Norm Li spent over a decade building an internationally renowned team but says his company’s work has dried up.Cole Burston/The Globe and Mail
Norm Li had to lay off 75 per cent of his staff at his eponymous company that makes renderings and other visual content for real estate developers as the Canadian residential development industry faces the worst downturn since the 1990s recession.
Mr. Li, who has been running his business since the early 2000s, said he watched as more developers put projects on hold, cancelled them or were forced into receivership. And then his company’s work dried up.
“I tried to hold on for a long time and I tried to keep it all together, but then one day, I saw it. I knew if I don’t lay these people off today, the next payroll, the bank is going to come shut me down,” he said.
Mr. Li is not alone. There have been job cuts across the industry as the sector’s slowdown enters its fourth year.
Mattamy Homes, Great Gulf, Polygon Realty Ltd. and Wesgroup Properties are among developers that have cut jobs. Preconstruction sales brokerages such as Hirsch & Associates, MLA Canada Realty and Rennie & Associates Realty Ltd. have laid off staff. And the myriad of businesses like Norm Li that do work for the real estate industry are also reducing their headcount. Marketing and advertising company LA Inc. shut down, while SvN Architects + Planners made some cuts and is not replacing those who decide to leave.
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If the slowdown continues, more than 100,000 jobs in the homebuilding industry could be eliminated. The downturn threatens a significant part of the Canadian economy and hampers the future supply of new homes just as the federal government vows to boost homebuilding to make housing more affordable.
In Toronto, the country’s largest real estate market, the decline has been the most pronounced. In the first quarter of this year, preconstruction condo sales were lower than the same period in 1995, according to condo research firm Urbanation Inc.
In other Ontario regions such as Kitchener-Waterloo and Hamilton, the annualized preconstruction condo sales for the six months ended in March were about 80 per cent lower than the 2020 to 2024 annual average, according to Altus Group. Ottawa’s annualized sales were 70 per cent below that 2020-2024 average while Montreal, Edmonton, Vancouver and Calgary were down between 62.5 per cent to 50 per cent, according to Altus.
Sales of preconstruction single-family homes were also dire in the major cities but not as bad as condos, according to Altus data.
“The reality is that the market has changed. The sales are not there,” said Cara Hirsch, whose Toronto-based company is operating with half the sales team it once had during the pandemic’s real estate frenzy. “Everyone in the development space is getting hit,” she said.
It has been a rough period for the industry.
Higher construction expenses and municipal development charges have driven up costs for builders. Borrowing costs are still relatively expensive. Housing demand has been curbed by the federal government’s decision to cap the number of foreign students and newcomers. At the same time, investors, who used to account for the majority of new condo sales, are no longer interested because they can no longer make a profit. Condo values are not increasing and investors are burning through cash because they can’t charge enough rent to cover their mortgage payments and condo fees.
Mattamy Homes, one of the country’s largest homebuilders, has cut about 6 per cent of its work force. Mattamy has been building homes for nearly five decades.
“Mattamy Homes has had to respond to Canadian economic conditions affecting the real estate market,” Brent Carey, a spokesman for the homebuilder, said in an e-mailed statement. “Global economic uncertainty has shaken consumer confidence, and affordability challenges persist, causing homes sales to drop in key markets across the country. Mattamy is not immune to these fiscal realities.”
Wesgroup said it has had to delay a number of projects because the economics no longer worked. The Vancouver-based developer has cut 12 per cent of its work force this year.
“We’ve worked hard to avoid workforce reductions, but like many of our peers, we’ve reached a point where we must realign our operations for long-term sustainability,” Wesgroup president Beau Jarvis said in an e-mailed statement.
Polygon Realty, which has built 34,000 homes in the Vancouver area over the past 45 years, started by not replacing employees who decided to leave. But this week it had to cut about 5 per cent of its work force.
Mr. Li has been running his business since the early 2000s, but recently had to lay off 75 per cent of his staff.Cole Burston/The Globe and Mail
“We never like to cut jobs,” said Polygon chief executive Neil Chrystal. “Unfortunately, the outlook for starting new projects has been pretty difficult.” Mr. Chrystal said Polygon can’t justify moving forward with some of its projects because of the poor economic returns and lack of buyers.
Great Gulf also cut jobs, according to two sources. The Globe is not identifying the sources because they were not authorized to speak publicly about the matter.
In the Vancouver region, one of the dominant preconstruction sales brokerages, MLA Realty, laid people off in March.
MLA helps developers with the design, marketing and sales of new condos as well as the leasing of rental buildings. It has sold about 10 per cent of the new homes built in the Vancouver region over the past decade, according to its co-founder Cameron McNeill.
Although the 25-year-old MLA weathered the 2009 global recession, Mr. McNeill called today’s slump much more challenging.
Mr. McNeill said he had to restructure the company. His work force is now 35-per-cent lower than a year ago. “We had to make some really difficult decisions,” he said.
Mr. McNeill said his company is doing more advisory work and representing more smaller wood frame projects that are typically geared to buyers who plan to live in the homes. He believes the Western market will be difficult for at least another year even though he has seen more optimism from developers.
Similarly, Rennie, the largest real estate services company in B.C., had to cut 25 per cent of its work force this year. President Greg Zayadi said his company realized that sales would not rebound to the level needed to sustain the business without layoffs.
Mr. Zayadi announced the job cuts on Linkedin because he felt it was important to be transparent about the state of the industry. “If you don’t talk about it, no one thinks there’s a problem,” he said.
Toronto-based LA Inc. shut down in late May saying that the real estate marketing company had witnessed profound changes in the sector over its 35 years in business.
“Unfortunately, the headwinds we have experienced over the last several years have been too great to continue,” it said on Linkedin.
Those headwinds also hit SvN, a multidisciplinary firm that includes architects and urban planners and has offices in Toronto, Vancouver, San Francisco and Mexico City.
Although SvN has a significant amount of public sector business in addition to residential development work, the company still felt the sting of the slowdown.
SvN principal Pino Di Mascio said his company knew it had to trim its headcount when it realized the revenue growth it was expecting would not occur for at least 12 months. SvN scaled back its work force to 165 positions from around 180 at the end of last year.
“We had to act pretty quickly,” said Mr. Di Mascio. But he said: “You don’t want to shrink too small, because the longer term trend is still that this industry is healthy.”
Research from Altus shows that even more jobs could vanish. Altus economic strategist Peter Norman estimates that there are 536,300 jobs in the new construction sector in Canada, of which 236,300 are direct jobs and the rest provide goods and services to developers such as steel producers and truckers.
Based on the current state of preconstruction home sales, Mr. Norman said 105,000 to 170,000 of those jobs are at risk of disappearing.
As the industry shrinks, there are questions about the pipeline of talent. The construction work force is already facing a problem with scores of experienced workers nearing retirement age.
Mr. Li said he spent over a decade building his team. “That is the saddest part. I finally had a team that was perfect. It was a killer team. We were internationally renowned.” He described the layoffs as “Sophie’s choice,” referring to the movie where a mother has to choose which one of her children would survive.
