High-end condos are proving the arbiters of style for rental properties, and recreational rentals aren’t being left behind.
Properties such as Caban and Aqua in Kelowna are two examples of projects built under civic zoning that allows short-term rentals by default. While they’re built with residents in mind, the zoning gives them extra value in the eyes of purchasers.
“Those buildings that have the zoning that allows nightly rentals typically end up being a little bit more of a resort-style recreational property,” said Taylor Musseau, partner and managing director with MLA Canada, Kelowna, who says the value can be as much as 10 to 15 per cent more than a property with residential zoning.
But the preferential zoning may be ending as early as next year.
With the upscale amenities developers like Cressey Development Corp. are building into projects like Caban, many of the properties are competing head-to-head with local hotels.
“The condo buildings that allow short-term rentals are in really favourable locations right downtown or on the water,” Musseau said. “We only have one waterfront hotel whereas the others are on the outskirts of the city. … A lot of these buildings have super-luxurious pools and spas and all those things you would get in a hotel, so why not?”
Since most of new buildings have commercial units at grade featuring restaurants, bars and services, the units are competitive with hotels.
The centrepiece of Caban, a 127-unit project in Kelowna’s South Pandosy district, is an outdoor terrace that boasts “an infinity lap pool, Himalayan salt sauna, fitness centre, pool house, hot tub, and private cabanas.”
“That location commanded a resort-type project, so we designed it accordingly. Virtually every unit in that project looks out to the lake, and the majority of the units also overlook the pool deck,” said Hani Lammam, executive vice-president with Cressey. “[But] our buyer is not necessarily seeking recreational property. I don’t think most people looked at it as a recreational property but as a home with resort amenities.”
Lammam doesn’t think most buyers are renting out their units, but he noted that city planners encouraged Cressey to rezone the property for residential use. Bonus density was offered as an incentive.
“They encouraged us to rezone and get more density on that site,” Lammam said. “Considering the product that we’re building it’s really not for nightly rental.”
Kelowna wants to tweak its three-year-old short-term rental rules to ensure that developers focus on the local market, however. A review is scheduled for next year, and given the city’s housing shortage, Kelowna director of planning and development services Ryan Smith doesn’t expect the rules to relax.
“I don’t see fewer restrictions,” he says, noting that the city is working to encourage developers to build more housing for residents rather than short-term visitors. “We would definitely be pushing developers towards doing market rental projects and condo projects.”
This should support the value of existing tourist units.
Canada Mortgage and Housing Corp. data indicates 53,905 units of housing in the city, of which market research firm AirDNA reports 2,056 are available for short-term rental. Occupancy of the units averaged 80 per cent in July with an average daily rate of $377. This exceeds local hotel rooms, which also saw an 80 per cent occupancy rate but commanded an average of $271.13 a night, according to hotel advisory firm HVS.
“I’ve heard so many people tell me that five, 10 years ago they would go on short-term rental platforms to get the deal. Now we’re seeing that a lot of these short-term rental products are priced very similar to hotels,” said Joseph Clohessy, general manager of the Delta Hotels by Marriott Grand Okanagan Resort.
A proactive approach by the city has ensured short-term rentals in the city are firmly regulated, Clohessy said, which has helped even the playing field.
“It seems to have level-set the market,” he said. “This summer, as an example, there seemed to be enough demand for all the different types of segments, for both the short-term rental market and the hotel market.”
Clohessy would know: his resort offers 262 guest rooms as well as 62 condo-style units which typically rent for a week at a time. Its listings on short-term rental sites range from $434 to $531 a night.
This fall, resort owner SilverBirch Hotels & Resorts will give guest rooms a makeover as part of a series of renovation projects that will bring accommodations up to current Marriott International standards for the Delta brand.
The project will also create two spacious new guest suites from the current 9th-floor concierge lounge, a nod to the spacious lakeside units at projects like Caban. It’s an upgrade that positions the hotel against newer offerings, not only in the condo market, but much-anticipated projects like the 184-unit hotel planned by Westcorp at the foot of Kelowna’s Queensway Avenue.