BCBusiness

JULY/AUGUST 2019 BCBUSINESS 19 G O F I G U R E 13.5 megawatt-hours B.C.'s annual per capita electricity consumption in 2016 8th in Canada 9% LOWER than national average A s the Vancouver hous- ing market grinds to a halt, property developers are pulling back. Under the provincial Real Estate Development and Mar- keting Act, builders must sell about 60 percent of a project within nine months to obtain construction †nancing. Good luck making those numbers in today's market. The presale absorption rate—essentially, how many condos sell in a given month— sank to just 20 percent in April, well below healthy levels. Nervous buyers have shifted to the sidelines, leav- ing developers in a cold sweat as marketing costs mount and pro†t margins shrink. There's only so much avocado toast to give away, and right now, consumers are showing little appetite. The result is a develop- ment industry in retreat. In Metro Vancouver, builders have abandoned one out of every †ve condo units they sought approval for in 2016, Toronto-headquartered real estate services †rm Altus Group reports. That's largely thanks to the uncertainty surrounding a market where making a buck seems increas- ingly unlikely or simply not enough to o'set the risk. Abandoned projects will probably sit dormant for the foreseeable future. The same sentiment is driving the commercial property market downward. Metro Vancouver land sales plunged 50 percent year- over-year in the †rst three months of 2019, the slowest †rst quarter in more than half a decade. The bottom line: land and construction costs remain inœated despite the weakness in residential sales. This erosion in pro†t margins and the obvious downside risk are prompting develop- ers to think twice. No one should under- estimate the signi†cance of these events for B.C., where real estate and construction account for nearly 25 percent of GDP. With 9 percent of the labour force employed in the building industry, according to StatCan, if you're looking for a catalyst to slow the provincial economy, this is it. Workers are scrambling to †nish the record number of units under way, but once the backlog starts to ease, the pipeline looks pretty thin. In other words, expect less work for people in construction, many of whom migrated here for jobs. Then again, everything is cyclical. This slowdown will ease land, labour and con- struction costs, prepping the stage for the next upcycle. Chilling Developments Weak condo sales have left Metro Vancouver builders and land brokers in a vulnerable spot. Avocado toast, anyone? by Steve Saretsky P R OP E R T Y WAT C H 17,701 megawatts B.C.'s power generating capacity, 2017 11% of Canada's total electricity generation 4th-largest electric power producer in Canada, after Quebec, Ontario and Alberta Capacity expected to be added when Site C comes online: 1,100 megawatts 2019 2018 2017 2016 2015 2014 0 100 200 300 400 In 2016, B.C.'s total energy demand was met by 69% 19% 12% FOSSIL FUELS ELECTRICITY BIOFUEL (WOOD WASTE, ETC.) ESTIMATED GENERATING POTENTIAL OF 1,000 TO 3,000 MEGAWATTS ESTIMATED CAPITAL COST FOR A 100 MW GEOTHERMAL PLANT $400 MILLION PROSPECTIVE GEOTHERMAL ENERGY SITES IN B.C. 16 Not Buying It Vancouver condo presale absorption rate Commercial Break Metro Vancouver Q1 land sales 0 25 50 75 100% Jan 2018 Feb 2018 Mar 2018 Apr 2018 May 2018 Jun 2018 Jul 2018 Aug 2018 Sep 2018 Oct 2018 Nov 2018 Dec 2018 Jan 2019 Feb 2019 Mar 2019 S O U R C E S : M L A A D V I S O R Y, S A R E T S K Y G R O U P S O U R C E S : L A N D T I T L E A N D S U R V E Y A U T H O R I T Y O F B .C ., S A R E T S K Y G R O U P

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