Surging demand for condos brings ever higher land prices

Monday, October 27th, 2003

Prices being paid for downtown land labelled as ‘insane,’ ‘crazy’ and ‘nuts’

Wyng Chow

PRICEY DIRT: 1900 West Georgia, shown on aerial photograph below, is the most expensive building lot on a list of top downtown properties. Others are listed in order of sale price per square foot. (See hardcopy for graphic)

CREDIT: Bill Keay, Vancouver Sun Developer Peter Wall, pictured here outside a lot at Homer and Smithe, says people will always come to Vancouver because of its scenery and climate

A land rush is heating up in downtown Vancouver, with bidding wars from developers pushing prices for residential building sites up to astronomical levels.

Driven by a seemingly insatiable consumer demand for condominium units and a shrinking land bank, developers are now willing to pay in excess of $100 per buildable square foot — double the prices of only a couple of years ago.

“We still have land on the Lower Mainland, but in Vancouver, there’s not much left, especially downtown,” said financier Peter Wall, blamed by many of his peers for driving up land values.

Wall, chairman and CEO of Wall Financial Corp., who recently launched construction of more than $400 million worth of condominiums in the downtown core, is already negotiating the purchase of three more development sites.

“I’m still a land buyer today,” Wall said. “When something becomes available, you have to react. You can’t be a follower.”

The current land costs are variously being labelled by critics as “insane,” “crazy,” or “nuts,” although development industry luminaries say there always seems to be some brave soul willing to step up to raise the ante.

Critics, however, point out that the end result will be higher condo prices for consumers as the desirability for living downtown continues to soar. At present, there are several billions of dollars worth of residential towers under construction in the Yaletown, False Creek, Downtown South and Coal Harbour areas, with more on the drawing board.

Vancouver city council recently voted to sell a development site at the busy intersection of Richards and Robson to the Millennium Group for $13 million, or about $100 per buildable square foot — a record price for the Downtown South.

The next two highest offers were for $80 and $75 a foot for the vacant lot, offering a maximum 135,000 square feet of redevelopment potential for residential and commercial uses.

By contrast, choice waterfront property along Coal Harbour, where upscale condo units have presold at prices of up to $6 million, has yet to top $92 per buildable foot.

Only a few years ago, developers were more accustomed to paying $30 to $50 a foot for coveted sites.

Commercial realtor Bryce Margetts said the rising prices have caused a growing number of his clients to pause.

“Downtown land is getting too expensive for a lot of them,” said Margetts of Colliers International. “There’s not much land left, definitely a significant lack of supply.”

Over the next several years, Wall plans to develop a total of 850 new condo units in three residential towers at Mainland and Homer, which he considers the “gateway to Yaletown.”

Wall paid $29 million — or $59 per buildable square foot — to acquire the 2.26-acre property, known as the Maple Leaf Storage site, in fall 2002, beating out four other major developers.

It was this purchase that prompted others to blame him for driving up land prices.

“That was the catalyst for everything,” Margetts noted. “When Peter Wall bought the Maple Leaf site, people said he was overpaying. Now it turns out to be a great buy. Now everybody would love to get a downtown site at that price.

“Since Labour Day, the (land) market has heated up considerably. Previously, hardly anything closed at over $60 per buildable foot. The current market is clearly above $75 a foot for any site in the downtown core with residential zoning.”

So far, the highest price ever paid for a residential development site anywhere in Vancouver was the $126 per buildable foot for a one-acre vacant lot in the 1900-block West Georgia, at the entrance to Stanley Park.

At the time of the September 2002 sale, Millennium Group president Peter Malek, who “came in second,” ironically called that winning bid “absolutely ridiculous.”

David Podmore, CEO of Concert Properties, acknowledged that he was scared off from bidding on the Richards and Robson site, the city-owned property now being sold to Malek.

“We were of the view it would go for a price that we would be concerned about, so we backed off,” Podmore said.

Cressey Development Corp. vice-president Scott Cressey, who was among the unsuccessful bidders at 788 Richards, said rising land costs will result in higher condo prices.

“I empathize with the end user,” Cressey said. “Every inputted price, including land acquisition, development cost charges and construction costs, has to ultimately be passed on.

“Developers have to realize a certain minimum profit margin. It’s always an interesting challenge. It’s a scary concept.”

For his part, Wall dispels any notions that Vancouver‘s condo market may be getting saturated. He expects sales to remain hot, as Multiple Listing Service figures indicate developers still can’t keep up with consumer demand, given record low mortgage rates and optimism over the upcoming 2010 Olympics.

Between May and June, it took Wall only 11 weeks to sell all 456 units at his Electric Avenue condo project in the 900-block Hornby, $104 million worth.

In August and September, it took him five weeks to sell all 423 units at the Hudson, at Granville and Dunsmuir, raking in $101 million.

And while marketing for the first 300 units at Yaletown Park won’t be launched until February 2004, Wall said he already has more than 150 people on a waiting list.

“People will always come back to Vancouver,” said Wall, a developer for more than four decades.

“As long as we’ve got the mountains and the ocean, low crime and little racial prejudice, and moderate weather, you can’t beat people off with a big stick.”

© Copyright  2003 Vancouver Sun

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