The Toronto development financing market has been a tough one to pin down at times since the start of the 2008 recession.
As developments go in general in Ontario since 2008, there have been more looking for money than moving ahead at times, creating a girth of projects either not started or unfinished.
So the on going question is where are things at now and what can developers look forward to seeing with respect to Toronto development project financing?
Well, according to a recent article in the mortgage broker news, vacancy rates for down town Toronto office buildings are back into single digits, indicating that the supply in the market is being taken up and that this lead to more new downtown construction projects in the near future. See article here http://www.mortgagebrokernews.ca/news/development-may-return-to-toronto-office-market/106610
The combination of commercial lenders in general getting more active in the lending market with the prospect of new projects coming online, is a good sign for Toronto development financing overall.
While the prime interest rate stays at 3.0% and the bond rate remains at the low end of the pricing spectrum for the most part, there cost of financing is currently very attractive, but is likely to change in the months ahead as the bank of Canada keeps a close eye on inflation and economic growth.
Another key factor with the cost of financing, believe it or not, is the Federal election. A conservative majority would provide the most potential interest rate stability while an NDP minority government, the least.
Compared to what we have witnessed over the last three years, most factors are pointing to more free flowing commercial mortgage financing for development projects in Toronto and in other parts of the province as well.
One big difference we can expect though from the pre 2008 period is higher lender financing criteria for development projects and with greater scrutiny applied by lenders before making financing decisions.
That being said, if the market starts to heat up and lending competition increases, there will likely be some slacking of the current lender review process .
As always, there are many factors in play, several of which may change quite a bit in the weeks ahead.
But all in all, the Toronto development financing market is the strongest its been in quite some time and with the increase in office space demand appearing to be on the rise, commercial lenders are much more likely to compete harder for up and coming projects in the area due to the strength of the market dynamics which strengthens their real estate security position.