nearly half (45%) of development execs said that they are still considering, or already utilizing, alternative financing exclusively.

Real estate joint ventures have also proven highly attractive. Majority (62%) of the executives surveyed said that they are open to establishing partnerships or joint ventures.

Read more: B-20 makes alternative space indispensable

Despite steel and construction material prices feeling the heat of intensifying cross-border trade wars, Canada’s development sector has entered a boom period recently.

In particular, Toronto activity hit a fever pitch as it had the greatest number of high-rise projects in progress during the second quarter of 2018, according to the latest edition of Rider Levett Bucknall’s crane index.

Residential towers accounted for 86% of Toronto’s Q2 projects, largely due to sustained demand for unit – and this might be just the beginning, Better Dwelling reported.

“The high crane count could continue to rise as well, since another 400 projects are proposed,” adding to the 97 cranes already up in Toronto as of the second quarter, the RLB analysis stated.

Toronto’s crane count far outstripped that of North America’s second most active market in that quarter – Seattle, with just 65 cranes. Chicago came at third with 40 cranes.

 

Related stories:
Disruptive factors in RE development have ‘evolved substantially’