New year, old stock
A new year, and how much new dirt will builders turn over new this year? Prevailing estimates by the Canada Mortgage and Housing Corp. (CMHC) suggest developers will start 27,900 units across B.C. in 2014, slightly more than 2013, with 18,400 units started in the Vancouver metropolitan area alone.
A good proportion of those units will supply the rental market, given that CMHC figures presented at last November's housing outlook conference indicated that non-purpose-built rental units represent 58% of the market in Vancouver. That figure is buoyed by a 17% drop in purpose-built rental units per capita since 2002.
Small wonder, then, that vacancies in purpose-built rental housing in Metro Vancouver edged down from 1.8% in 2012 to 1.7% in 2013, while in the city itself vacancies dropped 1% to 0.9%. This occurred even as the stock of purpose-built rental units across the region rose last year by 480 units, thanks largely to a net addition of 383 units in Vancouver. By contrast, 2,696 condos are now being rented – or 26.3% of the city's condos. In real numbers, that works out to a total of 51,224 condo units supplementing a purpose-built stock of 105,547 units.
Seeking bargains
Royal LePage reckons that despite talk of overheated housing markets, condos will remain in demand thanks to shifting demographics and affordability factors favouring small residences. But its latest report on the condo market also forecasts construction to keep pace with demand – something seen in CMHC stats indicating that housing starts moderated last year in the condo hot spots of Vancouver, North Vancouver and Burnaby, while rising alongside or in anticipation of transit development – most notably in the Port Coquitlam and Port Moody, as well as Pitt Meadows and Maple Ridge, and Richmond.
But the starting point for any new construction is land.
Colliers International highlights an extra reason for builders to focus on locales beyond the region's core municipalities: developers typically pay less than $100 per buildable square foot in Richmond, Surrey and the Tri-Cities, as well as the easternmost parts of Burnaby. Closer to the core, land costs are in the range of $150 per buildable square foot, while in Vancouver the average is upwards of $250 per buildable square foot (as in the case of 1445 West Georgia Street).
A decade ago, Millennium Development Corp. reportedly paid $100 per buildable square foot – termed "insane" at the time – for a site at the corner of Robson and Richards streets. This was just months after Peter Wall was accused of driving up land prices by paying the "astronomical" sum of $59 per buildable square foot for a site where Yaletown Park rose.
Seeking jobs
Construction sector employment is forecast to rise in 2014, pulling out of the slump that followed completion of projects related to the 2010 Winter Olympics. Central 1 Credit Union expects employment in the sector to surpass 2011 levels by 2017, when job growth will hit a robust 4.1% per year.
"Average job growth over the forecast period is higher in construction, led by major projects," opined the fall outlook for the coming four years. (Housing will add to employment later in the period.) The prospects are borne out by the latest edition of the B.C. Major Projects Inventory, released last month.
Projects new to the inventory include a $1.5 billion extension to Prince Rupert of NOVA Gas Transmission Ltd.'s Groundbirch pipeline from the Peace region and a wind power project TimberWest Forest Corp. is proposing on Vancouver Island worth $750 million.
Northern B.C. holds the lion's share of high-value projects, however. The region accounts for 65% of proposed projects out of a record $200.2 billion worth of proposals.
All told, the latest inventory details $304 billion worth of projects – a new record for the province. Better yet, the value of projects on hold has dropped to pre-recession levels, heralding further improvement in 2014.
Major projects include those with a capital cost of $20 million or more in the Lower Mainland or $15 million or more in the rest of the province.
