Originally Posted by allan_kuan
In a way it's kind of amazing that Concord Pacific is moving ahead with any sort of project here or elsewhere with the economic situation. Don't they still have to do the Capstan Station project, the North East False Creek project, as well as a few remaining lots in Central Yaletown? Not to mention the Surrey projects and any others that they have elsewhere? I'm very surprised that they're able to do all of this all on a profit, compared to like some other companies that have failed (Millennium comes to mind, although that was because of the pricey Olympic Village). =O
I think it has to do with their philosophy on how to maximize profit.
The average company will look short term. I have X amount of properties, which one can I develop right now to make me the most money to impress my shareholders (or pocket). So they will abandon their suburb projects in favor of ones closer to downtown. The idea being that if they were both 100 unit projects, the one with the highest retail value will make more money. The property is already owned, so it is a sunken cost, and the cost of building a highrise, be it in Yaletown or Surrey are roughly the same. So selling 100 units at an average of $400,000 is more money than selling 100 units at an average of $200,000. When you subtract virtually the same construction costs, the one in Yaletown is making more net profit.
However, if you look long term, it's a bit different. Right now the market is a bit unstable, and the future will probably have price drops between now and completion. But it's not a constant number across the board, but a % drop. So, the units closer to downtown drop more in real value than the ones in Surrey. The average you could sell a condo for in Yaletown might drop to $300,000, while in Surrey the drop might be to $150,000. It's the same percentage, but it's a lot more value being eaten away in Yaletown. As well, it's harder to sell high end properties in a recession, so you might even have to unload them after construction at even more of a discount (like MW) than you would like. As well, typically in a recession, many of the buyers are first time buyers, looking to get into the market (using government hand outs and low rates). They usually don't have the assets in place to jump right into high end, so there is a bit of a surge in the lower end of the market. It could make selling condos in Surrey a bit easier.
So if you are in the game for the long haul, properly building around the booms and busts makes you more money. Saving that high end location for when the market is at the maximum, will make a lot more money over the long term than building it right away.
If you are looking to make a quick buck, then building downtown right now is a good gamble as there isn't a lot of competition. But if you can hold out for recovery, then waiting is usually the safest bet.
Personally, I'm a bit surprised there isn't more construction going on in Whalley right now, but it would be my guess that a lot of properties are owned by developers focusing on Surrey, so that to those developers, their Whalley properties are like Concords False Creek properties. Its their high value investment and they'll wait for it to recover.