I have a photograph taken in 2006 of a row of red brick buildings on the edge of Chinatown, tinted golden in the sun, a striking composition showing part of the 500-block Pandora behind Swan’s Hotel. Condos should be standing there now.
The site is even more artistic now. Someone sowed poppies and other sun-loving flowers on the dirt and, over the summer, the property bloomed, a colourful contrast with the propped-up façade of an old Chinatown building to the side, all that was left standing after a fire.
There’s such an unprecedented level of construction activity in Greater Victoria that it’s easy to overlook one aspect of the long-running building boom: there is a growing number of holes in the ground and demolition sites where nothing at all is getting built.
It’s not like the development bust of the early 1980s when a spike in interest rates slowed construction and, yes children, house prices actually declined. Back then, some half-finished buildings were stalled for years and the corner of Bay and Blanshard was an excavation that filled with water in the winter.
The development industry is uncertain even in normal times. Lots of proposals get floated; not as many projects are completed. But we’re in the midst of a real slowdown, initiated by the credit crunch that started in the U.S. and worsened with the oil price escalator ride. The individual reasons for projects not proceeding are varied.
The Pandora property in the photo was going to be the $50-million Bambu condo project, two seven-storey buildings with 162 loft-style apartments, live-work spaces, and retail stores. Amadon Group pulled the plug after deciding the building costs made it too expensive to build at the promised prices, refunded buyers’ deposits, and sold a majority interest to another Vancouver developer, Anthem Properties. The buyer owns Market Square across the street and lots of other commercial property around B.C.
“Definitely it’s a concern, more so a concern when it’s properties where buildings have been demolished,” says Councillor Charlayne Thornton-Joe, the Victoria councillor who represents downtown.
Bambu’s cancellation was also disappointing as the site at least provided parking before excavation started.
“I’m not a big fan of surface parking lots but it was serving a purpose,” she says.
She’s also disappointed about the inactivity on the north side of the 700-block Yates Street, where three commercial lots are just growing weeds in a hole, although the graffitied wooden hoarding at the edge of the sidewalk has been repainted with new quotations.
“That’s definitely a concern. That one was going to be exciting because it was going to be residential and commercial.”
Thornton-Joe isn’t out to blame anyone: “Development is a risky business in itself.”
Likewise, the former Mayfair Lanes bowling alley property is empty, now just a place for skateboarders after the building was pulled down in 2006 and the hardwood floors were recycled. Great Canadian Superstore was planning a store there, but it’s on hold.
“We are committed to the project and we do own the land,” Tara Dudar of parent Loblaw told the Times Colonist 15 months ago. In July, head office said the same thing: “We do own land in the area; however, plans have yet to be finalized.” By now, the giant grocery outlet would have been open, but Wal-Mart’s new superstore rising at Town and Country is going to be first in the neigbourhood.
Of similar vintage as Bambu is a 99-unit project on Wilson Street in Victoria West called the Wing. It’s coming up on four years since construction stalled on the pair of four- and six-storey buildings. Developer Fernando Costa went into receivership and Gibraltar Management of Calgary, which provided him with $12 million in construction financing, assumed ownership and has tried to sell it. There has been talk of demolishing the partially finished buildings and starting over from scratch.
Some newer projects have joined the development delay list. Radius is one of downtown’s superstar development projects, a mix of offices, condos, and commercial space, the kind of mixed-use project that everyone likes because people will work and live, dine and shop in the neighbourhood. Unfortunately, work stopped at the site on Blanshard across from the arena early this year and developer John Schucht had the property up for sale over the summer. When the former chairman of Canada Trust and a director of EllisDon, Canada’s biggest construction company, and the construction manager on Radius, backs away from a $165-million development, you wonder if any big project is secure?
“We are in negotiations for another party to acquire Radius and I don’t really think I can comment at this time,” says Schucht. Real estate industry speculation said one deal fell through, but a second buyer might follow through.
A sale would be good news for prospective tenants like the B.C. Land Title Authority, which wanted 37,000 square feet, and University Canada West, which planned to move its campus from the former Blanshard elementary school to 30,000 square feet in Radius.
Every part of Greater Victoria has its own holes in the ground. A drive past Victoria Golf Club’s seaside links and Oak Bay’s waterfront mansions is a treat for tourists, until you come to 1175 Beach Drive. There’s a wire construction fence across the property and untended flowers and shrubs straggling out of old beds.
This was the Oak Bay Beach Hotel and, according to owner Kevin Walker, will be again. It’s just taking longer and a new team of advisors. The place was rezoned exactly two years ago now, and the old 1930 hotel was demolished in March 2007 — in hindsight, at least a year too soon. The new hotel was scheduled to open in 2009; now it’s 2010.
The key is selling the 20 condos, at prices starting at $1 million. His bank would like to see firm pre-sales in hand before any project loans. Walker says he also had to stop last year and cut out $5 million in costs. A new sales and marketing effort now is in place under Sotheby’s International.
There’s Thetis Quay, where developer Kevin Weaver got View Royal to rezone the old Victoria Plywood mill site almost four years ago not far from Admirals Walk shopping plaza. Construction has yet has yet to start. The big delay, he says, was getting a permit from the E&N Railway to cross their right of way to his waterfront property,
“Absolutely,” he’s surprised it took this long, but he believes it’s finally on the way. There’s a deal to sell the multi-family component to a builder, who has made a development permit application to the municipality.
What about the ultimate hole in the ground, the old gravel pit on Metchosin Road in Colwood? It’s known as Royal Bay, and Colwood approved the project master plan a decade ago. Aside from building a couple of hundred homes around the unexcavated edges of the site, nothing has been built in the pit.
It was under agreement of sale early this year to major house builders Remington Group of Ontario, which, after several months’ due diligence, backed away from the table.
Andrew Turner of Colliers, which has been trying to sell the 185-hectare development site for the German owners, says another buyer is lined up.
“We’re hopeful and, truth be told, they’re the right kind of entity for this.”
Why didn’t the previous bid succeed? “It usually comes down to dollars and cents.”
Overall, Turner has seen a change in the development industry. The “standard players” are still engaged, but banks are more cautious about financing very high-ratio loans for projects. There are signs that Canada is entering a period similar to the dramatic downturn in the U.S. “I do think there has been overbuilding,” he says.
Art Kool, a builder and developer in the past, is
one of the investors whom developers and homebuilders turn to for funds. The president of First Island Financial Services Ltd. says the key factor is construction costs.
“Everything has such a long lead time, when you buy the land, go before council, and face the opposition, for all the right reasons…”
Banks have tightened up lending policies; the U.S. squeeze is having an effect here too. “No question about it.”
Is it time to worry? Perhaps not yet, but I wouldn’t want to see many more additions to the list of stalled developments.