A proposal for a downtown Vancouver luxury condo tower that was scheduled to go to a public hearing next week has been abruptly cancelled by the owner.
It’s a sign of what some see as a shift in Vancouver’s hot real estate market, as the demand for high-end property has weakened, construction costs are skyrocketing and city officials are demanding ever-higher community-amenity contributions (CACs), a fee intended to pay for improvements to neighbourhood services.
A representative of the developer, Brilliant Circle Group, sent a letter to the planning department last week withdrawing the project. The letter, obtained by The Globe and Mail, explained that the decision “is due to the impact of the rapidly changing real estate market, which affects both the unit mix and the CAC evaluation.”
The developer and the architect for the project, James Cheng, declined to comment.
The project is not dead, but the company is going to re-evaluate the design and resize the units for the triangular piece of land at Georgia and Pender streets that was bought for $16-million five years ago. It is now assessed at $30-million.
But realtors and real-estate analysts say it is not surprising to see a luxury project stalled, given the current conditions.
“Everything’s corrected and the luxury market is gone,” said Ian Watt, a realtor who specializes in higher-end housing. “Anything under $2-million will sell, but in the last two months, there’s been only one sale over $3.5-million.”
Realtor Karel Palla echoed those numbers, saying that “at this point, there’s a very small percentage of people that can afford that type of product.”
And Michael Ferreira, whose company, Urban Analytics, closely tracks pre-sales, said, “We’ve definitely noted some softening at the high end.”
He said a year ago, “you would see 85 per cent sold within the first three months. Now it’s 50 to 60 per cent. You’re now seeing more incentives to attract buyers.”
Mr. Ferreira said several factors are contributing to that, including the fact that “there’s a little bit of fatigue in the market with the very steep price increases.”
Some planned projects “looking to launch this fall may be put on hold,” he said.
George Wong, whose company, Magnum Projects, was set to market the Brilliant Circle tower, said he thinks the West Georgia project is an unusual case and its withdrawal isn’t the beginning of a crash.
He is also marketing the Landmark On Robson towers for the company Asia Standard, which has about 240 market condos planned for the site. That is the highest-priced development on the market, with the apartments selling for $2,000 to $5,000 a square foot, depending on their placement.
Just less than 50 have been sold since the marketing started in February.
Mr. Wong said the Landmark’s owners, based in Hong Kong, don’t need external financing, so they are comfortable with taking five years to sell the building.
Several more high-end towers are planned for downtown, with observers wondering if some of the developers might take a pause as well.
They include a second tower by Asia Standard, in partnership with Landa Global Properties as well as projects by Bosa Properties, Westbank Corp., and Anthem Properties.
Anthem president Eric Carlson said he is still going full-steam ahead on a 30-storey tower on the former Chevron gas station site on West Georgia the company bought for $72-million.
“We’re still gung ho. We’re not in the least bit spooked," he said. "My call is our project is going ahead, but we will have to make sure we do construction tendering really hard and negotiate with the city over CACs.”
Developers are taken aback at the CACs the city is demanding, he said, which seem to go up with each project. Recently, developers have reported that city negotiators are asking for $300 to $400 a square foot.
Mr. Carlson said some newer, offshore developers may be having trouble with the rising pressures.