The game of opposites persists in Western Canadian commercial real estate: Alberta’s rising vacancy rates and supply glut are forcing halts on developments, while Vancouver’s lack of supply and skyrocketing prices are causing advocacy groups and government to discuss further taxations to curb the feeding frenzy.
On the West Coast, housing advocates are on the fence on whether the empty-homes tax will actually bring affordability to the residents, while real estate leaders argue that supply is a more effective remedy than any taxation. In Calgary, projects are being abandoned because costs cannot be justified by demand.
Here are Western Investor’s pick for the top four stories on real estate published this week.
Why Calgary developers face a long haul to dig out stalled office projects – CBC
Developments in the city are being put on hold as the market waits to see if demand will rise enough to afford new supply, according to CBC. Five major cities have been halted in Calgary, and development groups don’t see their portfolios growing anytime soon – but that might have more to do with vacancy rates than uncompleted projects.
Others say the real concern right now isn't the number of stalled or abandoned projects — but the soaring vacancy rate among existing buildings in the city's commercial core.
Commercial real estate firm Cresa, which only represents commercial tenants, pegs the current office vacancy rate at 24.5 per cent — and climbing.
"I don't think we've bottomed out," said Adam Hayes, a broker with Cresa.
He predicts a two- to three-point climb later this year or in early 2018.
He says that's when the supply side will become crystal clear with two new projects coming on stream, Brookfield Place and Telus Sky.
Calgary city Coun. Evan Woolley has two suspended sites in his ward south of downtown, Ward 8, but agrees that the commercial vacancy rate is the bigger challenge.
"We've got Calgary Economic Development working extremely, extremely hard travelling all over the world talking to the best and brightest, we have a real estate committee working on solutions to this and I remain hopeful," said Woolley.
Hayes says he's not surprised to see the number of stalled construction projects, given high vacancy rates and falling rent and lease costs.
He says it could be a while before those projects or new ones get off the ground.
"It could be years and years and years before we see tenants able to justify costs associated with new development."
RED Talks: Supply is the answer to Vancouver's housing "crisis" – Western Investor
Vancouver needs more housing option – well, build more housing! That’s the general consensus of real estate leaders at a recent Real Estate Development (RED) talk, WI editor Frank O’Brien reports.
San Francisco pro-development advocate Sonja Trauss said it doesn’t matter what kind of housing is built as long as there is more of it, and soon.
Truass, who founded the upstart 500-member, San Francisco Bay Area Renters Federation two years ago, said that, like in her high-priced city, Vancouver’s mandatory public hearing process used to decide density “is broken.”
“The people who live near a proposed new development are the last people who should be asked if they want higher density.” Trauss told the March 30 meeting, “You are guaranteed to get a ‘no’”
Instead, Trauss, a renter, former math teacher and self-styled anarchist, tries to pack such meetings with those who will benefit from more housing: young people from other neighbourhoods who will actually buy or rent the new homes.
Her group has even sued San Francisco suburban communities that have failed to approve the housing they said they would.
Trauss said more supply is also the answer for Vancouver, whether it is luxury homes, high-rise rentals or low-income housing.
“You have to support building, even when it’s a type of building you hate,” she said. “You really need everything right now.”
Most Canadians support foreign-buyer tax: poll – Business in Vancouver
Following Ontario’s plan to implement a foreign-buyer tax similar to Vancouver’s, a recent by Zoocasa.com survey gauged the public’s reaction to the tax across Canada.
The survey found 69% supported a foreign-buyer tax, and 61% said they believe foreign buyers are pushing the cost of real estate higher. In British Columbia alone, these feelings were even stronger, with 75% in support of the tax and 74% believing foreign buyers were driving up the cost of real estate.
“Recent market fluctuations and policy changes aimed at controlling participation and entry into these markets have caused consumer and media interest to reach a fever pitch,” said Zoocasa CEO Lauren Haw.
“This report is a look inside the heads and homes of Canadians, and should be a companion piece for those seeking a more in-depth understanding of our housing market and how it affects Canadians.”
Zoocasa found that respondents in higher income brackets, defined as those earning $100,000 to $149,000, were the most likely group to be worried about the rising cost of real estate; the company called this a surprising finding. The ability to earn property income was cited as a factor that was twice as important to those aspiring to buy homes for the first time than it was to current homeowners.
Effectiveness of city’s empty-homes initiative questioned –Business in Vancouver
What will the empty-homes tax do for supply of affordable housing in Vancouver? Not a lot, according to a housing advocates WI editor Frank O’Brien spoke to for Business in Vancouver story.
“I like the principle of it, but I think owners will find a way around it,” said Brendan Dawe, a spokesman for Abundant Housing Vancouver, a year-old tenant advocacy group pushing for the construction of more rental housing.
Dawe believes the tax will be expensive to administer and difficult to enforce.
Michael Geller, a Vancouver architect and developer who consults on housing issues, echoed that comment.
“I suspect the empty-homes tax will result in some properties rented out, and others sold to owner-occupiers or investors who will rent them out,” Geller said. “But ultimately, it will be administratively expensive and not make rental housing more affordable.”