Economy putting chokehold on luxury highrises, too
By Jason Buckland, Sympatico / MSN Finance
If you live in a major Canadian city these days, chances are there’s a prime piece of downtown real estate ensconced in scaffolding and ready for construction.
Only, look a bit closer next time. There’s probably not much going on. What you’re seeing is the illusion of development.
It’s become fairly well-documented now just how the economy’s freefall has stalled construction on big-ticket highrises and luxury skyscrapers across the country. What’s interesting is just how bad the problem has gotten.
In Toronto, sitting at the crossroads of the city, is a gaping expanse at the corner of Yonge and Bloor Sts. Advertised on its website as the future site of “Canada’s tallest residential condominium/hotel/retail development,” construction doesn’t seem to be going anywhere as, presumably, investors (from Russian oil money) had to rear back on financing when the downturn hit.
What’s been left behind is a scar on the city impossible to ignore. Cranes and concrete are par for the course down on the city’s waterfront – as new condos go up seemingly each week – but this is the heart of Toronto we’re talking about. A once-popular corner with a great burger joint I used to go to, those store-fronts were destroyed to make room for the 1 Bloor St. behemoth, only to be insulted by nothing popping up in their place.
And while some locals are pondering what could be done with the space (like, say, a cool civic square), it’s grown clearer and clearer that the Big Smoke isn’t the only city with this problem.
Vancouver’s $500-million, 60-storey Ritz-Carlton hotel and condo tower has been kaboshed indefinitely, too. Financing during the global credit crunch seems to have evaporated, forcing developers to refund pre-purchased units to their buyers at prices as high as $10-million.
In Chicago as well, south of the border, construction has wheezed dead on a proposed 2,000 foot tall skyscraper. The Spire, it’s called, would be the largest tower in the Western hemisphere.
But since January, like similar projects all over the world, there now sits a vacant hole where the Spire is to be built – an opening this economy won’t allow to be filled.
Posted by: jk | Mar 25, 2021 11:47:45 AM
The Yonge Bloor travesty, a combination of NYC based Lehman Brothers' financial genius and Bazis International (Bazi International), a Kazakhstan company, originally conceived to give the corner of Yonge and Bloor a facelift with a sleek 80-storey tower combining condominiums, a hotel and high-end stores, is now a hole in the center of Toronto. A parking lot I expect where there were once thriving businesses. Known as Roys Square now we have the look of an open-pit mining site. There probably should have been a clause in the original deal to make something nice, yes a park, call it "Travesty Park" with large fountain - Tevi like fountain - and flowers and trees in the event the actual project is abandoned. But really, .. 80 stories!? Who will be able to see its full "grandeur"? Not from the street! Maybe it should be built in Paris? No wait, Paris won't allow such monstrosities. In any case, I doubt we will ever see it built here so Plan B, C, D etc may be an option. Oh yea, I forgot. There isn't a Plan B , C or D etc. Good work folks! But in truth the whole thing was an "eye sore" from the start. Oh wait .. other than screwing everything up, there is no start.
Posted by: Wayne | Mar 25, 2021 11:49:55 AM
I am glad to see the luxury condos are having financial problems. I hope the developers and investors lose their shirts.
Posted by: Small-scale BC Developer | Mar 25, 2021 12:24:17 PM
I am a small-scale BC Developer, specializing in small, high-quality, but modest-sized homes. For too long now, there has been an oversupply of massive condo projects in BC. There are both benefits and detriments to the principle of buildings condominimum, both fiscally and environmentally, but they really have had their day...
Yes, it's a way to maximize density, therefore, squeeze out the profit; and, also, a way to fit as many people into a small-space as possible (good for the environment because it means more people living in downtown cores close to public transit). However, and it's a BIG however - condo living is unpalletable, therefore the Developer is forced to go up-scale to make condo living APPEAR to be desirable. They have to make it appear to be a "lifestyle-choice", and fill it with toys, which, inevitably, put-up the price! It's a case of the old saying - you can't have your cake and eat it too. The question is, "is that really a flavour of cake which we want to eat?" I don't think so.
When I say that condo living is unpalletable, who REALLY wants to be beholden to the whims and fancies of 300 of their neighbours?!?!?! The whole idea of being ruled by a massive Strata Association makes most people quake-in-their-boots, not to mention the long-term financial implications of having to pay into "contingency funds". The current situation with the way contingency funds are set up JUST DOESN'T WORK. No excuses for it, the way the law is written on this subject is LUDICROUS!!! I'll give you an example: - So, I'm an owner of a single-family home, and I buy my house new, and live in it for 10 years. When I go to sell my home, what would my reaction be if the prospective purchaser demanded that I cut them a cheque for $10,000 in anticipation of the fact that in a further 10 years from now, the roof might need to be repaired? "Go take a flying leap buddy!" And yet THAT is exactly what we ask of condo owners - that year-in-year-out, during the lifetime of their ownership, they pay into a non-reimbursable contingency fund, in order that sometime, down the road, a future owner may benefit!!!
In some jurisdictions, stakeholding in the contingency fund is considered a paper asset, which is sold-on to the new owner at face value, ensuring - that a) there will be enough in the fund to deal with contingencies, but also - that b) owners are not paying out for repairs not carried out during their ownership. Older strata properties are proportionately cheaper in recognition of the fact that purchaser must fund not just the purchase price of the unit, but also the reimbursement of the stakeholding! The system works, and it's far more fair.
All-of-the-above not-withstanding, the highly-flawed zoning process in BC is primarily responsible for the condo mess which we're now seeing. And why? Well, a Developer must spend massive amounts of time and resources in order to navigate the re-zoning process, so they are going to make sure that it is actually going to PAY! If you're a doctor, or a lawyer or a teacher, or a scholar, you get paid for the work that you do, don't you? You provide your effort, and your expertise, and you are financially compensated for it. Well, why should it be any different for Developers. We are the ones responsible, ultimately, for ensuring that there are enough homes to live in (at least for those who can afford to buy homes, but even for those who can't, there still needs to be enough housing stock to be able to find a place to rent). We are compensated for utilizing our time, expertise, and organizational skills to provide homes to people. It's called making a profit. It's not a sin to earn money.
We can, however, choose to waste 2.5 years and approximately $25,000 in funds in order to battle to re-zone a single-family lot to a duplex (gaining one low-impact in-fill unit), as recently evidenced by a real-life case in Victoria City, or we can spend the same amount to battle to re-zone to a high-density condo unit, and (gain 300 high-impact units). The zoning process places the same ridiculous burden on us as "Developers", whether we are proposing small, high-benefit, low-impact schemes, or large, low-benefit, high-impact schemes.
Which, would you, Mr., Mrs. & Ms. Public prefer to see more of - small-scale, high-quality, low-cost in-fill, - or - alternatively, massive high-priced, condo blocks. If your answer was small-scale in-fill, then you need to let your politicians know that under the current BC legislation, the legislative burdens on small-scale development, and the prohibitive road-blocks in the zoning process will positively ensure that there is NO financial incentive to Developers to build the homes that YOU actually want to be able to buy! Unfortunately, therefore, small-scale Developers like me who want to provide high-quality, reasonably priced homes are few and far-between. Not because all Develpers are greedy, but because some are just realistic!
Posted by: TB | Mar 31, 2021 4:07:51 PM
It saddens me to once again have a journalist blow everything out of proportion. So ONE condo isn't going up. What about the hundreds of others that are and who wants to live in a box anyway. This isn't China! This is Canada and I think we can make condos larger that 500 sq ft and all for a reasonable price. I am so sick and tired of everything being over priced. So does anyone elso agree that maybe the recession is right on time? Housing is overpriced, too many people are overpaid and executives with private jets just about sends me over the edge. Consumers are fed up with being gouged!!!!!