The challenge of building one of the first new rental apartment buildings on Robson Street in decades, in the heart of Vancouver’s West End, was not lost on the 50 or 60 business people who attended its launch party a little over a week ago.
Among the speakers was Mayor Kennedy Stewart and Bob Rennie, the city’s famous condo marketer whose team was brought on to market the new high-end rental building that is called the Chronicle, built by Great West Life Realty Advisors for owner Canada Life Assurance Company, which is bullish on the Vancouver market.
Mr. Stewart brought his dog along to underscore the pet-friendliness of the new building, whose interiors are more like a contemporary condominium. There’s a rooftop barbecue party area with a sleek common kitchen, a penthouse gym with views of English Bay, a plush common area at the ground level, small meeting room for remote workers, and parcel storage for e-commerce packages.
It’s not in any way affordable to the average Vancouver household income, but it does fit with the Mayor’s new target to get 100,000 housing units built in a decade. Rents at the Chronicle will be in the $4.50 to $5 a square foot range and sizes range from 430 square feet to 1,018 square feet. A one-bedroom starts at $2,550 a month and two bedrooms start at $3,550. Thirty per cent of the units have two or three bedrooms. The 21-storey building at 825 Nicola St. is entirely market-rate rental. It pre-dates the City’s Moderate Income Rental Housing Pilot Program, which offers a density bonus in exchange for 20 per cent of units set aside for below-market rents.
Mr. Stewart said he talks to tech and biotech companies all the time who worry about employee housing.
“They’re making good salaries, contributing, inventing answers to pandemics, growing our economy, and where they are going to live is here, in buildings like this,” he told the crowd, “in really secure market rentals that this city has needed for a very long time – 128 units, 250 people.
“We crunched the numbers last week and we are on track for 100,000 units over a 10-year period. This is what it looks like – this isn’t just numbers on paper. This is actual investment and hard work and brilliant design.”
Mr. Rennie spoke of the expected spike in population, with increased federal immigration numbers. He praised the mayor for supporting the development community:
“Which is political risk, but we need another 10 developments like this. … If we don’t get more of these buildings going, Mr. Mayor, we’re going to see rents approach $6 a square foot.”
He then threw some shade on councillors who sometimes push back at pricey developments, and naysayer residents, too.
“There are people on council saying we should see no more development, and it’s unfathomable to take that stand today. And I think communities that were ‘Not In My Backyard’ are really starting to see that their kids can’t even live in the region unless we start to see supply.”
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He ended with a joke that alluded to the downtown condo market that has gone soft these last few years – the type of housing that he’s famous for marketing: “I’m a little personally offended that it’s not strata title for condo,” he said to laughter. “But we’ve managed to put a new business model together to live through this.”
It took exactly six years for GWL to get to this ribbon-cutting day, and that doesn’t include the time required to find the property at the southwest corner of Robson and Nicola, where the popular Gyoza King restaurant once stood, inside an old retail and 13-unit rental building, most of that student housing.
GWL executive vice-president Jeff Fleming told the crowd that they hadn’t bought a multi-family property in a decade before this one came along.
“It’s tough,” Mr. Fleming said. “If we were in Toronto you’d probably be buying an apartment building of this size for the price you pay for the land out here.”
GWL Realty Advisors’ vice-president, development for Western Canada, Geoff Heu said the firm managed to squeeze into the competitive downtown market because of the West End Community Plan, which gave them certainty on the amount of density they were allowed to build. As well, they were buoyed by low interest rates and appealing Canadian Mortgage and Housing Corporation financing programs, and indirectly, by B.C. government measures that took the steam out of the luxury condo market, including the 20-per-cent foreign buyers tax and a new landowner transparency registry, which makes it more difficult for owners to hide behind numbered companies.
“Anything that moderated the condo market certainly evened the playing field for the rental developers,” says Mr. Heu, who gave a pre-launch tour of the building to the Globe and Mail, along with GWL’s senior director, development, Michael Reed.
Although they were able to purchase the land, they continue to compete with the condo market in another way. The pressure is on to deliver high-end rental because non-purpose-built-housing provides more than half of the rental supply, particularly condos.
“We are competing against the condo rental units, so we have to build at least to that level in order to get the same rents,” Mr. Heu said.
Despite a recent Oxford Economics report that said Vancouver is the least affordable metropolitan in North America (Toronto came in third), institutional investors such as GWL are hungry for the Vancouver rental market, which held strong throughout the pandemic. GWL has another rental project underway in North Vancouver and has negotiated the purchase of other properties in Vancouver.
“I would say we have a big ongoing appetite for our clients … everybody wants more Vancouver … and Vancouver is the hardest market to acquire,” Mr. Heu said.
“When you get to institutional funds that are this large, a lot of it is about allocation and risk mitigation, right?” Mr. Reed said. “So you want different asset classes and different market so that you are diversifying as much as possible.”
Pro-supply advocates argue that the more supply of housing, even high-priced housing, will lead to a drop in prices because the wealthier residents will move into the expensive housing and leave the older, more affordable units for lower-income residents.
However, there’s a hitch to that theory – which is that the older affordable units are being torn down in order to build the expensive housing. In some cases, wealthy investors are holding onto many properties as long-term investments instead of freeing them up for redevelopment.
“A lot of the properties here are being held by long-term owners. They are all established families, and they just want to hold it. And when they sell they have to pay capital gains, which is an issue,” Mr. Heu said.
“For many projects in Vancouver, you have to tear down old apartment buildings, to build a new project.”
Added Mr. Reed: “Because that’s the only place you’re allowed to build new apartment buildings.”
CBRE vice-chairman of capital markets, Jim Szabo, said existing apartment buildings are desirable because a rezoning adds yet more time to an already years-long process. Like many in the industry, he criticized city approval times for slowing development. He also said land prices downtown have made it difficult for rental development numbers to work.
“When you can sell a condo at $1,700 a foot and you can build rental and … even when it’s rented, you sell it at a yield basis it’s worth, I don’t know, $1,200 a foot. You can see why they don’t build rental. … Every site that comes up a condo developer will always outbid a rental developer.”
He gave the City credit for giving developers extra density in exchange for building rental buildings, which has generated more interest in rental. He can think of four or five new downtown towers that are the result of new policy. But he echoed Mr. Rennie’s suggestion that once tech workers start arriving by the thousands, along with international students, rents would climb even higher.
“If you think rents are expensive now, just wait … when we have no supply and the demand side completely changing over the next 18 to 36 months, you’ll have a real housing problem.”
Andy Yan, director of Simon Fraser University’s City Program, said that the Mayor’s goal to build 100,000 housing units is admirable, but he questions the affordable housing that is lost in the process.
“What are the net numbers for rental construction in Vancouver, and who does it displace? It’s a kind of a Pyrrhic victory, where high-priced market rental housing is being built where affordable rental housing once stood,” he says. “One has to remember that half of the renter households in the city of Vancouver can only pay about $1,400 a month, or less, for rent to be affordable. If you’re living in smaller units and paying more, is it winning or is it losing?”
GWL have had to hire consultants to help find new homes for those who are displaced, in accordance with city requirements. They also have to compensate tenants with several months’ rent, an expense they budget for in advance.
“We just have to be sensitive about doing it because the tenants all have different needs. Some are older, on a moderate income, health issues. … We can’t just go in there and kick everybody out. We’re a public company. So we try to exceed the city requirements in terms of compensation and relocation costs and moving allowances,” Mr. Heu said.
Most tenants end up finding their own homes, Mr. Reed said. To redevelop the site for the Chronicle, they only had to help relocate five people because the majority of tenants were international students. One tenant moved out of town, another moved in with a relative. The North Vancouver site involved far more tenants and was therefore especially sensitive.
“It’s hard. It’s people’s lives,” Mr. Reed said. “You have to be forthright and give everyone as much time and notice as you can.”
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