Are Toronto Lofts a Better Investment Than Condos?

Are Toronto Lofts a Better Investment Than Condos?

Yes. And No. It depends.

We talked in last week’s post on hard versus soft lofts about the confusion surrounding the term “loft” in today’s market. And so to even begin to answer today’s question, we need to agree on the definition. Let’s focus the discussion around authentic, hard lofts and whether or not they’re more profitable on the whole come re-sale than traditional condos or soft lofts. And let’s also focus on the areas in and directly around the Toronto core.

Even with a narrower field of comparison, it’s not a black and white issue as there are many factors to consider and there are always exceptions to the rule. But we can say that Toronto lofts are quite frequently a better investment than their nearby condo neighbours and here’s why.

The Authenticity & Character Features In Toronto Lofts Can’t Be Duplicated In Modern New Builds

Hard lofts are so beloved by Toronto buyers because they’re a real slice of history. Every building has its own stories, its own past, that appeal to our sense of wonder and appreciation of where we came from. They also boast authentic, heritage features like exposed, original brick or concrete, large, factory windows, soaring, warehouse ceilings and construction materials that aren’t commonly used today like solid wooden posts and beams as seen here in the Candy Factory Lofts.

It’s not just that these features are rare that gives them their value. It’s that you just can’t duplicate this look in an authentic fashion in today’s new build market because a) it would cost way too much to be viable and b) even if you had unlimited budget, it’s extremely difficult if not impossible to source some of the materials that were used historically.

Value For Money

Contrary to popular belief, hard lofts don’t always cost more than condos or soft lofts. Quite the opposite, on a cost per square foot basis (which is the only fair comparison), hard lofts are often much more affordable than newer condos.

A great example is the Broadview Lofts – one of the nicest, hard loft buildings in Toronto – which is tracking so far this year at an average sales price of $572 / sqft versus The Ninety soft lofts built right around the corner at 90 Broadview at $651 / sqft. You never would’ve seen The Ninety without the change movement in local Riverside that the Broadview Lofts helped to spark and you can still buy into Riverside’s “original loft” for less than nearby new builds even though it’s a far nicer building in my opinion.

The total price tag on hard loft units may be more than in many new builds but this is because you’re usually getting a much larger space – you won’t find many micro hard lofts like you do in new build condos with units as miniscule as 300 sqft. Yes, that’s not an unusual footprint these days (we’ve seen some pre-construction condo units as small as 269 sqft).

Now, a lower cost per square foot doesn’t necessarily make a hard loft more affordable for first-time buyers but it certainly makes a lot of these larger, authentic lofts much better value than many condos that fall within the same price range.

Affordable Fees

There was a time that the swanker and more fulsome the list of amenities at a condo, the more appealing it was to the average buyer. But as condo prices continue to rise – not as dramatically as the freehold market on average but still well above historic annual appreciations – buyers are seeking pared down buildings to keep their monthly expenditures in check.

Even parking is becoming less of a selling feature as many buyers are public transit users who don’t want to pay extra both at time of purchase and in their monthly maintenance fees for a parking spot they don’t need.

Hard lofts often have an advantage over condos on this front because most have minimal amenities and maintenance fees are generally fairly low. The exception is buildings that haven’t been well-maintained as repairs on historic or heritage buildings can be pricey. This is where you need your Realtor and lawyer to carefully review the building’s status certificate.

And make sure that you hire a Toronto loft expert who has experience in the neighbourhood and buildings that you’re interested in. A lot of times there are things that are critical to know as a buyer that the paperwork isn’t going to reveal.

Rarity & Demand

The single-most important reason why lofts for sale in Toronto are typically a better investment than a standard condominium is the fact that they’re far rarer and they’re perpetually in high demand.

It’s a simple supply and demand equation – we’re not converting many more authentic, hard lofts in this city while new build condominiums have been rising at unparalleled levels. And Toronto’s new condo boom is still going strong. And so hard lofts as a percentage of the total condo mix in Toronto are becoming a smaller percentage of the market as each year passes.

Yet Torontonians’ appetite for century homes, industrial aesthetics and heritage features is insatiable – we love us some soaring ceilings and exposed brick in this city. So it’s only natural that hard lofts – providing they’re in a decent location and the building is well-managed – generally rise in value at a faster rate than condos in the same neighbourhood.

And while it makes scoring the right loft challenging for buyers (we’re seeing a lot of bidding wars this year on hot lofts), it’s comforting news indeed for loft owners who can rest-assured that their investments are more sheltered from market fluctuations than more common property types.

Need proof? Just check out what’s happening in the Calgary real estate market where hard lofts have remained buoyant throughout a very turbulent time.

We Can Help You Find the Perfect Loft

The trick with any real estate investment is to a) not overpay going in so you leave enough meat on the bones for profit come re-sale after fees and b) that you get in on the front end of rising values – purchase after an area’s hit its peak and you’re obviously not going to make as much money as earlier buyers who took a higher risk.

How much risk you want to take and what your tolerance is for, say, living in a transitioning area or living through renovations of an underwhelming interior are different for every buyer. This is where your Realtor can work with you on developing the right buying strategy based on your needs, budget and goals.

Most buyers fall somewhere in the middle – they want to out-earn the average in terms of value appreciation and they’re willing to take some risk to do that but they want to live in a neighbourhood that’s far enough along in its gentrification movement to feel safe and convenient in terms of access to amenities and transit.

If this sounds like you, one tip is to keep an eye on areas that have one or two great hard lofts already but are seeing numerous new condos and soft lofts being erected all around them along with investment in local-area infrastructure and an influx of new restaurants & retail.

We’re seeing a lot of this on the west-end right now in neighbourhoods like Roncesvalles Village (e.g. Robert Watson Lofts pictured below, and Sorauren Lofts), Wallace Emerson (e.g. Wallace Station Lofts) and Davenport Village (Foundry Lofts).