Bulk Condo Buying Surges as Toronto Inventory Mounts

Condos are being bought in bulk as Toronto’s struggling condo market sits on a glut of unsold inventory that developers are looking to unload. Harley Nakelsky, president of Baker Real Estate, told Real Estate Magazine he is doing more bulk deals than “likely anyone else in the world.” With individual unit sales moving slowly, developers are increasingly open to selling entire blocks of units at once.

Who is buying and why now

Potential bulk buyers include institutional investors, family offices and groups of individuals looking to convert condos into rental product. “They do it for ROI,” Nakelsky said. “This is the best time to buy that we have ever seen.” He noted that well-educated investors are getting on board, each with a different theory about whether bigger or smaller units inside or outside the city will work best. Typically, they hold onto the units long-term.

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The market is heading toward a cliff in 2029, Nakelsky said, when there won’t be enough inventory to meet demand. That’s when bulk buyers could see a large return. There are usually several rounds of negotiation. About half of bulk buyers submit offers so low that developers won’t even consider them. Still, aggressive promotions and pricing make it worth the time and money. “They’re getting discounts,” Nakelsky said. “(Just) not big discounts.”

The secrecy around many of these transactions, however, makes it hard to track how much inventory is actually moving or who is really behind the deals.

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Public and private deals reveal the scale

Pauline Lierman, vice-president of market research for Ontario and Quebec at Zonda, told REM that bulk buyers typically purchase 40 to 50 units near a building’s occupancy, after construction. She said there can be ‘quite the discounts,’ with deals that can often be $100 to $200 per square foot below the standard price, bringing it to about $800 per square foot. Some purchases have been made public, but often they’re shrouded in secrecy. “They’re doing deals that have NDAs. So they can’t really talk about them,” Lierman said. “This is why it’s such a black box.”

One deal that was made public is a $1.3-billion private-public fund led by investment firm High Art Capital, with $300 million put in by the Ontario government. The fund follows a similar push by Montreal-based Jesta Group, which pledged up to $500 million toward acquiring more than 1,000 Toronto condo units. High Art Capital Managing Partner Ryan Roebuck told Real Estate Magazine the firm reached its goal of $1 billion from private investors and even exceeded it, so it will be placing a cap on the fund.