Fight for affordability
Where should cities allow luxury developments? How should developers price units in less affluent areas? Are there natural limits on pricing?
These were among the questions Michael Ferreira, managing partner of market research firm Urban Analytics Inc., addressed at the Urban Development Institute on October 19.
A flashpoint for his comments was Joyce, a 256-unit tower Westbank Projects Corp. is developing in Vancouver’s Joyce-Collingwood neighbourhood.
Westbank has sponsored the Fight for Beauty exhibit at Fairmont Pacific Rim, but Ferreira suggested affordability is the bigger battle.
Warning of buyer fatigue as square-foot pricing sails past $3,000 downtown, $1,500 in Mount Pleasant, $1,100 in Metrotown and $750 in Surrey (“of all places”), Ferreira said builders shouldn’t take demand for granted.
“Just because you can, should you?” he asked. “There needs to be some caution in terms of not trying to push that price too high and too far beyond what the market is prepared to pay just because there appears to be a lot of demand.”
Vancouver is arguing for the right housing options in the right location, but Ferreira – speaking personally – took issue with the city’s approval of Joyce and the project’s pricing.
“I don’t think we should be approving projects in a neighbourhood like Joyce-Collingwood that will command $1,200 to $1,300 a square foot, whether it’s a beautiful design or not,” Ferreira said. “$900 to $1,000 a square foot … would be perfectly acceptable.”
A report of Ferreira’s comments disappeared from Postmedia news sites, prompting speculation on social media and a tweet from Vancouver Sun editor-in-chief Harold Munro attributing the article’s removal (rather than correction) to errors rather than pressure from Westbank.
Westbank told Business in Vancouver that prices at Joyce began at $592 a square foot and, overall, “Joyce sold where Mr. Ferreira apparently said it should.”
Nevertheless, the incident adds to a saga of concern about a project that’s repeatedly made news for its benchmark pricing as well as Westbank’s sales tactics. Reports in June alleged that Westbank planned to market the project in Asia before Canada, something it has regularly done with other projects, including Kensington Gardens at 2220 Kingsway in November 2013. Criticism last year of a Hong Kong preview and high prices for its redevelopment of Sewell’s Marina in Horseshoe Bay led Westbank to develop a locals-first sales program that’s now a model for how Vancouver Mayor Gregor Robertson wants developers to proceed in Vancouver.
Who’s keeping shop?
Vancouver businesses pay 4.87 times the residential tax rate, the highest multiple in Canada, according to a new report from Altus Group and Real Property Association of Canada, and up 11.2% from last year. (See “Taking municipal tax ratio to task,” page 23.) This equals $2,000 a month for Sabrina Faas, owner of Bayswater Tea Co., a 1,265-square-foot shop that’s operated at West Broadway and Bayswater for more than 12 years.
Faas says the bill compounds the effect of shifts in surrounding residential properties, which are either underpopulated or left empty by new owners.
“Before, there’d be a family in the top and students in the bottom, which for me is anywhere from two to eight customers, including a huge gamut of students that need jobs,” she said.
The combination of fewer customers, a smaller labour pool and higher operating costs has pushed Faas and other West Broadway Business Improvement Association members to make hard choices. Some close temporarily or altogether; others move.
Altus Group says shopkeepers typically expect a 15% to 18% margin after operating expenses, but Paul Sullivan, principal of appraisal firm Burgess Cawley Sullivan & Associates Ltd., says Vancouver’s best eke out 5%. Preserving that means selling an extra $200,000 a year just to cover tax increases.
“[Vision Vancouver] promised a fix for the 2018 assessment roll,” Sullivan said. “Put simply they have nothing on the table to solve the problem and appear either incapable or unwilling to solve the issue for our local small businesses.”
This leads retailers one way, Faas said: “You’re stretched to such a point that you can’t do it anymore.”
