Novel sales pitch hits Vancouver

Neil Sharma
Canadian Real Estate Wealth

A novel, if risky, idea is slated for Vancouver’s real estate landscape.

Aragon Properties will be building two condominiums before even opening sales—a move that almost never occurs in Canada because developments must hit about 80% sales before financing can be secured.

“We’re going to bring to market two particular products in some of the most desirable areas of Vancouver’s West Side. One of the things here is the finished homes offer buyers clear advantages over buying off plans; it lets buyers see first-hand the special architectural detail included in each home,” said Aragon’s Howard Steiss, who added that the projects are self-financed.

“To get the kind of architectural detail we’re including has to be understood and appreciated.”

One of the condos is called Amber, a 31-unit, four-storey brick, concrete and wood building, and the other is called Shift, a six-storey, 43-unit condo. Both projects have up to three bedrooms. Viewings will begin in July.

An advantage to buying a brand new home that’s already constructed is, apart from its tangibility, the move-in date is much, much sooner and not subject to the same delays preconstruction condominiums are usually burdened by.

“We have a ‘30-90’ design focus: We focus on 30% of the floorplan where you spend 90% of your life, so we have an emphasis on kitchens, bathrooms, outdoor balcony areas, outdoor decks, rooftop decks, including built-in kitchens. We also have window walls.”

The window wall in particular turns the balcony into an extension of the interior.

Conversely, the old tried, tested and true preconstruction method shows nary a sign of waning in Vancouver, despite all indications that the market itself is. Perhaps for that reason alone—to say nothing of how disquietingly expensive buying into the Vancouver market is—a master-planned community with adequate rental stock is integral to Vancouver’s new market realities.

Ryan Thé, vice president of development at Wesgroup Properties, says that The Westminster in the Brewery District is capitalizing on a great need in the market.

“The demand for rentals is so high and vacancy rates are very low, and there was a clear need in the market as well, so we decided to go rental,” he said. “It was about a more diverse look and having more residential buildings and carving them up that way. Rental has lots of opportunity for developers to fit a need in the market.”

The master-planned Westminster is composed of eight buildings—four of which are commercial, office, retail and health care—comprising two condominiums and two rental buildings.

“We’re currently leasing now and finished the building earlier this year,” said Thé. “The interest has been good with about 23 homes as of today available out of 187. We’re a fully pet-friendly building with an ‘eight leg policy’: up to two cats or dogs.”

Copyright © 2019 Key Media Pty Ltd

Burnaby highrise will be the region’s tallest vertical village

Randy Shore
The Vancouver Sun

The newly approved Concord Pacific Metrotown development will feature a 65-storey tower and test the vertical limits of the urban village concept.

The tallest of the three towers to be built on the old Sears site in Burnaby’s Metrotown will be the region’s highest, eclipsing Burnaby’s 64-storey Two Gilmore Place, which is just getting underway.

The lower levels of the development will turn the old-style enclosed mall inside out, with restaurants and shopping accessible from the street. Three towers with 1,309 residential units will sit atop a podium of commercial space.

“It’s as if you took the village space around Park Royal and added some towers, plus several levels of atrium-style space with lifestyle and health-related businesses,” said Pete Webb, senior vice-president of development.

“It will also add lot of dining opportunities, which is something that is missing from the area,” he said.

A suite of office spaces and boardrooms will be accessible to the residents of the towers to accommodate the growing number of people who work from home or have nomadic computer-based businesses, he said.

“This is a live, work, play environment,” he said. “There is a symbiotic relationship between the work environment and the living environment. People can go downstairs to meet clients and hold meetings in a more professional space.”

Concord also envisions a cluster of lifestyle and medical tenants to encourage healthy living and allow people to age in place.

“Shopping centres are reinventing themselves away from these controlled black box environments,” said Webb. “We are devolving the mall to reintroduce street grids, outdoor spaces are re-engaged and retail is facing out at grade.”

Burnaby’s Downtown Metrotown plan is a centrepiece of the city’s strategy to absorb about 125,000 more people by 2041.

The result will be Manhattan-style density with British Columbia style, active and open and the street level, with terraces of commercial development surrounding highrise living.

“Clearly, the old concept of towers, parks and retail — all in separate buildings — is no longer the correct way to look at it,” he said.

Metro Vancouver is ground zero in the trend toward “vertical villages.”

Billions of dollars are being invested in mixed-use developments on the sites of retail malls such as Lougheed Town Centre, Brentwood and Oakridge, among others.

The notion of a mall as a large enclosed box surrounded by parking lots is dead.

“We are going to lead the re-envisioning of the Kingsway strip where towers and commercial spaces will really activate the grade level,” said Webb.

Two Gilmore Place (214 metres) will likely be the region’s tallest building when it is completed in the spring of 2025, but its reign will be short.

Concord Metrotown will come in at a cool 219.5 metres when it is completed.

Vancouver’s Shangri-La (201 metres) is currently B.C.’s tallest building and it positively towers over Trump International Hotel and Tower (188 metres) and Solo District — Altus (188 metres) in Burnaby.

“Two Gilmore Place will be the tallest for a while until we take over and then someone else will build something bigger,” said Webb.

© 2019 Postmedia Network Inc.

Office sales are the positive outlier in a quarter of declining sales volume and velocity

Tanya Commisso
Vancouver Courier

Greater Vancouver office sales are remaining strong amidst an overall lag in commercial sales value, according to a new 2019 Q1 investment report.

Sales value are down 49 per cent in the first quarter of 2019 as compared to the same period last year, totaling $1.58 billion. Sales velocity also slowed considerably, down 36 per cent from the year prior. Three hundred and twenty-two transactions mark the lowest sales volume in 18 quarters, according to Altus Group’s report.

“The lowest transaction volume since Q1 2013 is reflective of the gap between vendor and purchaser price expectations, the lack of product and has resulted in decreased market activity,” said Paul Richter, director of data solutions at Altus Group.

The industrial sector posted the strongest sales value decline, down 54 per cent from the fourth quarter of 2018 to $228 million.  Just 40 sales took place, versus 70 last quarter. The decline is more to do with a lack of availability rather than a decline in sales or prices. Prices increased 5 per cent over the quarter, to an average of $399 per square foot.

Retail saw its second consecutive decrease in investment, posting 35 sales worth $136 million in Q1 2019, down 47 per cent in dollar volume from last quarter and 78 per cent year-over-year. However, Altus reports that despite the two-quarter slump, capitalization rates are expected to level out moving forward following a period of flight compression.

Vancouver’s office sector remains the outlier, recording the only increase in sales and dollar volume this quarter. Twenty-six sales took place this quarter, up from 16 the quarter prior and 13 during the same time last year. Two suburban office transactions accounted for approximately $303 million of the $395 million traded in the office market, vaulted the sector’s dollar value by 639 per cent from the previous quarter and 221 per cent year-over-year.

“This was the strongest quarter for Vancouver’s office market since Q1, driven by key transactions as well as new, centrally-located, high-end strata projects,” the reports reads.

Typically Greater Vancouver’s strongest performing sector, residential land market sales dipped under the $1 billion mark for the first time in 13 quarters to $446 million. This was the sector’s transaction volume since Q2 2014. This represents a decrease of 68 per cent in dollar volume from the previous quarter and 66 per cent year-over-year.

© 2019 Vancouver Courier

Government decisions helped push Parq casino into “selective default” on a $560 million debt

Glen Korstrom , Frank O’Brien
Vancouver Courier

Questions swirl around whether taxpayer money was used wisely in courting the Parq Vancouver entertainment complex development given that project’s financial woes. Yet a look at the process of delivering the city’s biggest casino shows that trusting the word of politicians proved a dangerous gamble for the developer. 

The province rejected a stadium-naming deal that would have netted $35 million for the casino, and the city refused to budge on restricting the number of gaming tables to half of what Parq had requested.

arq Vancouver’s future is uncertain in the wake of S&P Global Ratings downgrading owner Parq Holdings LP’s credit rating April 30 to “selective default.”

Parq announced May 10 that it has restructured its debt to lower its annual interest payments, which had totalled $112.2 million per year on close to $560 million in debt related to project funding to build the complex, but the company did not reveal too many details of that pact. 

It separately revealed that it has brought on a new equity partner, but it did not immediately say what company that is, other than that the partner is “a domestic Canadian company with hospitality holdings in several markets.”

The entire Parq project, however, came into existence thanks to financial help from the publicly owned BC Pavilion Corp. (PavCo) and British Columbia Lottery Corp. (BCLC).

The B.C. government was also separately involved in financing the emerging entertainment district by providing loans to pay for a renovated BC Place stadium with a new retractable roof – a project that totalled $514 million.

The government’s decision to upgrade the stadium was seen as key for the Parq development because the new stadium was envisioned to be a main destination for people who would also visit hotels, restaurants and bars.

Part of the $514 million that PavCo used to renovate BC Place came from a $150 million loan from the B.C. government in the 2010 fiscal year. PavCo planned to use lease payments from the Parq development and funds from a corporate sponsor that would buy naming rights to the stadium to help pay off that debt.

The B.C. government, however, scuttled the only deal for naming rights in 2012 by rejecting a $35 million offer from Telus Corp. because it said the deal was not good for taxpayers.

PavCo’s most recent financial disclosure, for the 2018 fiscal year, showed that its debt to the province stood at more than $140.4 million, following an annual payment of $2.64 million on the loan and $4.64 million toward interest.

PavCo has not made a serious dent in its debt to the government partly because it is generating much less income from its land lease to help pay off the debt than was originally expected.

PavCo first signed a 70-year lease with Paragon Gaming, which conceived of the Parq development, and it announced that agreement in early 2010. Paragon later partnered with Dundee Corp. and PBC Group to create Parq Holdings.

Paragon’s agreed terms in the lease included building and operating an entertainment complex and paying PavCo $6 million per year to use the land.

Paragon expected Vancouver city council to approve Paragon’s request to expand Edgewater Casino’s number of slot machines to 1,500 from 600, and tables to 150 from 75, when it moved the casino into the new development.

However, while council agreed in April 2011 to allow Edgewater to move to the new development, it unanimously rejected any expansion of operations.

To keep the Parq project on track, PavCo in 2013 renegotiated the 70-year lease that it had with Paragon and allowed Paragon to pay $3 million per year, or half of the originally agreed-upon sum, with the lease rate rising with inflation after 2027.

PavCo also signed a side deal to allow Paragon to pay $8.5 million of the first $9 million in lease payments to the Musqueam Indian Band, instead of PavCo, as part of a reconciliation effort with Indigenous people.

Cutting Paragon’s lease rate in half was controversial.

“If you have a bidder who cannot complete on the terms of the agreement, you put it out for bid again – put it out for highest and best use,” said Sandy Garossino, who led the campaign to prevent Edgewater from expanding. PavCo executives, however, are unwavering in the belief that it was a good deal.

“PavCo expects to receive more in lease revenue from the site than it would from a one-time sale,” the company told Business in Vancouver in an email.

© 2019 Vancouver Courier

Governments are doing enough to improve the province?s housing situation

Neil Sharma
Mortgage Broker News

British Columbians are a frustrated bunch—and who could blame them?

An Ipsos poll conducted on behalf of the Urban Development Institute found a strong majority of the 1,001 respondents don’t believe their governments, whether municipal, provincial or federal, are doing enough to improve the province’s housing situation. In Vancouver, Canada’s most expensive real estate market, the problem is especially pronounced.

One problem is housing isn’t brought to market quickly enough, says UDI President and CEO Anne McMullin.

“People are frustrated with long housing delays, increased taxes and a shortage of affordable housing options,” she said. “The government brought in measures over the last couple of years that have not improved affordability or availability of housing options and what they brought in hasn’t been what people are looking for. It hasn’t had the intended effect. Rents remain high, home prices at lower end of the market remain high, and British Columbians are saying the governments are not doing enough to encourage new rental home construction and availability of different housing options.”

Another gripe respondents have is that there’s little housing diversity in most neighbourhoods. McMullin noted that 75% of neighbourhoods are exclusively replete with single-family homes and also that 75% of respondents believe there should instead be an array of housing types.

Another rankling issue is that the approvals process takes much longer than it should.

“More than 70% of people believe that the long list of policies and regulations in place has made the approvals process far too long, and they also believe that all the regulatory red tape has made housing less affordable,” said McMullin. “At the very high end, prices have come down a bit, yes: A $10 million home is now $8m, and an $8m home is now $6m. But condo prices aren’t going down much. There’s a softening in the market right now but they’re still higher than they were three or four years ago.”

McMullin also contends that there are about 10,000 housing units stuck in purgatory at the moment because people cannot afford to buy them. However, given the slew of taxes, fees and delays their developments are subjected to, developers can’t bring down the prices.

“So it will make fewer and fewer homes available and prices in the next 18 months will go back up again as there’s pent up demand.”

If housing prices begin falling, buyers will be spooked by the very real possibility that their home equity will decline below what they paid for the homes, added McMullin.

The rental housing shortage appears to be the most resonant issue with British Columbians, if the Ipsos poll is any indication. But as it turns out, developers are shying away from building rentals because of the economics.

“You can’t just go in and pay full market value and only develop rentals, so you need incentives,” said Vancouver-based Jason Turcotte, VP of development at Cressey Development Group. “Government incentives are critical because the highest value for that land will always be condominiums. It’s an easier route for developers, so it generates higher land value.”

Copyright © 2019 Key Media

Low vacancy in the office market is making growth difficult

Steve Randall
REP

Ottawa is in demand from businesses, especially those in the technology and e-commerce sectors; but it needs to ensure inventory can keep up.

That’s the warning from CBRE which says that the vacancy rates for offices and industrial real estate are being driven down and economic growth could be stifled without increased supply.

“In every sense, Ottawa is competitive on a global scale,” CBRE Ottawa Managing Director Shawn Hamilton told the Ottawa Market Outlook event last week.  “The only thing we need now is room to grow, and it is incumbent on all of us to do what we can to help create more. If we do nothing, we risk stifling the growth we’ve worked so hard to achieve.”

In the past five years, the city’s population has grown by 99,000 and added 46,000 jobs. Offices have seen a total absorption of 2.1 million square feet in that time with 88% of it during the past 2 years. The office vacancy rate is 7.5%.

Meanwhile the industrial segment has seen absorption of 2 million square feet with a vacancy rate of just 2%.

“The reality is we are approaching the point where low vacancy in the office market is making growth difficult for tenants, whether they’re in the central business district or in the Kanata tech hub, where the rate of growth is higher than in the core. Larger opportunities (50,000 sq. ft.-plus) are scarce, with only smaller pockets of space sprinkled around the city,” added Hamilton.

What’s the solution?

Hamilton is calling on the federal government to take direct action – by moving out of some of the buildings it occupies.

This includes acceleration of the Department of National Defence’s exit from its downtown premises; and the movement of some of the government’s office space in the CBD to Orleans, closer to its employee base.

He also wants the municipal government in Ottawa to cut development charges to encourage more construction.

Hamilton has a message for landlords: “Build, and if you can’t build, be ready to build so you can shorten the development cycle. We need to be able to deliver space to service the city’s growth and reach our true potential, while limiting the distractions and setbacks that can result from growth.”

Copyright © 2019 Key Media Pty Ltd

Altus Group reveal 3,853 new homes sold in April

Steve Randall
REP

There was some better news for the new homes market in the Greater Toronto Area in April as sales jumped 123% year-over-year.

The Building Industry and Land Development Association (BILD) reports that figures from its official data source, Altus Group, reveal 3,853 new homes were sold in the GTA in the month.

Of those sales, 800 were single-family homes. That’s a significant jump from the 443 sold in April 2018 but still 50% below the 10-year average.

For condo apartments, there were 3,053 sales; up 137% year-over-year and 37% above the 10-year average.

“Both builders and buyers stepped up their game in the new condominium apartment market in April,” said Patricia Arsenault, Altus Group’s Executive Vice President, Data Solutions. “The number of units in new projects launched, and the number of sales, were well above the April average of the past 10 years. While it is still too early to call the market as being on the upswing, the stronger showing in April is encouraging.”

Prices down slightly

There was a slight moderation of benchmark prices for both single-family and condo apartment groups compared to March.

The benchmark price of new single-family homes was $1,119,772, up 0.3% year-over-year while the benchmark price of new condominium apartments was $758,585, up 2.5% year-over-year.

“The last two months have seen stronger new home and condominium sales in the GTA after a sub-par April in 2018,” said David Wilkes, BILD President & CEO. “There seems to be a resiliency in the market as new home buyers are coming off the sidelines.”

Copyright © 2019 Key Media Pty Ltd

The forecast is starting to look brighter for BC’s housing market in the coming years

Josh Sherman
Livabl

The forecast is starting to look brighter for BC’s housing market in the coming years.

Central 1 Credit Union anticipates BC home sales will pick up again in 2020, and the following year prices are expected to increase as well but for now they’re “marshmallow soft.”

“Home sale deterioration ends in the first half of 2019 with a mild pick up in the latter part of the year as firm economic conditions underpin a recovery, and initial impacts of policy measures fade,” writes Central 1 Deputy Chief Economist Bryan Yu in a Resale Market Housing Outlook 2019-2021.

While an annual sales decline three-peat appears to be on the horizon, 2019’s year-over-year decline will be far less pronounced than the 20.2-perent drop in activity last year, Yu projects.

He’s calling for sales to drop 10.7 percent this year, before bouncing back by 8.8 percent in 2020 and 5.2 percent in 2021.

Meantime, the median price of a BC home is set to sink 4.1 percent this year to $515,000. A further drop of 1 percent is penciled in for 2020 but that will be eclipsed by a 1.2 percent increase in 2021.

A lingering low interest rate environment and the federal government’s recently announced First-Time Home Buyers Incentive are also going to help prop up the market, Yu suggests.

The incentive will see the Canadian government give qualified homebuyers up to 10 percent of a downpayment in exchange for a corresponding equity stake in the property.

“Faltering housing market activity will curtail new home construction and related employment and spending going forward, but there is still a lot to like in the economy,” Yu explains.

Yu notes the tech sector, infrastructure spending in the Lower Mainland, demand for Canadian exports as a result of the low Loonie, and the $40-billion LNG Canada gas terminal as positively contributing to the province’s economic prospects.

© 2019 BuzzBuzzHome Corp

CMHC market analysis showed senior rentals in flux

Ephraim Vecina
Mortgage Broker News

Significant regional variances in senior housing activity were apparent over the past year, according to recent market analysis by Canada Mortgage and Housing Corporation.

In its latest regional reports for the asset class, the Crown corporation said that the vacancy rate for seniors’ residences went up over the past year in British Columbia, Nova Scotia, Quebec, and Saskatchewan. The trend went in the opposite direction in other provinces, decreasing in Alberta, Manitoba, Ontario, New Brunswick, Prince Edward Island, and Newfoundland.

BC stood out as its overall vacancy rate for standard spaces (independent living spaces increased for the first time since 2012, from 3% in 2018 to 4.2% in 2019. Meanwhile, the province’s vacancy rate for non-standard spaces (where residents receive at least 1.5 hours of care each day) fell from 2.1% in 2018 to 1.3% in 2019. Spaces with rent rates at $1,900 and lower saw intensified demand, with the lowest vacancy rates across all ranges.

In Ontario, vacancy rates for both standard spaces and overall seniors’ housing remained relatively unchanged, at 10.3% and a record low of 9.9%, respectively. Standard spaces posted an average rent increase of 3.9% annually, reaching $3,759.

Quebec saw its vacancy rate for standard spaces grow from 6.9% last year to 7.2% in 2019, with an average monthly rent of $1,788. Non-standard spaces also had higher vacancy, 5.7% in 2019.

Alberta vacancies in the asset class fell from 15.4% in 2018 to 13.8% in 2019. Standard senior’s housing vacancy in Calgary shrunk from 18.9% to 15.0%, while the rate in Edmonton increased from 9.1% to 9.7%. As for non-standard spaces, the provincial vacancy rate spiked up from 4.0% in 2018 to 7.4% this year, fuelled by significant increases in Calgary and Edmonton.

Copyright © 2019 Key Media