Growth could be slowed by higher energy prices, disruption in foreign markets

Michael Kane
Sun

British Columbia‘s economy will continue to post robust growth in the 3.5 to 4.0 per cent range through 2006, according to the province’s Credit Union Central.

The only clouds on the horizon are from afar — the threat of higher energy prices pushing down global growth and commodity prices, or a major disruption in foreign exchange markets resulting from the U.S. trade deficit. Supporting above-average growth in B.C. are low interest rates, higher investment spending, export strength in some sectors, rising in-migration, and improved business and consumer confidence, Helmut Pastrick, the central’s chief economist, said.

That view is largely endorsed by economists at both the Business Council of B.C. and the left-leaning Canadian Centre for Policy Alternatives, although both caution that the U.S. slowdown could be sharper than expected and hurt Canada.

“Helmut is at the upper end of Canadian forecasters for B.C. but I agree with his analysis,” said Jock Finlayson, the business council’s executive vice-president. “It is a pretty good picture over-all and certainly the strong momentum that we have seen in the province is going to continue.”

In addition to U.S. concerns, Marc Lee, Vancouver-based economist for the CCPA, questioned whether the benefits of growth are reaching increasingly indebted low and middle-income earners who would suffer most if the economy sours.

“Over-all I agree with a lot in the forecast,” he said. “Certainly the economy has continued to improve through 2005.”

A strong rebound in business investment –14 per cent this year and 12 per cent in 2006 — is the prominent feature in Thursday’s forecast.

Pastrick said imports of machinery and equipment, largely from the U.S., are being driven by strong market conditions in some industries, the increased buying power of a stronger loonie, and last year’s record corporate profits of $16.7 billion, a 33 per cent jump over 2003.

While business investment should help the province to close its productivity gap with the rest of the country, he cautioned that imports are pushing the province’s trade balance deeper into deficit, rising to more than $10 billion by the end of 2006, up from $6.9 billion last year. B.C. last had a trade surplus in 1988.

“It is a minus and it does subtract from over-all growth,” Pastrick said in an interview. “Any time we have money essentially leaving the economy, that’s less money that can be spent here.”

Nevertheless, he anticipates 3.6-per-cent growth this year and 3.9 per cent next year and says it could surpass 4.0 per cent in both years if exports do better than expected.

While Lee notes that hourly wages actually dropped in 2004, Pastrick sees employment and hourly earnings growing at about three per cent both this year and next.

Most industry sectors will post fairly robust growth, he said, with coal and metal mining, construction, retail and wholesale trade, professional and business services, and wood manufacturing leading the pack.

The fishing, hunting and trapping sector is projected to decline, and slow growth is anticipated in education services, pulp and paper and accommodation and food services.

While Canada’s building boom may end soon, Vancouver will stay hot

Ashley Ford
Province

Housing starts continue to dip across the Lower Mainland but the construction industry is still screaming along at near capacity.

Cameron Muir, senior market analyst at Canada Mortgage and Housing Corp., said yesterday that while housing starts dipped by three per cent to 1,797 units last month, “homebuilders are now working flat out, leaving little room for further expansion of the housing sector.”

And there is more grim news for homebuyers. “Prices have nowhere to go but up. Rising construction costs, coupled with continuing low new home inventories, will make sure of that,” Muir says.

He predicts the average price of a new apartment condominium in the Lower Mainland will climb 10 per cent this year to $345,000.

Despite the continuing demand, Muir says he doubts starts this year will crack through the 20,000 barrier achieved in 1993 and 1994. Starts will likely come in around the 19,400 mark achieved last year.

Overall starts across Greater Vancouver are down nearly 10 per cent to 7,257 units from a year ago, with the largest decline of 23 per cent in the single-family category. But multiple starts have also dipped by four per cent compared with 5,455 units from the same period last year.

Scotia Economics says the housing boom may soon end because Canadian homebuilders are facing rising cost pressures, fuelled by building materials prices, increasing development fees and rising land values. But that won’t be the case in Vancouver, it says.

“Among the seven major cities surveyed by Statistics Canada, the hot Vancouver market is facing the biggest increase, a trend that will likely continue with major infrastructure projects in the lead-up to the 2010 Winter Olympics,” Scotiabank says.

“In terms of selling prices, however, the largest increases can be seen in Montreal and Ottawa, in part reflecting a faster appreciation in land values,” said senior economist Adrienne Warren.

“Mounting cost pressures are a threat to slow the booming pace of construction activity in Canada, removing one of the major sources of support to the overall economy in recent years,” she added.

Statistics Canada figures show construction costs increased 6.4 per cent between the first quarters of 2004 and 2005. That’s below the 8.2-per-cent annual increase reported at the end of 2004, but still more than three times the average 1.8-per-cent yearly gain from 1990 to 2003.

© The Vancouver Province 2005

Frances Bula
Sun

VANCOUVER – A unique new “twisted” tower that was called “a revolution not an evolution” got enthusiastic and unanimous approval from Vancouver‘s urban-design panel Wednesday.

Panel members called the Arthur Erickson-designed tower for West Georgia Street — a slim, triangular building that rotates 45 degrees between its base and its roof — stunning, evocative, and a beautiful “feminine” match to the more masculine, slightly taller Shangri-La tower that will be built across the street.

The two structures, both destined for the 1100 block of West Georgia, are currently the city’s two tallest planned buildings.

The scene in Vancouver city hall’s committee room 1 Wednesday was radically different from what happened three months earlier, when developer Simon Lim, along with architects Mark Whitehead and Mark Thompson, presented their first plan for the 167-metre tower.

Then, it was savaged by a special design panel that included both local and out-of-town members, which left Lim and the architects feeling seriously beaten up by the end.

However, within a few weeks, the city’s most powerful realtor and unpaid urban designer, Bob Rennie, wooed Arthur Erickson into joining the team, and he and developer Ian Gillespie, who is building the Shangri-La across the street, encouraged Lim to try again.

This time, the reviews were consistently glowing for the new design and several members commented on how spectacularly the team had responded to criticism, not by trying to patch up an inherently weak design, but by going back to the drawing board and starting over.

“It’s not an evolution, it’s a revolution,” said panel member Shahla Bozorgadeh, a comment that was echoed by chair Alan Endall when he summed up the remarks.

Architect Peter Wreglesworth, among others, commended the team on picking themselves up after a “rough go.”

“The solution is bold and decisive and evocative, he said.

Everyone agreed that the tower’s design earned the developer the right to the extra density he is seeking on the site.

© The Vancouver Sun 2005

Slight dip shows industry has reached its capacity

Gillian Shaw
Sun

Housing starts dipped slightly in Vancouver last month, but only because B.C. builders are so busy the residential construction industry has reached its capacity, according to the Canada Mortgage and Housing Corp.’s latest report.

In the Lower Mainland, it’s a case of “if you build it they’ll buy it,” but developers are already producing as much inventory as they can, the report suggests.

Multiple housing starts totalled 1,381 units in May, up two per cent from the same period last year, while single-detaching housing starts dropped 17 per cent to 416 units, with an overall drop of three per cent to 1,797 units in May compared to May of 2004.

However, the drop indicates housing construction is at capacity, not that there is any dwindling in demand, according to Cameron Muir, senior market analyst at CMHC.

“Demand is still very strong out there,” said Muir. “There is still a hefty number of units being built, but the capacity of the industry has been pretty much reached.”

Muir said the factors that are keeping housing stats from rising even further include:

– A limited and shrinking land supply, particularly in downtown Vancouver but also in areas out from the city centre and into the suburbs. Developers are turning to so-called brownfield sites, former industrial sites that may require extra work to make them usable, because the prime building sites have been used up.

– A shortage of trades people to fuel the labour needs of the construction boom.

– A shift in straightforward multi-family towers to more complex mixed-use building, increasing both the time to get the project approved and off the ground and the construction time to complete it.

The CMHC is forecasting about 19,500 housing starts this year, making it probably the fifth or sixth best year in history, according to Muir, but there is no expectation it will crack the 20,000 mark.

Compared to the rest of Canada, housing inventory in Greater Vancouver is slim. Muir said there are only about 100 units that are completed and unoccupied in the region, whereas five years ago that number would have been around 2,600. In the downtown core, that inventory stands at zero today, said Muir.

“If you want to buy in the downtown core, you are going to buy a unit that’s under construction, or a parking lot with a sign on it,” said Muir. “Builders and developers are seeing their inventory waning.

“We now have 11,500 apartments and condos under construction in the Lower Mainland, but 75 per cent of those are sold.”

Muir said while builders and developers know new construction will be snapped up, they can’t increase their output to meet the demand.

“Low inventories and high pre-sale activity is the signal to increase the number of units being built, but we’re not seeing that because of the land-supply issue, the more complex developments, and as well a workforce in the construction side that is finite,” he said.

A report by Scotia Economics, said the national housing boom may be coming to an end because of rising construction costs that are being fuelled by higher prices in building materials, by increasing development fees, and by rising land values.

Scotia Economics senior economist Adrienne Warren said inventory is building up in such cities as Toronto and Montreal, but the experience is not being shared in Vancouver and Victoria.

“Things are slowing down to a more sustainable level,” said Warren. “It’s not so much a hard landing or a bursting of the bubble, but an easing of the growth.”

Warren said rising construction costs are just one factor expected to contribute to a slowdown in the housing market in the next couple of years. “We have already seen a peak in construction last year,” she said. “Rising construction costs is one factor, there is also an inventory of unsold homes building up, particularly in the condo market and there has been a reduction in pent-up demand.”

Peter Simpson, chief executive officer of the Greater Vancouver Home Builders’ Association said his industry is so busy that builders will be pushed to meet this year’s forecasts for housing starts. He pointed to a reversal that has seen multiple housing starts climb to far outstrip single-family housing starts.

“Twenty years ago 45 per cent of housing starts were multiple, today multiple housing represents 75 per cent of housing starts,” he said.

Iranian expat develops $92-million eco-friendly townhome-and-tower complex

Malcolm Parry
Sun

MOHAMMED ESFAHANI was already considered a class act in the late 1980s. That’s when, as a Tehran expatriate with a master’s degree in civil engineering, he worked as a development manager for Kassem Aghtai’s Fama Holdings here.

Among his responsibilities then were the Discovery and Admiralty at Howe Street‘s southern end. Now, as an independent developer with cousin and mechanical engineer Roger Navabi as his partner, he’s broken ground kitty-corner to those projects on his biggest job to date.

It’s the $92-million, 180,000-square foot townhome-and-tower complex, the latter element so designed that all units are located on corners.

On completion, it should receive LEED (Leadership in Energy and Environmental Design) certification for such claimed characteristics as reducing water-consumption and storm-drain runoff, and for employing geothermal heating and cooling to reduce pollutant gas emissions by 184 tonnes annually.

Such environmental benefits add close to three per-cent to the project’s cost, Esfahani said — a sum marginally offset by Ottawa‘s corresponding grant of $60,000.

Esfahani’s biggest gigs before this were the $46-million, 140,000-square-foot Domus and the $30-million, 90,000-square-foot Alda — both in Yaletown.

But another inner-city project he launched last fall shows a different direction for Esfahani. It’s the $38-million, 145,000-square-foot Stella complex rising in Calgary‘s Connaught area.

“Calgary is becoming like Vancouver was 10 to 15 years ago,” said Esfahani. “People are just beginning to appreciate living downtown.”

They are not, however, yet ready to pay $1,100 per square foot for penthouses, as Pomaria’s fetched before the project’s excavation was completed.

Then again, land in Calgary wouldn’t cost $12 million. As a consolidation, the city wouldn’t sell its part of the Pomaria site to anyone who hadn’t assembled all the remaining lots. “So we had to pay very dear for some of them, Esfahani said ruefully.

Still, the self-confessedly fussy developer is on the prowl for a unique site, preferably on the waterfront, to build something “exceptional.”

– – –

© The Vancouver Sun 2005

New technology key to saving time and money

Ashley Ford
Province

Build it quickly and build it cheaply!

Given the searing temperature of the current construction market, both in price and activity, across the Lower Mainland, it might be said International Hi-Tech Industries Inc. is attempting the impossible.

But the Delta-based company is taking a revolutionary, high-tech approach to its three-tower Optima residential development in the heart of Surrey, pledging it will cut the cost of construction by 30 per cent.

It is believed to be the first application of the technology in B.C. for a highrise project.

The first phase of the complex, a 21-storey, 78-suite tower will cost an average $250 per square foot to build, compared with $300 for conventional concrete highrises now selling in Surrey, says company president Roger Rached.

The benefits for potential buyers are a state-of-the-art, better building for a more reasonable price than conventional concrete high-rises, he says.

So what’s the big secret?

For starters, IHI is both manufacturer and developer and it’s the technology that holds the key. Using advanced, pre-manufactured customized panels built at its Delta plant, construction of the project is expected to save at least 10,000 hours of work.

IHI has pioneered the technology using insulated, high-strength concrete and steel panels that are shipped to the building site for immediate erection. It utilizes computer technology to incorporate electrical and mechanical systems into the panels, further trimming construction costs.

It says the technology is earthquake, tornado and blast resistant as well as being energy-efficient and high-fire resistant.

The complex has been designed by Omar Take, who is also project manager. He is a senior architect with Tange & Associates of Japan. Selling prices have not yet been set.

Phase 1 of construction will begin this September and take roughly nine months to complete. Marketing starts at the end of June.

The overall project is expected to take half the time it would for construction of a conventional concrete complex.

The other two towers will contain 66 and 65 units respectively. There are only four residences per floor, ranging in size from 624 square feet to 1,173 square feet.

© The Vancouver Province 2005

Three-surface building would be Vancouver’s second-tallest

Frances Bula
Sun

VANCOUVER – An Arthur Erickson-designed skyscraper that promises to be Vancouver‘s most unusual and striking building is on its way to city hall for approval.

The slim, elegant, glass-covered building rises from its triangular base to its summit in a way that gives the 167-metre tower — which would be the city’s second highest after the Shangri-La across the street — a sense of grace and movement.

The tower will appear to twist 45 degrees from bottom to top. Each floor will be offset 0.75 of a degree from the one below.

“We wanted to do something as simple, as straightforward, and as structurally honest as possible,” said Erickson, who was brought in to help with the design after the first plan for the building at 1133 West Georgia was unanimously rejected by the city’s urban design panel three months ago.

Now, Erickson, working with the original team at Musson Cattell Mackey, is back with a design that appears to respond to all the criticisms of the first design.

The surfaces on the three faces of the building, which create an optical illusion that the building is actually bending, are what Erickson calls “hyperbolic paraboloids” — a technique that employs nothing but straight lines, yet the surface is curved.

When the first design of the building came to the urban-design panel in March panel members said it was disappointing and ordinary for what would be a prominent building. Panel members said the building, which consisted of a kind of inverted glass vase shape that flared out at the top, set on a stone base, was too broken up and that it should have simple, straight lines going from top to bottom to emphasize the building’s height. It was also criticized for lack of “green” considerations.

Erickson’s design emphasizes the vertical lines of the building, replaces the stone base with glass, and incorporates elements like solar tubes on the roof to help cut the building’s power demands by up to 30 per cent. It also opens up half the small, mid-block lot to a public plaza in one part, which would be lit at night by fibre-optic lights embedded in the pavement, and an enclosed “palm court” in another part.

Developer Simon Lim, for whom this is the first major project in Vancouver, said he recognizes that he will also have to negotiate with the city about other public amenities that need to be provided.

In the unique universe of Vancouver development, where there appears to be a limitless demand for downtown condos, the city’s planning department extracts considerable benefits from developers in exchange for permission to build higher than what normal zoning would allow. Developers of the Shangri-La tower on the other wide of West Georgia ended up giving $12 million in benefits that included everything from an outdoor public art gallery to restoration of the heritage church next door to money for the city’s housing fund.

Lim’s tower would be almost double the normal density allowed for that site. He is planning to buy 200,000 square feet of heritage density, a mechanism the city uses to allow owners of heritage buildings to sell off imaginary space in order to help pay for the costs of preserving Vancouver’s small stock of older buildings. It’s widely expected that Lim will buy much or all of the space being generated by the Woodward’s project, on which he was an unsuccessful bidder.

© The Vancouver Sun 2005

Applications for non-residential construction surge

Scott Simpson
Sun

New indications of British Columbia‘s robust economy emerged Monday with Statistics Canada announcing that non-residential construction continues to charge along at an “unbelievable” pace.

The value of permits issued for non-residential construction projects actually dipped 29 per cent in April, compared to March — but an economist with Stats Can advised that the B.C. numbers are nonetheless outstanding.

The permits reflect municipal approvals for new projects that are likely to get underway in the near future.

The non-residential sector is the harbinger of new employment opportunities because it encompasses everything from construction of public institutions and office towers to sawmills, mines, warehouses and retail stores.

Permits issued in April were valued at $273 million across B.C., compared to a record $382 million in March. The former record was set in January of 2000 — $370 million.

“The decline in value in April is important, but it’s a step down from a record high. And despite the decline, the [value] remained very high,” said Statistics Canada economist Etienne Saint-Pierre.

The cumulative value of non-residential building permits issued through the first four months of the year is the highest on record for the January-April period, $1.085 billion. That’s 34.4 per cent higher than any similar period on record, and nearly double the value of activity in the same four months in 2004.

The previous record for the first four months of the year was $807 million in 2001.

According to Abigail Fulton, vice-president of the B.C. Construction Association, the non-residential sector is just warming up, and is expected to overtake B.C.’s red-hot residential construction sector in the coming years.

“Up until now there has been a big boom in residential, but we think this is going to shift and over the next 10 years you are going to see a real boom in non-residential,” Fulton said. “The Olympics will fuel some of it, but really a small proportion in what’s happening to the economy.”

Stats Can reported that the value of residential construction permits issued by British Columbia municipalities rose 13 per cent in April, compared to March, and permit values are up 14.9 per cent for the year to date at $2.138 billion.

“The data for both residential and non-residential construction, on an historical basis, are at record highs in 2005,” Saint-Pierre said.

“The figures are very strong for B.C. — it’s a pillar of strength in Canada for construction, especially this year when I look at the non-residential figure it’s quite unbelievable.”

Helmut Pastrick, chief economist for Credit Union Central of B.C. noted that 2004 “was not a banner year” for non-residential construction.

“Now we’re seeing in the last six months or so, commercial permits are up, we even had a bit of a spike in institutional-government construction,” Pastrick said.

He noted that some of the value of the permits reflects higher costs for construction materials, energy and labour — on the other hand, project costs may be higher than the permits estimate.

In Greater Vancouver, non-residential permits were up 87 per cent in the first four months, with the Vancouver Regional Construction Association attributing the activity to “a strong domestic economy.”

“All of these projects translate into jobs,” said association president Keith Sashaw in an interview.

“Things like the Trade and Convention Centre are going to require hundreds, if not thousands, of people to work the conventions. A lot of the non-residential investment is in commercial activities, warehouses, commercial expansions, all of those things which generally mean a pretty optimistic and buoyant environment.”