Posted Feb 2, 2009, 8:04 PM
Join Date: Aug 2008
Globe and Mail: B.C. housing market in a deep freeze
Interesting article from today's Globe that attempts to find a silver lining or two to the housing market 'deep freeze':
B.C. housing market in a deep freeze
Developers worry about how to keep companies going during hibernation that some predict won't break until after the Olympics
From Monday's Globe and Mail
February 2, 2009 at 5:29 AM EST
VANCOUVER — Ward McAllister has been through five housing-market crashes since he finished university in 1982 and started working in development. But he and other B.C. developers have never seen anything quite like this one.
"I wouldn't call this a crash. It's like a market freeze. It's like everything's been held in suspended animation."
The public is refusing to buy and that has caused developers to put on the brakes.
Mr. McAllister, who heads the company Ledingham McAllister, said he was at a gathering recently that included every major developer in town. He asked them how many projects they were starting in 2009. The answer was zero.
And no one is sure when the current cocoon state will end.
At a recent Urban Development Institute event focused on forecasting the future, developers Rob Macdonald and Michael Audain were optimistic in their speeches to the anxious crowd of 1,100. They predicted the market in B.C. will return to something approaching normal this fall, although with a reduction from last year's peak prices.
But others are less optimistic.
"We don't think it's coming back any time soon," said David Negrin, the immediate past president of the UDI who heads the development arm of Aquilini Investments. "We don't see it coming back until at least after the Olympics."
That's at least a year and a half from now.
So how do companies keep themselves going in the hibernation period?
That's a question not just for developers, but for a vast industry. One in every 10 people works in the province's construction industry, everyone from the guy hired to pound nails to architects to truck drivers to the developers themselves.
In September, the construction sector accounted for 235,000 jobs in the province. By November, it was down to 220,000.
Some developers locally have joked that they're going to cope with the downturn by going to Phoenix or taking up a new hobby. In reality, most of them are trying to find a way to keep their companies busy, in order to keep their employees working, to prevent losing valuable staff and to continue making money.
Some, as reported in December, are taking a fresh look at the economics of building rental apartments.
"It's an opportunity for developers to take advantage of the current low construction costs," said Brent Toderian, director of planning for Vancouver. "It's a good way to build low and sell high. They can rent for a few years and then, when the market picks up, sell."
The UDI is going to hold a workshop in the spring to help its members figure out if building rental is feasible for them.
Office space is something else that development companies are considering.
Mr. Toderian said his department is starting to get inquiries about office projects in numbers that hadn't been seen in the past.
Still other developers are phoning the province's social-housing agency, BC Housing, to find out if the government might be interested in using some of their sites for future housing projects.
"We are getting dozens of phone calls," said BC Housing CEO Shayne Ramsey. Federal and provincial governments have typically put money into extra social housing projects in the past when the private market has slowed.
And yet other developers, especially the confident and well-financed ones, aren't necessarily looking to do anything immediate.
Instead, they're planning to use the time to get ready for the next market upturn.
It can take one to two years to go through public consultations and city approvals, especially for a complex site. In hot markets, developers often bypass those more labour-intensive projects.
But when markets slow down, developers with long-range ambitions and money will use the down time to go through the longer process.
"The sophisticated developer recognizes that's the thing to do," Mr. Toderian said. "But it depends on whether they have the financing ability to do the planning work."
Some, apparently, do, since Mr. Toderian reports that his department, which does the front-end work for building projects, is getting steady work.
Development consultant Chuck Brook, who works all over the Lower Mainland, said times like this are actually the best for the kind of work he does.
Special to the Globe and Mail
Artists benefit from condo conundrum
While the downturn is definitely causing some pain, it's also providing breathing space for several groups around Vancouver that had been suffering the consequences of rampant development fever.
One group is artists, who found themselves increasingly being squeezed out of low-cost spaces in a market where no building, no matter how grungy, was safe from being redeveloped as a potential condo site.
The building at 901 Main, a former residential hotel on the edge of the Downtown Eastside that had become an artists' hub in recent years, was a symbol of that.
The building was sold to development company Amacon, to the distress of artists both inside and outside the building.
But the development plans have slowed and now those living there are hoping they can stay past the original move-out deadline of April, 2009.
Artists elsewhere are feeling a sense of relief that they're safe for the moment.
"And with prices going down, maybe there's a chance for artists to buy their own spaces," said Esther Rausenberg, one of many who helped lead the battle to save 901 Main. "And through 901, they gained a better understanding of what development is all about."
Another cluster of people who are somewhat relieved are the planners and permit-issuers at various city halls, who were working at breakneck speed over the past couple of years.
That was especially true in Vancouver, where they were being swamped with work directly related to the Olympics and all of the condo projects that developers were trying to get up pre-Olympics or immediately thereafter.
The city's planning director, Brent Toderian, said that is allowing his department to take on some delayed large-scale planning projects, such as reviewing the city's policy on building heights and working out a new development plan for the industrial False Creek Flats area.
"The best thing you can do in a downturn is fix the things that need to be fixed."