Costly project isn’t even built and already it’s cause for a party

Malcolm Parry
Sun

PUTTIN’ ON THE GLITZ: It’ll be years before the 60-floor Residences at the Ritz-Carlton tower can have jazz star Diana Krall, architect Arthur Erickson and 1,200 others in it simultaneously. But all 1,202 jammed the street-level demonstration centre Wednesday to toast Canada‘s costliest residential project with cascades of the only tipple developer Simon Lim offered: Dom Perignon champagne.

Lim respects fellow developer Peter Wall: “He brought in the tallest building, density transfers and living over a hotel.”

Wall also brought in soprano Jessye Norman and tenor Ben Heppner. Krall, smoothing an Alexander McQueen black-satin dress and aligning jeweled Louis Vuitton slingbacks with the piano pedals, she swung into Frim Fram Sauce, S’Wonderful and other songs from her The Very Best of Diana Krall album.

After modelling $41,000-worth of Badgley Mischka, Holt Renfrew and Monica Rindi mink coats in the warm scrum, Lauren Reynolds, Diane Gagne and Mary Ann Mepperlink thought it s’wonderful to be photographed outside on spacious, wintry Alberni Street.

© The Vancouver Sun 2007

Private sector and government building budgets hurting as costs rise

Derrick Penner
Sun

Inflation in construction costs will eat up about half of the growth expected in spending to build new offices, shops, schools and roads in the next two years, according to Credit Union Central B.C.

That means that while investment in non-residential construction is skyrocketing, project owners will have to spend more and build less.

“What [inflation] does,” Dave Hobden, an economist with Credit Union Central, said in an interview, “on the flip side of raising current spending, it also has the tendency to lower real growth, the quantity of investment.

“Because, at the margins, some projects don’t fly if you have that kind of inflation environment.”

Credit Union Central is forecasting that non-residential construction spending will hit $16.3 billion by the end of this year, an increase of 19 per cent from 2006, and reach $19.3 billion for 2008, another 19-per-cent rise.

However, Hobden added that with estimates for inflation in non-residential construction costs to run 10 per cent by the end of this year and rise another 11 per cent next year, inflation accounts for more than half of the gain for costs.

That rate of inflation makes it hard for both private sector and public sector builders to budget for their capital projects.

Hobden noted that governments at the provincial and federal level are running surpluses, and “can handle [inflation] without any serious harm to other types of spending.”

However, municipalities are struggling to keep up with the cost of replacing crumbling infrastructure, as well as building new roads, bridges and skating rinks.

“The thing that’s of greater concern for me is [cost] escalation on projects that have a long lead time between budgeting and the start of construction,” Tom Tim, general manager of engineering services for the City of Vancouver, said in an interview.

He added that for municipal purposes, Vancouver doesn’t put more than a Consumer Price Index inflation factor into project budgets, which in the current context “doesn’t keep up with construction costs.”

So when actual costs break budgets — such as the Trout Lake skating rink renovation, which saw costs balloon to $15.9 million from $10.9 million, and the Killarney rink renovation, which went to $16.5 million from a budget of $14 million — “after the fact, you have to come up with funding and find money from other places,” Tim said.

Vancouver will also face inflation shocks for its Burrard Street bridge refurbishment and Granville Mall reconstruction, both of which were budgeted years ago, Tim added.

And the inflation is being driven by the building boom, which is still robust by any measure.

Jock Finlayson, executive vice-president of the Business Council of B.C., said seven of the 10 fastest growing industries in B.C. are either in the construction sector, or supply construction.

“That tells you the single biggest engine driving this economy is construction,” Finlayson said.

However, Finlayson also characterized the construction sector as overheated at the moment, while B.C.’s trade sector is being hammered by Canada‘s high dollar and by the housing recession in the United States.

“It would be better for the province, going forward, if we would see more growth in the broader economy, particularly in tradeable industries,” he said.

Hobden said B.C.’s slowing trade sector is increasing its trade deficit, which means the province is importing more than it exports, but the domestic economy appears strong.

The deficit “would only become noticeable if consumer demand and domestic demand were to fall off, and we’re not forecasting that,” Hobden added. “We can continue to finance a trade deficit for many years and decades to come.”

© The Vancouver Sun 2007

They’re not even the most expensive in Canada

Marke Andrews
Sun

The cost of renting office space in downtown Vancouver climbed slightly during the past six months, and rose at a greater rate outside the downtown core. But the city still looks like a deal when compared with London, Moscow or Mumbai.

In a new report from CB Richard Ellis, the world’s largest real estate services company, Vancouver was ranked the 52nd-most expensive city in the world to rent office space, and the third most expensive Canadian city, at $49.98 per square foot per year. This is up slightly from May, the last time the survey was done, when Vancouver ranked 57th at $49.46 per square foot.

The cost of doing business in Vancouver‘s suburbs, which includes areas within the city but outside the downtown core, rose at a higher rate. Vancouver suburbs ranked 99th on the list with a rental cost of $33.46 per square foot, up significantly from the May ranking of 119th and $28.86.

 (The numbers represent gross rents, and include net rents, taxes and operating costs.)

Chris Clibbon, senior research analyst at CB Richard Ellis’s Vancouver office, said developments in the Broadway corridor and new office buildings opening in Vancouver‘s suburbs are the reasons for the spike.

“Rents on the Broadway corridor have increased quite a bit because the vacancy rate is even lower than downtown,” said Clibbon, citing a 2.6-per-cent vacancy rate in the Broadway corridor, compared with Vancouver’s record-low three-per-cent vacancy rate in the downtown core. “And in terms of new supply, there’s nothing that will change the vacancy rate [in the Broadway corridor].”

Clibbon said that new office developments in Vancouver‘s outlying areas have raised the suburban costs, because new buildings generally have higher rents than older ones.

The most expensive place in the world to rent office space is the West End of London, England, at $326.67 psf, followed by Mumbai, India ($188.22), the City of London ($179.57) and Moscow ($179.55).

The most expensive Canadian city remains Calgary, ranked 34th in the world at $64 — virtually unchanged from May’s 33rd ranking at $64.12 — followed by Toronto, 35th at $63.35.

Other Canadian cities on the list of 170 are Edmonton (57th, $46), Ottawa (64th, $44.25), Calgary‘s suburbs (89th, $37.11), Montreal (94th, $35.84), Halifax (111th, $30.23), Toronto‘s suburbs (116th, $29.50), Montreal‘s suburbs (130th, $25.27), London, Ont. (135th, $24.53) and Waterloo (138th, $24.32).

© The Vancouver Sun 2007

Growth up by19% this year and next

Gordon Clark
Province

B.C.’s record-setting building boom is showing no signs of slowing down.

Investment in non-residential construction is expected to hit $16.3 billion this year, up 19 per cent from 2006, Credit Union Central of B.C. said yesterday in its latest Economic Analysis of B.C. newsletter.

And CUCBC economist Dave Hobden is predicting that the value of non-residential construction will grow by a further 19 per cent next year and another 11 per cent in 2009.

“Forecast demand for non-residential buildings is driven by continued moderate-to-robust growth in consumer spending, office employment, real GDP and accommodation revenues,” Hobden said.

Hobden said the high growth will lead to rapidly rising costs on the projects due to “limited supplies of labour and services . . . The outlook is for demand to continue to outpace supply, leading construction costs to rise by an average of 10 per cent this year, 11 per cent in 2008 and nine per cent in 2009.”

Credit Union Central said gross domestic product from non-residential construction is expected to rise at twice the rate of B.C.’s overall GDP.

“Robust growth in both jobs and average earnings will boost labour income, while net business incomes and returns on invested capital will remain high,” the group said. “By dollar volume, about 41 per cent of current and planned non-residential projects involve an extensive variety of commercial and institutional buildings.

The Lower Mainland-Southwest and Thompson-Okanagan regions will experience the fastest growth in non-residential construction, the group said.

“Moderately robust” growth is forecast for Vancouver Island and the Kootenays while the Cariboo, the Northeast and North Coast-Nechako areas can expect “moderate growth.”

© The Vancouver Province 2007

Owner-builders have to prove proof of intent and pay a $425 application fee

Derrick Penner
Sun

The province has tightened the rules governing those who build their own homes to cut off the underground contractors who exploited the practice to build houses for sale.

Violators of the new rules will face fines of up to $25,000 under the new legislation.

The current Homeowner Protection Act requires building contractors to be licensed and provide homeowner-warranty coverage, but exempts people from those requirements if they are building the house they plan to live in.

However, the Homeowner Protection Office (HPO) estimates up to 20 per cent of the 20,973 houses built under the exemption since 1999 were houses really built for sale, with up to one-quarter of buyers who purchased the houses of builder-owners reporting defects in construction.

“[The homeowner exemption] has been abused by people who are essentially in the home-building business,” HPO CEO Ken Cameron said in an interview.

“They would build a home under the exemption, then sell it, often just after initial occupancy, then go on after the 18-month waiting period and build another and sell it, then build and sell [again].”

The Homeowner Protection Amendment Act took effect Monday. It still allows people to build their own homes, but receiving authorization from the HPO will require proof that that is their intent, and the application will cost $425.

A builder-owner has to live in a house for at least a year before selling. Then the period a homeowner has to wait before receiving another authorization to build another house will increase to 18 months for the second, three years after that for a third authorization, then five years for a fourth.

Cameron added that builder-owners will also have to disclose that they built their house and that it doesn’t have warranty coverage, then face a more specific statutory obligation making them liable for construction defects for up to 10 years after completion.

The authorization for HPO compliance officers to issue compliance orders and hand out fines will also be helpful, Cameron said. Previously the act was enforced in court, which meant having to convince Crown counsel to take the cases on and push them through an already busy court system.

“[Enforcing through the courts] has been cumbersome,” Cameron said, “The industry, the underground industry in particular, knew that and that we were increasingly toothless tigers out in the field.”

As well, the HPO will create a searchable database that prospective buyers can use to see if the houses they are looking at were built by licensed contractors or owner-builders.

The new rules were welcomed by the building industry.

“[The new rules] crack down on the abuse of the owner exemption,” Peter Simpson, CEO of the Greater Vancouver Home Builders’ Association.

Simpson said underground builders give his members, particularly the smaller firms, unfair competition because they don’t have to be licensed and pay licensing fees.

© The Vancouver Sun 2007

1963 Graham residence seen as ‘significant piece of architecture’

Jennifer Saltman
Province

The current owner of this West Vancouver house built in 1963 by Arthur Erickson on an ‘impossible site’ has applied for a demolition permit because it is in disrepair. — NORTH SHORE NEWS

The architectural marvel that Arthur Erickson has credited with kick-starting his career is in danger of being torn down.

“The David Graham house in 1963 launched my reputation as the architect you went to when you had an impossible site,” Erickson is quoted as saying in 1988’s The Architecture of Arthur Erickson.

The current owner of the house, Shiraz Lalji, has applied to the District of West Vancouver for a demolition permit because the house, which is unoccupied, has not been maintained and is in disrepair.

“I just think that whoever is making the decision should consider it very carefully,” Erickson told the North Shore News. “Of course, I would be very disappointed if it were taken down. I think it was a very fine example of a certain period in architectural history.”

The site for the house is a rock cliff dropping 12 metres from the arrival level down a sheer cliff to a rock bench over the ocean.

Many thought the lot could not be built on, but Erickson overcame the problem with a multi-storey house that descends in levels.

The wood-and-glass residence temporarily housed stars Warren Beatty and Julie Christie during the filming of McCabe and Mrs. Miller.

“It fits in with the landscape and it’s just beautiful — the setting is just gorgeous,” said Heritage West Vancouver president Carolanne Reynolds, who toured the house last week. “It is just an incredible place to be in.”

Reynolds said there isn’t much rot in the house and the shell is intact, so it could be renovated or restored.

The house is currently listed as a building of primary cultural and historic importance on one of the district’s heritage inventories, although that designation does not protect the house from demolition.

The property, valued at almost $3.5 million, was bought by Lalji in September 1988 for $925,000.

Lalji also owns — along with

his brothers Amin and Mansoor — a $524,000 condo on West 2nd Street in North Vancouver‘s

Lower Lonsdale area.

Calls to Lalji at his office at Larco Investments Ltd. — a large West Vancouver real-estate firm — were not returned yesterday.

The company owns Park Royal Shopping Centre and Whistler Village Centre, at the base of Blackcomb Mountain.

Reynolds said her heritage group, along with the district’s heritage planner, an architect with the Arthur Erickson Foundation and the chair of the district’s heritage working group, will meet with Lalji’s builder today.

They also plan to meet with a builder of their own to see what can be done to save the house.

“They’ve got to be impressed with how valuable and how significant this piece of architecture is,” Reynolds said. “It would be such a shame to lose it.”

© The Vancouver Province 2007

City’s increase higher than most in Canada, except Calgary, Edmonton

Sun

The cost of apartment-building construction in Metro Vancouver rose almost 14 per cent over the past 12 months, far ahead of national rate, Statistics Canada reported Monday.

Nationally the composite price index for apartment building construction was 156.2 (1997=100) in the third quarter of 2007, up 8.5 per cent from the third quarter of 2006.

In Metro Vancouver the index rose by 13.8 per cent, to 166.1, compared to Q3 2006, mostly the result of higher labour and materials costs arising from a strong market for building construction, the federal data agency said.

Of the seven census metropolitan areas in the index, Vancouver‘s percentage increase was topped by Calgary and Edmonton, at 18.1 per cent (to 186.8) and 17.9 per cent (179.1) respectively.

Toronto came in fourth at 5.0 per cent (157.3), followed by Ottawa-Gatineau (150.7) at 4.6 per cent. In Halifax the index rose 3.6 per cent (136.5), while in Montreal the increase was just 3.2 per cent (140.5).

The latest figures on increased apartment construction costs follow on last week’s Goodman Report, which noted that the prices that building owners pay for rental apartments in the city of Vancouver are up 18 per cent over 2006.

Based on 2007 sales in apartment buildings up to Oct. 31, the average suite in Vancouver sold for $184,644. In the suburbs of Metro Vancouver, the average apartment price rose nine per cent to $118,000.

Authors of the report, David and Mark Goodman of Macdonald Commercial R.E.S. Ltd., said in Vancouver, the biggest price increase occurred in Kitsilano, where prices rose more than 35 per cent, from $167,956 to $236,413. In Marpole, sales in the first 10 months totalled just five buildings, compared to 14 for all of 2006, and prices rose from $114,903 to $143,990.

David Goodman said he doesn’t foresee much change for Lower Mainland renters who, facing a vacancy rate of less than one per cent in the city, don’t have a lot of apartments to choose from.

“Rental buildings are a vanishing breed,”he said. “Many of these old apartment buildings are 40 years old and they’re becoming troublesome for the owners because of the high cost of maintaining them.”

© The Vancouver Sun 2007