Large landlord expects tenant turnover will offset slower rent growth in Atlantic Canada

Halifax Landlord Killam Apartment REIT Expects Turnover to Offset Slower Rent Growth

As the rental market in Atlantic Canada shows signs of slowing down, Halifax-based landlord Killam Apartment REIT is anticipating an increase in apartment turnover to new tenants to help offset the slower rent growth. CEO Philip Fraser discussed this topic during the company’s recent second-quarter earnings call with analysts on Aug. 7.

Fraser mentioned that a significant portion of the turnover will involve units where Killam has the opportunity to raise rents to market rates. In Halifax, for example, the company estimates that its rents are, on average, 22 per cent below market rates, indicating room for rent increases when new tenants move in.

Like other landlords in Nova Scotia, Killam can adjust rents to market rates and achieve larger rent increases on turnover, as the province’s temporary rent cap only applies to lease renewals.

Overall, Killam expects approximately 20 per cent of its 18,000 apartments across Canada to turnover to new tenants this year, slightly higher than the 18 per cent turnover rate in 2024.

During the earnings call, Chief Financial Officer Dale Noseworthy noted that people now have more housing choices compared to previous years, which influences rental market dynamics.

Killam’s Strong Performance in Halifax

According to Killam’s earnings call slide show, the mark-to-market spread is highest in Halifax. The company generated $34.31 million in net operating income from its Halifax apartments in the first half of the year, a 7.6 per cent increase from the same period last year.

Noseworthy highlighted that Killam’s apartments in Atlantic Canada continue to outperform, with New Brunswick and Nova Scotia leading in occupancy, rental rate growth, and net operating income growth.

Apartment Repositioning Strategy

When asked about the rents achievable through repositioning apartments, Noseworthy mentioned a rent growth of 40 to 50 per cent for renovated units. Around 250 apartment units are set to undergo repositioning by the end of the year, a strategy commonly used by institutional landlords to attract higher-income renters.

According to housing expert Nemoy Lewis, apartment renovations are aimed at delivering promised returns to investors and shareholders. The rent growth observed on repositioned units aligns with industry standards.

Focus on Affordable Housing

Despite the focus on repositioning and rent increases, Killam has emphasized its commitment to providing affordable housing. While some new units may have monthly rents exceeding $2,500, the company’s average rent remains below this threshold.