Veteran optimism
It's back: Capital City Centre, a mixed-use project previously known as Colwood Corners on the site of the former Colwood Plaza strip centre, is breaking ground on the first phase of what will be a billion-dollar development.
Backed by Victoria's League Financial Partners, Capital City Centre was originally proposed by Cityzen LP, a partnership between League, Bear Mountain development consultant Les Bjola of Turner Lane Development Corp. and others. But that was back in 2007, before the financial crisis of 2008 that shelved many projects. Planning for the Colwood project continued, however, with Bjola remarking in spring 2009 that he didn't expect construction to start for another three years.
That's a prediction that's come true, though League has assumed the role of developer in place of Bjola. Victoria builder Farmer Construction Ltd. is handling construction, which will begin with six storeys of office space and 76 residential units above a level of retail. Confirmed retailers include London Drugs, Coast Capital Savings and Credit Union and RBC Royal Bank. League, which will occupy half the office space (23,000 square feet), hopes to sign a grocer soon.
Completion of the initial buildings is set for December 2013, but the entire first phase will take six years to build. It will also include two 26-storey residential towers, a four-storey residential block and retail space. The site will boast 11 buildings with a total of 4.3 million square feet split almost evenly between residential and commercial uses.
The gradual nature of the first phase's construction sets the pace for later phases. The project will be broken into 11 separate components with nine phases of parking (versus four phases originally). League co-founder and CEO Adam Gant said the aim is to build only what the market can bear and to limit upfront capital costs.
"[It] allows us to break it down so that at any time any part of the market is ready to absorb that type of real estate, we can build that portion of the project."
The initial residential component, for example, is proceeding with just 60% presales.
"We purposely held some back," Gant said. "We think that in the next two years there will be more price appreciation, and we're just trying to meet the financing requirements in the short term."
Cautious optimism
"Projects on hold hit record high," could have been one headline for this column, but the numbers in the latest issue of the B.C. Major Projects Inventory don't bear out such bad news.
While it's true that the number of projects on hold in the third quarter surged to 75, up from just 61 three months earlier and 56 a year ago, the value of stalled projects was $24 billion – consistent with tallies for the previous 18 months. Conversely, the number of projects proposed or under construction fell while the aggregate value of projects in each of these categories rose to record highs. There were $121.3 billion worth of projects proposed in the third quarter and $67.6 billion on the go.
But one cause for concern might lie in the relative proportion of projects underway versus those proposed. Prior to the collapse of Lehman Bros. and the ensuing financial crisis in 2008's final quarter, the value of projects under construction was typically 66% or more of the value of proposed projects. Nowadays, the proportion is typically less than 60%, suggesting an optimistic but cautious market. (The first half of 2009 was an exception, with Olympic-related projects keeping the economy humming even as the value of proposed projects dipped.) Today, projects under construction represent 55.7% of the total value of proposed projects.
Tempered optimism
One can hardly keep all the year-end numbers straight! While residential real estate prices in Metro Vancouver rose last year, it's anyone's guess what the increase was.
Real Estate Board of Greater Vancouver's benchmark price rose 7.6% last year to $621,674. That's well below the 14.3% increase RBC Economics reported last week (based on figures to the end of November).
Royal LePage, meanwhile, issued a report indicating that average home prices in the region rose 11.9% in 2011. It adds a forecast that prices will rise 2.3% in 2012, consistent with the majority opinion that pricing will moderate this year. •
