For many, the problem with pre-construction isn’t the uncertainty, the fees, or the shrinking unit size. More often than not, it’s is the wait.
It’s very easy for a developer to delay a project. Added to an already years-long process, clients can sometimes be frustrated with the process. But I promise you: it’s worth the wait. It’s the reason why pre-construction is such a good investment. Because you get in on the ground floor.
Want to see what’s happening during your three-year wait? Here’s a timeline of what goes into a construction project from start to finish!
Just like you, a condo project starts with a little twinkle in someone’s eye. Or, more likely, a land assessment.
Developers have teams dedicated to scoping out optimal sites for building new condos. They’re looking for locations where the land is underused or completely obsolete, but in dynamic or culture-rich neighbourhoods.
The West Don Lands is a great example.
The area was bordered by the Distillery, Corktown, and one of the city’s main arteries - good accessibility, waterfront views, and a bustling culture. But the land was abandoned and heavily polluted. It made, with some serious investment, an incredibly lucrative revitalization project. And now we have the Canary District.
Of course, cost is still key. The Canary District relied on some heavy public funding. Developers in Toronto usually allocate at least 25 percent of their budget just to land costs - but can easily hit up to 35 percent.
Once the development team finds a site, a whole whack of math happens. Does the land value reflect the development possibilities? Will the city allow a high rise? What about parking, density, and public transportation?
What developers are looking for is optimization - how to get the highest return in the least amount of time.
A development concept is about much more than the architecture. Usually a team of professionals from different sectors and backgrounds make sure that everything would work if they put together a project.
It takes architects, market professionals, urban planners, contractors, and a legal team to decide whether the project makes sense. They have to figure out how to integrate heritage buildings, support government initiatives, and abide by local bylaws. Can the market support a condominium? Is there enough demand?
By the end of a meeting (or several), someone will decide whether to secure the development or not.
The site is purchased, and the development team expands to include a construction contractor, structural engineers, a financing team or a lender, interior designers, graphic designers and marketing teams, and many others. Every planning stage must be done before construction begins - from architectural drawings to landscape design to all of the legal contracts.
Success at this stage requires onboarding of public support. Does the neighbourhood want a development here? Is the city on board? Are planning authorities okay to move forward? Can the area socially support a condo? These questions matter to the developers, pre-construction purchasers, and financing lenders.
Most lenders won’t actually support a pre-construction condo until many of the units are sold. Especially given concerns about condo oversupply in Toronto, pre-sales are integral to getting a project (literally!) off the ground.
Developers aim to sell 70-90% of their units before they even start building. They usually market pre-construction units (and early purchases) with lower margins to ensure they hit this target.
The very first wave of units are sold at a (usually) VIP-only event, with industry folks, pre-construction realtors (hint: that’s me!) and press. The developers want to generate as much buzz as possible - so the earliest units have rock bottomest-price. And some great incentives.
It makes sense - early buyers are rewarded for putting their money in the soonest, waiting the longest, and carrying more risk. But this is why pre-construction is so great for investors: the earliest prices are vastly, vastly different than what a unit will sell for upon completion.
Once the ideal number of units are sold (and the financiers appeased), construction starts.
Construction goes in seven stages. The land is cleared, a gigantic hole dug (even bigger for extra underground parking), and then foundation is laid. This can sometimes be the longest stage because concrete has to be poured in layers.
Next are the “towers”, or the structural shell like floors, support walls, beams, slabs and columns.
Sheeting and siding might be added while the structure is going up, but sometimes services are put in too. Water, electricity, and other utilities (are there any natural gas-powered condos out there? If you know of one, let me know!) are added to each floor as the structural construction progresses.
Flooring is added, walls and exterior are framed, and then all of the finishing works can be put in: lighting, fixtures, cabinetry, faucets and more. It’s a long process - and it’s not always the same. But for the most part, each builder follows a standard set of processes to get the condo done as safely and quickly as possible.
You have two occupancy dates. You can take interim occupancy - you can live in the building but you don’t technically own the unit yet. But when everything is said and done, the lobby's completed, the elevators are working, and all of the legal stuff is finished, there’s final occupancy. With it comes development charges, final down payment percentage, and other occupancy fees. To learn more about occupancy fees and fee payment structures, go here!
Finally, when everything is done, the developer legally transfers the units to the individual purchasers. Between interim and final occupancy is a period of anywhere from three to eighteen months. This is why knowing your builder is so important. If the developers meet their deadlines, plan properly, and don’t encounter any major setbacks, this isn’t a big deal for a buyer. But it can be.
You live happily ever after. Or your tenant does!
Building a condo requires a lot of planning, a lot of risk, and many moving parts. Because of all of the unknowns, it makes sense that pre-sales are so important to financing a new development. It’s what makes pre-construction such a great opportunity to get the absolute lowest price on a property. You can get in on the ground floor, when a developer really needs to sell units before they can get started, and enjoy a product that costs much much more down the road.