Land value works out to $83,000 for each condo in the new Vancouver House tower.
“Something out of whack here,” real estate consultant says
The 2.2-acre site of the new Vancouver House residential tower cost the developer, Westbank, $32.4 million, or more than $15 million per acre and it was not the most expensive residential land sale in Metro Vancouver so far this year. That would be the $83.5 million paid by Wall Financial for a site on Alberni Street in Vancouver’s West End that measures less than acre.
“[Residential] land remains the most the most sought-after commercial real estate investment in British Columbia,” notes Avison Young in a mid-year report on commercial real estate sales.
But one real estate commentator believes the white-hot demand for residential reveals an economic fault line, because much more is being spent building condominiums than on places for people to work or learn.
Residential land is clearly leading B.C.’s investment curve. Just the top five residential land sales across Metro Vancouver in the first half of this year, at a total of $255.6 million, were worth more than all B.C.’s industrial property sales, at $163 million, and accounted for 30 per cent of the total commercial property transactions in the province.
Other notable sales of residential land, all aimed at high-density development, include $69 million paid by Canada Sunrise Development Corp. for 4.91 acres on Number 3 Road in Richmond and the $20.7 million sale of 1.1 acres in Burnaby's Metrotown area. In what is seen as a long-term residential land banking hold, Wesbild Holdings and two partners paid $50 million for 87.4 acres in Coquitlam.
The higher land values may signal rising prices for future multi-family housing units. The land costs for Vancouver House, for example, translates into $83,000 for each of the 388 condominiums in the twisting tower that will rise at the north end of the Granville Street Bridge.
Real estate buyers pay much less for non-residential land, the Avison Young report reveals. Metro Vancouver industrial land, for example, sold for between $1 million to $2 million per acre this year, while the biggest sale of commercially-zoned land pencils out to $1.45 million per acre for a 40-acre site near Burnaby’s Brentwood Skytrain station.
“There is something out of whack here,” commented real estate consultant Ozzie Jurock, who hosted a Real Estate Outlook 2015 conference in Vancouver Sept. 13. Jurock noted that in the first seven months of this year, Metro Vancouver residential permits reached $2.9 billion, while total non-residential construction was $1.2 billion. Across the province, home building permit values are currently outstripping non-residential permits by a ratio of four to one.
“Residential construction this far ahead of non-residential reflects a weak pattern of business investment that could stunt economic growth,” Jurock said. “In a truly robust economy, more investments would be made in commercial buildings and infrastructure than in condos.”