Contractors’ group predicts demand to rise

Derrick Penner
Sun

B.C. will need 18,135 new construction workers by 2009, according to the latest Canadian Construction Association forecast. Photograph by : Vancouver Sun Illustration

British Columbia construction contractors already gritting their teeth over shortages of tradespeople have received more news to raise their stress levels: They’ll likely need a lot more skilled workers up to 2011.

B.C. will need 18,135 new construction workers by 2009, according to the latest Canadian Construction Association forecast, just as the industry lists finding skilled workers as its biggest challenge.

And it doesn’t account for any of the 22,644 workers — 19 per cent of the total workforce — the association estimates will retire between now and 2014.

The association included projections of labour demand in its forecast showing B.C.’s construction workforce growing steadily to 190,485 in 2009 at the height of Olympic-related venue and infrastructure construction.

The association used data compiled by the Construction Sector Council, a national industry body devoted to developing the construction workforce.

Beyond 2009, mining and energy-related projects will dominate the sector, said Jeff Morrison, the Canadian Construction Association’s director of government affairs. Along with continued spending on public infrastructure, the developments are expected to employ 188,104 people in 2010 and 185,918 in 2011.

“Some of those sectors will drive [construction] post Olympics,” Morrison said, “So therefore the demand for construction services will remain fairly steady.”

Manley McLachlan, president of the B.C. Construction Association, said evidence of the stretched labour force can be seen in the scarcity of bidders for big projects.

McLachlan added that, through monitoring the B.C. association’s bid repository, he sees as few as two bidders vying to build projects that would have drawn eight or nine bidders just a few years ago.

“That tells me contractors are being prudent and recognize they can’t overextend themselves,” McLachlan added. “[But] that’s one small step away from projects [being] rolled back and put on hold.”

Investors, he said, are starting to examine the availability of human capital to build a project just as closely as they monitor their financial capital needs when planning projects.

And non-residential contractors can’t count on an infusion of workers from the residential sector with the anticipated decline in housing starts over the next couple of years.

Peter Simpson, CEO of the Greater Vancouver Home Builders’ Association, said home renovations are expected to increase significantly as housing starts drop, which will soak up many workers not needed to build new homes.

“We’ll still need the workers in home building and renovations combined,” Simpson added.

The retirement picture is also worrying to Simpson. He said although workers near retirement want to wind down careers, they are still needed to train and mentor the trainees coming into the workforce.

“There’s only so many we can convince to stay on,” he added.

Simpson said the apprenticeship tax credits that the provincial government announced Wednesday will help employers attract new workers, but other steps are needed.

McLachlan said builders have to cooperate on scheduling their work to ensure they don’t stretch the workforce too thin. The Construction Owners Association in Alberta already achieves that goal and should be emulated in B.C., he said.

McLachlan added that the industry needs to do a better job of recruiting. The training system needs to make sure no training seats remain empty in one part of the province while there are waiting lists for them in other locations and recruiters need to do a better job of engaging aboriginal communities to find workers.

Ultimately, McLachlan said immigration rules need to be revised to make it easier for foreign-trained tradespeople to get into Canada.

“Every element of what contributes to the human-resource side of the construction industry has to be working at capacity,” McLachlan added.

© The Vancouver Sun 2006

Prices sometimes fall into substantial troughs, expert says

Derrick Penner
Sun

Mark Hewett added he doesn’t believe Vancouver’s real estate market will experience anything like the technology-sector meltdown of 2000. Photograph by : Vancouver Sun Illustration

In a sea of buoyant sentiment about Greater Vancouver’s rising real estate prices, a pair of Canaccord Capital Corp. investment advisers are cautioning their clients not to get too high on the gains they’ve seen.

It is not like Mark Hewett and Erik Dekker are doomsayers. B.C.’s economy has a lot of positives, Hewett said in an interview.

However, a Canaccord researcher sent some Vancouver price data to U.S. financial analyst Dennis Gartman, and Gartman — who Hewett said knows the city well — included a technical analysis of the price graph in one of his recent newsletters.

Hewett and Dekker included Gartman’s findings in one of the research notes they send to clients, a copy of which wound up in the hands of The Vancouver Sun.

Gartman’s assessment is that Vancouver real estate prices have been on a run, reaching “levels that we think suggestive of one of Vancouver’s rather regular and seemingly inevitable breaks.”

Canada Mortgage and Housing Corp. forecast a seven-per-cent price increase for Vancouver, and the Credit Union Central B.C. estimated a six-per-cent rise for 2007.

And Vancouver-based experts say Gartman is drawing conclusions from looking at price alone.

Gartman, however, noted that the line of Vancouver’s real estate never goes straight up. It moves in waves reaching peaks, then falling into sometimes substantial troughs. For instance:

– In the dark days of 1981-82, the fall from peak to trough was 40 per cent, and it took seven years to climb out.

– Prices peaked again in 1990, then fell 20 per cent before recovering in 1992.

– The next peak in 1995 ended with a long bear market with no new highs until 2003.

By Gartman’s estimate, in the current cycle a Vancouver detached house rose from $340,000 at the last trough in the winter of 1998-99, reaching nearly $800,000 this year.

“If the peak was made earlier this year, and if history is any guide to us,” and Vancouver prices decline by the average of the last three cycles, Gartman said it could take 25 to 30 months to go down the trough, and 65 to 70 months to see a new peak.

Based on past experience, Gartman added that the drop could be in the order of 28 per cent, taking that $800,000 house down to $575,000.

What will really happen? Hewett said the downside perhaps won’t be as drastic as Gartman suggests, and noted that Gartman didn’t crunch Vancouver’s economic fundamentals.

Hewett said no one really knows if the market turn will be two months, one year or five years from now.

Just that “based on past cycles, prices will retreat at some point,” Hewett said.

For anyone who thinks it’s different this time and the market will go up forever, Hewett adds, “It’s never different. We’ve seen it too many times before.”

Hewett and Dekker’s advice to clients is, if they’re selling, consider doing it soon and at a “fair market price.” If they’re buying, wait a few months to gauge the trend.

Hewett added he doesn’t believe Vancouver’s real estate market will experience anything like the technology-sector meltdown of 2000. Still, he advises clients “it’s good to be cautious. As in any sector, you don’t want to over leverage yourself.”

Cameron Muir, chief economist with the B.C. Real Estate Association, said Gartman’s observation ignores the prevailing economic conditions that brought about past “price breaks,” such as the crushing interest rates of the early 1980s, or the economic stagnation that B.C. experienced in the late 1990s.

“[That] history repeats itself certainly is a truism,” Muir said. “But all the circumstances of history have to repeat.”

Muir added the current market cycle is closer to the end than the beginning, but current economic conditions are different than at the peaks of previous cycles: Interest rates are low and not likely to rise to levels that would shock the market, and the economy is still expanding.

© The Vancouver Sun 2006

Developer of the Bay’s city core facility offered more density for more commercial room

Frances Bula
Sun

The Hudson’s Bay parkade, a key building site in downtown Vancouver, is about to become the test case for aggressive new city efforts to ensure the downtown area has enough space for jobs.

It’s the first building to come before council in the aftermath of a city analysis released last week that said Vancouver could run out of job space within five years in the downtown peninsula.

Planners recommend the developer of the parkade, a prominent site at the corner of Georgia and Richards, be required to make half of his building commercial space, more than double what he had proposed.

A report released today, which council will vote on next week, outlines the deal planners are proposing for developer Simon Lim. They say he should be allowed to build to the maximum height allowable there, 291 feet, and that he should get a density of what’s called in planner language 10 FSR — 10 times the square footage of his lot.

That’s double what the normal zoning allows, but the catch is that planners Trish French and Michael Gordon are recommending that council require Lim to build half of that as commercial space.

They are recommending he get the extra density partly as compensation for his restoration of Dunsmuir House on the same block, a 167-unit residential hotel that used to be operated by the Salvation Army. Part of the deal is that Lim will preserve the building and continue to rent it out as single-room housing for low-income people.

The business community has been watching the parkade site closely since developer Lim bought it, waiting to see what the city will ask him to do.

The city’s new planning director, Brent Toderian, acknowledges that council’s decision on the building will send a signal to the development community.

“If council sends the message that they take the metro-core results seriously, this will affect our negotiations for other sites. This is giving us a chance to test council’s will.”

He believes if Lim is allowed to build more than half of the building as residential, “it will be perceived as a missed opportunity.”

The report says that if the city sticks with the existing policy for that area, which borders the commercial-only central business district, it will lose a quarter of the potential commercial space in future developments. The existing policy says developers have to build 40 per cent of the space as commercial.

Lim said he believes the city has offered an attractive compromise, since it would allow him to have twice the density the zoning normally allows. But he also would like to some flexibility on height, since loading that much density on the site without allowing the building to go higher could result in a “very massive, ugly building.”

While Lim says that pension fund office developers have called him with offers to finance an office tower on his site, he is not interested in building more office space than he has to.

He owns some office space downtown and “no one is beating down my door throwing big fat rent cheques at me.” He also believes the demand for office will slow after the 2010 Olympics.

His plans for a hotel and possibly some retail in the commercial space that he builds. He will also provide 500 parking spaces to accommodate the Bay’s needs.

© The Vancouver Sun 2006

Figures may signal better news for buyers, less upward pressure on prices

Derrick Penner
Sun

The average price for a Greater Vancouver single-family home was $765,256 in November, a 3.8-per-cent decrease from October. Photograph by : Vancouver Sun file

Real estate sales across the Lower Mainland this year are continuing at a pace about 10-per-cent below last year’s record clip, regional real estate boards reported Monday.

And although the number of active listings is also up more than 30 per cent compared with last year, inventories haven’t reached levels that would signal a correction, says Tsur Somerville, director of the centre for urban economics and real estate at the Sauder School of Business at the University of B.C.

On Monday, the Real Estate Board of Greater Vancouver reported MLS-recorded sales of 2,358 units, about 20-per-cent below the same month a year ago. Active listings in Greater Vancouver totalled 11,308 in November, up 30.6 per cent.

The average price for a Greater Vancouver single-family home was $765,256 in November, a 3.8-per-cent decrease from October.

The Fraser Valley Real Estate Board reported November’s sales, at 1,194, declined 26 per cent compared with November a year ago. Valley listings of 7,391 were up 37 per cent compared to last year.

The average Fraser Valley single-family home sold at $487,392 in November, with no change from October.

However, Somerville said new listings declined from October to November, and dropped more than the decline in sales from month to month.

To him, that is a sign sellers aren’t flooding the market, and “unless we see this dramatic increase in inventory, there isn’t a need to worry about any kind of catastrophe.”

Somerville added that the important factor to remember is that the overall framework of the Lower Mainland’s real estate market is a strong economy, which is strong for more reasons than a robust residential construction sector.

Somerville said the last two celebratory years where people said, “‘Buy real estate, it goes up, we’re doing great.’ That party’s ending. And that’s probably a good thing. No, it is a good thing.”

Carol Frketich, regional economist for Canada Mortgage and Housing Corp., calculated a rough estimate of existing-home inventory of about 4.8 months, compared with three months a year ago.

Frketich said that suggests there will be more choice for buyers, and less upward pressure on prices.

However, she doesn’t see much room for downward pressure on prices while provincial economic indicators, such as job growth, wage growth and overall economic output, pointing upward.

“We don’t see any economic developments out there that would force people to put their homes on the market, which would be an indicator you could see a price correction,” Frketich said. “People are putting their homes up for what they hope they can get, and there’s still sales happening, so demand is still there.”

Rick Valouche, president of the Real Estate Board of Greater Vancouver, said 2,350 sales for the month still represents a strong month, even if it was 20 per cent below 2005.

“The good news is that the active-listing base is increasing,” Valouche added. “It’s at 11,000, but we’ve got to get it around the 14,000 mark to be in a normal market.”

Dave Rishel, president of the Fraser Valley Real Estate Board said he looks forward to seeing more balance in the market, because “if prices [keep going] up the way they were, we’d all be in trouble.”

Condominium presales still form an unknown in Greater Vancouver’s markets, Somerville added.

Somerville said a large number of pre-sales that were made within the last two years are starting to come into completion, and no one knows how many of them are held by investors who plan to sell.

If there has been more unseen speculation by investors looking to cash in on the rising prices of their condos under construction than has been anticipated, and a lot of those purchasers sell into a softening market, “that is something that could make things dicier,” Somerville said.

© The Vancouver Sun 2006