Port payoff for rental properties in Prince Rupert

Dock of the bay

“One of the most promising areas in the whole of Canada is Prince Rupert,” declared B.C. billionaire Jimmy Pattison as the northern seaport prepared to welcome its first container ship in October 2007.

A decade later, the latest expansion program has boosted container capacity at Prince Rupert to 1.35 million 20-foot equivalent units (TEUs), a 50% increase from 850,000 TEUs two years ago.

While the increase is significant and the activity has created jobs, the numbers show how reality has lagged behind the port’s ambitions.

During a visit in August 2007, this columnist heard how the facility would trigger a re-naissance in a city planned a century earlier as the northern terminus of the Grand Trunk Pacific Railway (now part of Canadian National Railway Co.). Prince Rupert had taken its hits from the decline of the fishing industry and the closure of the Skeena Cellulose pulp mill in 2001.

Prince Rupert Port Authority and Canada Border Services Agency hiring sprees a decade ago spurred plans for a new subdivision in a city whose population plummeted from 16,714 in 1996 to 12,815 in 2006.

A decade later, the population remains just 12,687, but the rental market has strengthened considerably. Vacancies have dropped from 15% on an inventory of 629 units when the container terminal opened in October 2007 to 4.9% on a stock of 825 units at the end of 2016. Rents have grown with supply, rising from an average of $561 a month in October 2007 to $726 a month at the end of 2016.

It’s a different story with retail development. Terrace remains the retail hub for locals even though Walmart took over the space formerly occupied by Zellers after Calgary-based Royop Development Corp.’s plans for a shopping plaza were shelved.

Then there’s the question of the container terminal itself.

Part of B.C.’s claim to being Canada’s gateway to Asia – and Asia’s gateway to North America – Prince Rupert anticipated increasing its initial capacity of 500,000 TEUs to two million by 2012 and four million by 2015. The expansion that port operator DP World completed last week falls short of these targets, and comes on the heels of a 5% decline in containerized traffic last year, when the port handled 7.4 million tonnes (the port’s annual report doesn’t express the volume in TEUs).

Déjà vu

Renters were hardly pleased when the province’s Residential Tenancy Branch announced that landlords could charge tenants an extra 4% in 2018 – the fourth consecutive increase since 2014 and the biggest boost since the 4.3% hike allowed in 2012.

Such is the cost of living, however, with the annual allowed increase being inflation plus 2%.

The effects of inflation are being felt in other segments of the housing market, too.

According to Statistics Canada, the cost of building a new rental unit in Metro Vancouver is at levels not seen since 2007. The federal statistician’s price index, derived from surveys of contractors, was 163.2 in the second quarter of 2017 – 100 represents benchmark costs in 2002 – up 1.7% from the previous quarter.

The current index is just 0.2 points off the 10-year high of 163.4 logged in the third quarter of 2008 – when the financial crisis hit. That crisis sent the index tumbling, leaving it to bottom out at 131.9 in the opening months of 2010.

Similarly, the second quarter saw the cost of new housing surpass levels last seen in 2008.

The index for land and construction costs rose to 105.5 in June 2017, firmly above the 100.5 reading of March 2017 – a high last reached in July 2008. The financial crisis pushed the index to a low of 91.7 in April 2009, before strengthening to between 94 and 97 until spring 2016, when it began its current rise. •