The City of Vancouver is seeking approval for their annual inflationary adjustment to DCL (Development Cost Levy) rates and CAC targets.

The inflationary rate adjustment to DCLs and CAC targets are an annual process that allows the City to keep pace with annual changes in property values and construction costs.  

The proposed 2019 inflationary rate adjustment represents an increase of 5.2%, reflecting increases in the cost of land and non-residential construction costs. A core principle behind the annual inflationary rate adjustment system is that it should be able to adapt to market changes. As a result of a weakening residential market, it is recommended that this year’s inflationary rate adjustment be applied only to non-residential rate categories, maintaining existing rates for residential uses. The one exception is the phase-in of the Vancouver Utilities DCL rate for high-density residential development on the east side.

The annual inflation index since 2010 is outlined in the table below:

The 2019 rate adjustments are outlined in the following tables from the City Staff report:

The staff report outlines the following economic rationale for the inflationary rates for both residential and commercial:

Residential Market

• According to City of Vancouver data, the value of year-to-date building permits
  issued (as of March 2019) has declined by 24.1% from last year’s value;
• According to CMHC, year-to-date new housing starts in the City (as of May 2019)
  have increased by 3.8% compared to 2018;
• According to CMHC, year-to-date new housing absorptions in the City (as of May 2019) have declined 20% compared to 2018;
• UDI’s State of the Market report for Q1 2019 also showed that sales across new
  concrete condominiums, wood frame condominiums, and townhouses have
  declined to some of the lowest levels observed in Vancouver since Q1 2013 and that inventories of unsold units are trending upward;
• UDI’s State of the Market report for Q4 2018 indicated that new tax measures and stricter mortgage lending policies have contributed to uncertainty and pessimism in the Metro Vancouver market from real estate investors;
• According to data from the Real Estate Board of Greater Vancouver (April 2019),
  resale home prices have declined year-over-year for all housing types in all locations of the region. In Vancouver, year-over-year resale prices are down between 9% and 14% depending on the location and type of housing.
  .
  Non-Residential Market
  • Colliers, Cushman & Wakefield, and CBRE indicate strong demand for office space with vacancy rates reported as low as 2.0% in Downtown Vancouver along with high amounts of office floor area absorption and increased average asking rents. There is also a large amount of supply anticipated for completion in the early 2020s with large multinational tech firms opening new offices in Vancouver.
  • Colliers, Cushman & Wakefield, and CBRE also report increased demand for industrial floor space with vacancy rates reported as low as 1.9% in Vancouver. New supply is being constructed featuring a mix of ground floor production space and office on upper levels.

Target allocations of DCL revenues are estimated as follows:

• Replacement housing – 36%
• Transportation – 25%
• Parks – 18%
• Childcare – 13%
• Utilities (Upgrades for Affordable Housing) – 8%

A full copy of the 2019 Annual Inflationary Rate Adjustment to Development Contributions and Associated DCL Amendments can be viewed here: http://council.vancouver.ca/20170725/documents/p8.pdf

The City of Coquitlam Council will receive a report next week for information and feedback regarding residential density and land use transition approach for the City Centre Area Plan (CCAP) Update. The planning update got underway last year, and it is anticipated that a draft plan will be presented to Council in Summer 2019.

The original CCAP was developed in 2008, and updated with a Transit Oriented Development Strategy in 2012. This update was initiated to capitalize on the Evergreen Line, with an intent to prioritize high density development around the new station areas. The City Centre update projects 24,000 new residents by 2046.

The focus for proposed new residential density will be broadly defined in two separate areas:

Core Area 

The majority of land use changes to the existing 2008 CCAP are proposed around
the Coquitlam Centre and Lincoln Skytrain stations. Currently, the maximum permitted density for all residential and commercial uses under the City Centre Commercial land use designation (C-4 zone) is 6.5 FAR inclusive of density available for affordable housing, with a 0.5 FAR commercial floor space requirement. It is proposed that a maximum FAR of 6.5, inclusive of density available for affordable housing, and a 1.0 commercial FAR requirement be applied in the Commercial Downtown Core until a comprehensive review of the City’s density bonus program is completed. 

The City separately reviewed commercial densities in a discussion paper released last month in which an increase in minimum commercial densities in the City Centre was recommended.

For areas designated as City Centre Commercial outside of the Commercial Downtown Core, the existing 6.5 FAR maximum, inclusive of density available for affordable housing, and 0.5 FAR commercial floor would be maintained.

Shoulder Area

Outside of the Commercial Downtown Core and City Centre Commercial designation, a combination of high and medium density residential rounds out the residential density and land use transition.

High density residential allows up to a 5.5 FAR, inclusive of density available for
affordable housing, under the RM-6 zone without any height limit and the medium density land use allows up to a 2.64 FAR, inclusive of density available for affordable housing, under the RM-3 zone with a height limit up to 8-storeys.

To provide a transition to the adjacent lower density neighbourhoods, site
specific height limits are proposed for high density (20-25 storey) and medium
density (4-6 storey) residential areas. Although proposed residential land use changes are primarily within the CCAP Focus Area, staff recommends a land use change for the area east of Inlet Street and south of Tahsis Avenue from low density apartment residential and townhousing to medium density with a 4-6 storey height limit.

A medium density land use form with a 4-6 storey height limit in this area will serve as a transitional land use between the Commercial Downtown Core and peripheral areas in City Centre and blend into adjacent established, lower density neighbourhoods.

A draft plan will be developed with a final round of public consultation and council consideration later this year.

Further detail on the City Center Area Plan update can be viewed on the City of Coquitlam’s website, here: https://www.coquitlam.ca/planning-and-development/resources/special-plans-projects/city-centre-area-plan-update

2018 has been another record year for land sales in Metro Vancouver approaching $5 Billion in total sales value, surpassing both 2016 & 2017, with $4.5 and $4.4 Billion respectively. This record year is really the culmination of several large deals which were marketed and negotiated prior to the market cooling down earlier this year.

Here’s a look at each of the 10 largest land deals of 2018:

1. 9850 Austin Road, Burnaby

• Price:                   Approx. $220 Million*
• Site Area:            4.1 acres
• Vendor:               Greystone
• Purchaser:          Pinnacle International

The goods:        The largest land deal of 2018 is one you might not even have heard of. The sale comprised a large site adjacent the Lougheed Skytrain Station on the Burnaby side of Burquitlam that the City of Burnaby designated as High Density Mixed Use within the Lougheed Town Centre Master Plan. Density may range from 2.2 FAR to 5.0 FAR for RM5s zoning districts and 6.0 FAR for C-3 zoning districts. The site was listed and sold by Cushman & Wakefield. (* – the exact purchase price could not be verified due to share sale. The deal also included an unspecified VTB).

2. Burnaby Saputo Site, 6800 Lougheed Highway, Burnaby

• Price:                  $209 Million
• Site Area:           19 acres
• Vendor:               Saputo
• Purchaser:          Peterson Group

The goods:          The second largest land deal of 2018 was the sale of Saputo’s 19-acre Burnaby plant to Peterson Group was completed in October for $209,000,000. The site had been listed by Cushman & Wakefield in early 2017 and the transaction involves the relocation of Saputo’s dairy plant operations to a new processing plant on a 20 acre site on Kingsway Avenue in Port Coquitlam, which is expected to be completed within the next three years. In the interim, their sale deal with Peterson envisions a lease back until their new plant is ready in 2021. Rezoning and development plans have not been released but a large-scale mixed use development is anticipated.

3. 1045 Haro Street & 830-850 Thurlow Street, Vancouver

• Price:                  $165 Million
• Site Area:           43,266 SF
• Vendor:               Strata
• Purchaser:          Private Investor

The goods:          This sale involved the wind-up and sale of a 160 unit strata building, along with commercial units at the corner of Haro Street and Thurlow Street in the West End. The site sits in a newly formed tower zone as part of the West End Community Plan.  A rezoning application will be required before development can occur.

4. 8671-8831 Cambie Road and 3480-3540 Sexsmith Road, Richmond

• Price:                  $147 Million
• Site Area:           12.4 acres
• Vendor:               RCG Group
• Purchaser:          Polygon

The goods:          This land assembly by Polygon creates a great development site on the Eastern edge of Richmond’s City Centre Area. The assembly was the precursor to a rezoning application which envisions over 1,200 residential units and retails space in six buildings.

5. 1640-1650 Alberni Street, Vancouver

• Price:                  $130 Million
• Site Area:            17,292 SF
• Vendor:               Hollyburn Properties
• Purchaser:          Landa Global

The goods:         This tower site was owned by well-established family-owned Hollyburn Properties who had planned to rezone the site for a 42-storey rental building. With valuations for condos at an all-time high, Hollyburn wisely decided to sell the site through Simon Lim and James Lang of Colliers. While a new rezoning application has yet to be filed, the site will almost certainly now become a mix of condos and rentals.

6. 1063-1075 Barclay Street, Vancouver

• Price:                  $113 Million
• Site Area:           17,292 SF
• Vendor:              Westbank & Bosa Properties
• Purchaser:         Grand World Holdings

The goods:         Another tower site in the coveted West End Community Plan, this assembly of separate strata buildings reached a stalemate between developers who decided to sell together, rather than to each other. Simon Lim of Colliers sold the site in May 2018 to a Hong Kong based investor/developer. The Globe and Mail detailed the sale in March 2018.

7. “Park West”, Capilano and Marine, North Vancouver

• Price:                 $98 Million
• Site Area:          1.9 acres
• Vendor:              Pacific Gate Investments
• Purchaser:         Keltic Canada Development

The goods:         This 1.9 acre site at the corner of Capilano Road and Marine Drive in North Vancouver was rezoned by a group of local private investors over a period of years to allow a 258-unit, two-tower development that was ultimately named “Park West”. After rezoning enactment, the site was sold to emerging developer Keltic Canada. Park West is now in the advanced stages of marketing with over half the units sold.

8. 101 East 69th Avenue & 86 SE Marine Drive, Vancouver

• Price:                  $90 Million
• Site Area:           12.5 acres
• Vendor:              Walmart Canada
• Purchaser:         Hungerford Properties

The goods:        This site was sold by the Colliers team of David Taylor, Roy Pat and Darren Cannon in February 2018. The vacant site was owned for several years by Walmart Canada who ultimately sold via off-market transaction to Hungerford Properties who has quickly become one of Vancouver’s pre-eminent industrial and commercial property developers.

9. 5720-5800 Minoru Boulevard, Richmond

• Price:                  $60 Million
• Site Area:           3.899 acres
• Vendor:              Private Investors
• Purchaser:         Thind Properties

The goods:        This sale represents an assembly of various industrial and commercial buildings in the Lansdowne Village subearea of the City of Richmond’s City Centre area. A subsequent rezoning application envisions a new development with 384 residential units and a total density of 3.0 FAR.

10. 6645 Dow Avenue, Burnaby

• Price:                 $59 Million
• Site Area:           40,946 SF
• Vendor:              Private Local Investors
• Purchaser:         Westorchard Properties

The goods:       Also sold by Simon Lim of Colliers, this is Metrotown’s last RM5s/C2 Development site on Beresford Street – 40,946-SF Metrotown development site. The property is currently improved with a 40-unit apartment building, providing stable holding income through the rezoning and entitlement process.

*Note: The adjacent 34,650 SF site at 6675-6691 Dow Avenue also closed recently to the same buyer through Mark Goodman. The sale price was $43,275,000. The $102 Million combined price tag would create one of the largest deals of the year.

Honorable Mentions

These ones just fell off the list (via later edit) or are technically longer term land plays:

1140 Pendrell Street, Vancouver

• Price:                 $57 Million
• Site Area:          30,261 SF
• Vendor:              Strata
• Purchaser:         Skyllen Pacific

The goods:        This West End development site was sold by Hart Buck and Jennifer Darling of Colliers in September 2018 after a listing process. The Property, improved with an older lowrise strata building, is zoned RM-5B which allows for immediate redevelopment for up to 2.75 FSR density. Under the current zoning, the land price equates to $687 per buildable SF.

443 Seymour Street & 605-621 Seymour Street, Vancouver

• Price:                 $100 Million
• Site Area:          18,720 SF
• Vendor:              Private Investor
• Purchaser:         Reliance Properties

The goods:       This parkade (known by many locals as the Goldie’s pizza building) was sold via off-market transaction to well known commercial owner/developer Reliance Properties in July 2018. The site is anticipated for redevelopment with a new office building approximately 30 storeys in height.

Some notes from the above list:

• Only 4 of the 10 largest land deals in Metro Vancouver took place in the City of Vancouver (down from 9 of 10 last year)
• 7 of 10 were sold by market bid process (the other 2 were ‘off-market’)
• 5 of 10 were bought by well-established ‘local’ development groups, the other buyers were offshore or ‘new-entrant’ development companies
• 7 of 10 will require a rezoning process before development can occur