REAL ESTATE: With everyone building condos, high-end apartments just seemed right
Wendy Mclellan
Province
CREDIT: Wayne Leidenfrost, The Province Harry Sengara takes a call in an Arbutus Atrium apartment.
Rental construction has not been exactly at the top of the list for Vancouver property developers of late.
With condominium projects as ubiquitous as corner coffee shops, and selling as fast as a latte, developers have opted to make money selling their projects.
But three Vancouver brothers are convinced the city is ready for a high-end apartment building, purpose-built for the rental market.
“We think there’s a real niche for this type of thing, but we are going opposite to the market,” said Harry Sengara, who owns the 43-unit building with brothers Sonny and Karnil. “My wife thought I was nuts, and I wasn’t sleeping for a while. But it seems to be working.
“I spent two years doing the research — I didn’t want to build an albatross,” Sengara said. “We could have built it, sold the units and that would be the end of it, but we wanted something for our children that would generate cash flow after we’re dead and gone. We’re in this for the long term.”
The brothers, who were born and raised on the west side — and still live there — have just completed the Arbutus Atrium on West 12th Avenue and Arbutus. Despite the high rents, 18 of the suites are already spoken for.
The two-bedroom units rent for $1,750 or more and rents for the three-bedroom suites start at $2,500. All of the spacious apartments are finished with granite countertops in the kitchens, Italian tiles and in-suite laundry facilities.
The family owns a lumber company in Richmond as well as several rental buildings, but had never developed property before. They owned the office building on West 12th Avenue at Arbutus for about 10 years before deciding to bulldoze the aging building and develop the apartment complex.
“I think Vancouver is ready for this kind of thing, and it will only get better,” Sengara said. “A lot of people come here to educate their kids and they want a safe building. There are also a lot people coming to B.C. who will rent for a couple of years and then buy a place, and there are people who would rather ride their bikes on Saturday than cut the lawn.
“Vancouver is only going to get bigger.”
Despite chronically low vacancy rates — about 1.1 per cent — in the Lower Mainland’s rental market, few developers are willing to invest in purpose-built rental apartments, said Cameron Muir, senior market analyst for the Canada Mortgage and Housing Corporation. “There was a little spike in 2001, but that was because condos weren’t selling and developers did some rentals and seniors’ housing,” Muir said.
“In this market, it’s just not economically feasible. Flush developers can outbid on the land and there’s no way purpose-built rental apartments can compete with these land costs.”
The agency predicts vacancy rates will remain well below two per cent, although there may be a few more units available later this year as first-time homebuyers move into their newly completed condos and investors get their new units into the rental pool. But at the same time, Muir said more people are moving to B.C., which will keep vacancy rates low.
With condo prices in Vancouver continuing to soar, developer Grosvenor Canada Ltd. is reconsidering its plan to retain ownership of the 92 townhouses in a new retail/residential project to add to the city’s rental pool.
“It’s very hard to develop rental at this point,” said Ryan Beechinor, senior vice-president of the company developing The Rise on Cambie Street and 8th Avenue in Vancouver.
“You’re leaving $100 a square foot on the table if you don’t go the condo route. We’re still watching, but the spread is getting wider.”
He said the project won’t be completed until the fall of 2007, so the firm still has time to decide. Meanwhile, the one-bedroom units, zoned as artist live-work residences, are already set up so they can be switched to strata title.
Al Kemp, CEO of the Rental Owners and Managers Association of B.C., said many people would rather rent than own, but only a handful of rental apartment complexes have been built in the city during the past 20 years.
“Five or six or eight years ago, you wouldn’t attract people to high-end rentals, but now you can,” Kemp said. “Some people don’t want to own, or they’re putting their money into a chalet at Whistler, or a sailboat.”
ACCOMMODATING RENTALS
– The number of purpose-built rental units in the Lower Mainland has barely changed in the last decade, increasing just 1.4 per cent (1,542 units) since 1994.
– The average vacancy rate in Vancouver last year was 1.3 per cent, compared with two per cent in 2003.
– Most suburbs have vacancy rates below two per cent, but there are exceptions. In 2004, Surrey‘s vacancy rate was 5.1 per cent and Delta’s was 4.1 per cent, according to a CMHC report. While the numbers are higher than other municipalities, they are near historic lows.
– West Vancouver has the highest rents in the Lower Mainland at an average of $1,166 a month. In Vancouver, rents averaged $863 per month.
– The lowest average rents were recorded in Maple Ridge/Pitt Meadows, where a bachelor suite rents for $513, compared with $796 for a bachelor unit in Kitsilano.
© The Vancouver Province 2005
