Buying Where Others are Building

When multiple new developments are planned or under construction within a few blocks of a property you are considering, it creates a very specific investment dynamic. It’s a situation that can dramatically elevate the long-term value of your asset, but it can just as easily create short-term pressure on rents, vacancy and operations. Understanding both sides of this equation is essential before committing capital.

Pros of New Developments Nearby

One of the strongest advantages is the overall improvement in neighbourhood desirability. New developments tend to bring better amenities, upgraded public spaces, cafes, gyms, retail and improved transit access. These are features that renters pay for, often willing to accept higher rents to live in an emerging pocket of the city. As the neighbourhood becomes more vibrant, your property benefits from increased foot traffic, stronger tenant demand and improved perception. New developments also attract strong tenant profiles like professionals, young families and higher-income renters who value updated amenities. Even if your property is older or more modest, the influx of this demographic profile improves the entire area. It often leads to lower delinquency, reduced turnover and a more stable tenant base. Over time, these improvements help support steady rent growth and stronger retention.

Another key advantage is the effect on land values. When a municipality approves multiple new projects within a concentrated area, it signals that the location is destined for greater density and long-term growth. This tends to increase the underlying land value of existing buildings, even those that aren’t being redeveloped. For owners, this creates additional upside through refinancing, repositioning or future redevelopment possibilities. New development also serves as a vote of confidence. Developers, lenders and institutions do not commit to large projects without believing in the long-term viability of the neighbourhood. Their investment often leads to cap rate compression and easier financing, particularly once the area becomes recognized as a growth corridor. This can improve both your exit strategy and your long-term equity growth.

Cons of New Developments Nearby

The most immediate downside is competition. New buildings come to market with modern finishes, expansive amenities and aggressive marketing campaigns. They typically offer up to three months of free rent, discounted deposits or flexible lease terms. If your building hasn’t been updated, it will need to compete on value, service or character, which can temporarily put downward pressure on rents. Absorption risk is another major concern. Even in strong markets, new units take time to fill. If several projects deliver at once, the renter pool may temporarily stretch thin. This slows lease-ups, extends vacancy periods and reduces the effectiveness of renewal strategies. If your underwriting relies heavily on consistent annual rent growth, these absorption delays can create short-term financial strain.

Construction activity brings disruptions that can affect tenant satisfaction. Noise, dust, traffic detours and blocked sidewalks reduce curb appeal and can lead to complaints or early move-outs. Tenants often leverage these inconveniences to negotiate concessions at renewal time, and some prospective renters may avoid the area until construction subsides.

Infrastructure strain also occurs when multiple buildings are added within a small radius. Parking becomes tighter, utility demand increases and local services are stressed. This may lead to increased operating costs or the need for operational adjustments to maintain quality of life for tenants. The worst-case scenario is overbuilding. If developers misjudge demand or economic conditions shift suddenly, there may be more supply than the market can absorb. That leads to concession wars, deeper rent cuts, higher vacancy and softer valuations. In such periods, it can take 12–36 months for the market to normalize.

How to Assess and Mitigate the Risk

The most important step is disciplined underwriting. Build multiple scenarios, including slow absorption and adverse rent environments. Test how your cash flow holds up under lower effective rents, longer vacancy periods and higher renewal incentives. If the deal only works in the best-case scenario, it is fragile. Next, analyze comparables. Many new developments target specific demographics or offer luxury amenities that do not directly compete with older mid-rise properties. Understanding exactly who each building attracts helps you determine whether the new supply directly threatens your tenant base or simply expands the market. Evaluate demand drivers carefully. Employment growth, transit expansion, university influence and population trends will determine whether the market can support the new supply. If the fundamentals are strong and diverse, new development risk becomes manageable. If the fundamentals rely on a narrow base, caution is justified.

Operational strategy also matters. Retaining existing tenants becomes more important during construction-heavy periods. Modest upgrades to units, refreshed common areas, better communication and responsive property management all play key roles in maintaining occupancy. Even small improvements in curb appeal or interior design can make a meaningful difference when competing with new supply. Financing structure deserves close attention. If you expect to refinance during the delivery of new supply, consider how temporary NOI compression might affect valuations. Flexible loan terms, interest-only periods or conservative leverage can offer stability during absorption cycles.

All things considered,

new developments near your potential investment should not be seen as inherently positive or negative. They represent change, and change always brings both opportunity and risk. The long-term trajectory of areas undergoing redevelopment is usually upward: more demand, higher rents, stronger demographics and rising valuations. The short-term path, however, often includes competitive pressures, concessions, construction disruptions and the need for stronger management. With the right underwriting, operational discipline and long-term outlook, investing near new development can be an exceptional opportunity. The key is understanding the timing, preparing for volatility and positioning your property to benefit once the surrounding projects stabilize and the neighbourhood’s full value emerges.