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How Much Value Does A Terrace Add To A Condo?

Outdoor space in a condo is always coveted, but calculating the value it adds isn't always simple.

Is there anything more "Toronto" than complaining about the weather? I'm guilty of this as well - spending all winter complaining about how cold it is, then all Spring complaining about the rain, then all summer complaining about the humidity. I've always found it interesting that Toronto rarely experiences a gradual increase (or decrease) in temperature in the Spring and Fall. It feels like mid-May rolls around and boom - it's hot. And September rolls around and boom - you need to pack away your shorts. I'm the kind of guy that enjoys weather in the high-teens. I can wear jeans if I like, nobody will bat an eye if I wear shorts, I can wear a shirt and not sweat through it... But those ideal temperature days only seem to last a week or so each Spring and Fall and then I'm scrambling to figure out if I'll be too hot or too cold when I'm running to appointments. Ah, the weather in Toronto! The easiest way to strike up a conversation with a stranger in an elevator, eh?

A couple weeks ago I listed an incredible condo unit in a very high-end building. This building always sells extremely well (and quickly) and I've sold more units there than any other agent in the city - and it's not even close. So I know it very, very well. But 2024 is proving to be more confusing than most years for Toronto condos. Some units move quickly, while others sit. And in a building like this that rarely has units come up for sale, it was unusual that at the time we were ready to list, we found ourselves competing with two other similar sized units, at a similar price point - all around the $2 million mark. This never happens here. But we had one thing going for us that none of the other units did - ours had an 800 sq ft private terrace. Now you can't tell me that wasn't going to draw some attention! Here's a look:

The challenge when it comes to terraces for condos is determining the value. I'm a very objective, numbers-oriented person (if you know me at all, you know my brain is basically one big Excel spreadsheet), so I'm always looking for the formula or calculation that can let me pinpoint the value of something. But when it comes to real estate, and especially condos, I kinda feel that buyers tend to value terraces more similarly to how they would a great view - subjectively and more so with emotion than with hard numbers. I mean, how much is an unobstructed view of the lake worth to someone? To some, it's "priceless" and they'll pay whatever it takes to have it. For others, it's nothing more than a nice-to-have. And while I don't think any buyer would argue that an unobstructed lake or CN Tower view isn't worth something, the actual number will vary significantly depending on who you ask.

That's not dissimilar to terraces. There are folks out there who will say "yeah a terrace is great, but you can only really use it for four months out of the year". Then there's folks who look at a terrace as a meaningful extension of their living space and will make full use of it, nearly year-round. I think we can guess which buyer will value that terrace space more.

But I can't come up with a list price or value on a property and plug "emotional and functional appeal" into Excel and have it come up with a number. I've tried. Excel isn't that smart. Not yet anyway.

So how do you place a value on a terrace?

First off, I think it's important to remember that not all terraces are created equal. And even before that, I think it's important to confirm what isn't a terrace. A terrace is not just a balcony with a gas-line for a BBQ. Just because you have a gas line, doesn't mean you have a terrace. We can debate this. Secondly, just because you have an extra deep balcony (say 6' deep, which is much deeper than most condo balconies), it doesn't mean you have a terrace. You have a great, deep balcony. Fantastic, yes. But a terrace? No. And I know some people will argue about what exactly a terrace is, but my counter-argument will always be that if you have to convince me that you have a terrace, you probably don't have one. But I digress.

Back to numbers. Consider this: A terrace that's 7' deep and 30' wide, complete with a gas line and hose bib for water. That's a 210 sq ft terrace, and something most folks in TO who want outdoor space would jump all over. But what about a similarly sized terrace that's 15' deep and 15' wide? With those dimension, you can fit a real outdoor dining table, a sectional sofa, some planters - it's a real, functional backyard. And while a 7' x 30' terrace is certainly nothing to scoff at, you'd have a hard time having a 6-person summer evening dinner party out there. So which is worth more?

Now consider a 400 sq ft "wrap-around" terrace. You've seen them. They run the entire length around your typical corner unit, but are usually no more than 5' deep. Yes, they are massive. Yes, they run 80' long. But I can guarantee you that anyone with this type of "terrace" only every uses about 100 sq ft of it, at most. I've personally found wrap-around terraces to be quite nonfunctional. I'd probably even argue that they're not really terraces because what about it makes it a terrace and not just a really, really long balcony?

So is it fair to value the three examples above in the same manner? I used to live and die by price-per-square-foot when it came to condo valuations, but then I realized something equally important - layout really matters. A lot. The same applies to terraces. The layout and shape matters a ton.

Let's take the 15' x 15' terrace to start. One could argue that it would be appropriate to assign a flat value to a terrace of this size - somewhere in the $30,000-$45,000 range. That seems consistent with how the market values outdoor spaces of this size. That would give us a value of around $135-$200/sq ft for the terrace, when compared to a similar unit without any outdoor space (or one with just a "regular" balcony).

But would you assign this same price-per-sq-ft analysis to the 400 sq ft wrap-around terrace? I wouldn't. A 400 sq ft, 20'x20' terrace would be much more valuable, and I would argue that the difference is significant. I would happily value a 20'x20' terrace at anywhere between $100 and $200/sq ft (or $40,000-$80,000). But I would not give anywhere near same value to the 400 sq ft wrap-around terrace/balcony. You just can't.

My listing I mentioned earlier had an 800 sq ft terrace, and I really struggled to determine how much extra value that gave to the property. I figured $200/sq ft might by a little high, because as you get larger and larger, you see diminishing returns on the per-sq-ft valuation. But $100/sq ft just felt a little low given the terrace was "open-air" - i.e., there were no balconies hanging above, which meant sunshine all day and a ton of privacy. It was also 14' deep, which meant you could fit any outdoor furniture you wanted, with ease.

I ultimately used a combination of fixed value and price-per-sq-ft and determined that the same unit without a terrace would probably sell for $100k+ less than my listing with one. And when I broke down the numbers, that came to valuing the terrace at around $125/sq ft. Every way I looked at it, it made sense. And I must have been right because we sold almost immediately using that logic.

So all that being said, there's no doubt having a terrace will add value to your condo. That's a no-brainer. The difficulty comes with figuring out how much value. But based on all the analysis, it seems fair to say that a terrace can be worth anywhere from $100/sq ft all the way up to around $200/sq ft. A wide range, yes, but the shape and functionality of the space makes all the difference.

Have you checked out my previous blog posts?

If you have a comment, feel free to leave it below. And remember, if you haven't already, please "like" my Facebook page, follow me on Instagram and check back regularly!

Your Toronto condo lover,

Adil Dharssi

Sales Representative

iPro Realty Ltd, Brokerage

Direct: 647-223-1679 (call/text)


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