What drives high cost of building a Vancouver condo? (BIV, 14-Jan-2016) Useful reference numbers.

Construction Cost Guide 2016, Altus Group, BIV 14-June-2016(Updated) Business in Vancouver carries a short article that provides useful reference numbers for discussions about the cost of new condos in Vancouver — and presumably these numbers would apply to the types of buildings being constructed for both rental apartments and strata condos.

What drives high cost of building a Vancouver condo? (By Frank O’Brien, Business in Vancouver, 14-June-2016)
https://www.biv.com/article/2016/6/what-drives-high-cost-building-vancouver-condo/

Below we take the main points, in bullet form. For the full text please visit the article. Data are from the 2016 Construction Cost Guide prepared by Altus Group. The Cost Guide is available for download if you provide contact information.

  • Construction costs per square foot
    • Typical highrise concrete condominium in Vancouver range from $210 to $270.
    • Typical low-rise, four-storey wood-frame condominium would cost from $130 to $165.
  • The land component for a multi-family strata development could add from $200 to more than $400 per square foot of buildable space, depending on the location (source: a study of recent deals by RealNet Canada).
  • Example: A 1.3-acre multi-residential site on West 8th Avenue in Vancouver bought by Delta Group in February 2016 for $70 million. Land zoned for floor space ratio of 3.0, or nearly 170,000 square feet. Considering gross buildable square footage cost is approx. $412 per square foot. “Cost of completing a highrise condo tower in just land and construction costs would be in the range of $660 per square foot. Building a high-quality, four-storey wood frame condominium project on the same site would require hard costs, for land and construction, of around $560 per square foot.”
  • Altus Group annual construction cost guide excludes “soft costs,” including land, property taxes, community amenity contributions and other municipal fees, site servicing, legal fees, design, landscaping, advertising, marketing, broker commissions and any developer profit.
  • A fall 2015 study for the Urban Development Institute by Urban Analytics found that new concrete condominiums downtown were pre-selling for an average of $1,100 per square foot and topped an average of $825 per square foot on Vancouver’s west side.

The above figures are from the perspective of construction and profits. A lot more than land and construction costs affects affordability. CityHallWatch readers are pointing out other aspects to this discussion. See comments by Brendan further below regarding parking costs, etc.

Another reader e-mailed to ask these questions:

  • What are the environmental costs (carbon footprint, etc.) of high-rise concrete vs low-rise wood?
  • What are the maintenance costs of high-rise vs low-rise over the life of structure, including strata fees, special levies, and so on.
  • What are environment costs of replacing high-rise concrete vs low-rise wood at end of life?
  • What does the speculative factor add to costs if speculators expect Council will easily rezone land for a high-rise?
  • How often are mountain views resold over and over and what does that add to land costs?
  • Until planners can answer all these and provide valid price-comparison units why should Council approve high-rise towers if the end result is supposed to be affordability?

4 thoughts on “What drives high cost of building a Vancouver condo? (BIV, 14-Jan-2016) Useful reference numbers.

  1. I just took a look through the Altus guide, and it says the ‘hard’ construction costs that you have cited include underground parking, and I immediately thought they looked too low.

    You’re going to need to add about $50 – $75 per square foot to all the ranges to come even close to the costs incurred to build downtown. Parking stalls are crazy expensive these days.

    For soft costs, most developers will not include CACs in that calculation, and treat it as a separate line item since it’s never the same on any project, and really it’s more or less a sub-item to add to land costs since you’re paying the CAC in exchange for density. Soft costs (excluding land and CACs) are typically about 25-32% of the ‘hard’ construction costs, and financing will add another 5% of hard costs.

    So to build downtown, on a site that has no CAC (assume no upzone), you’re going to be about $325 hard + $100 soft + $15 financing + $400 land = $840 per buildable.

    Now, remember you can only sell about 83-84% of your building because you can’t sell the lobby, hallways, elevators, and stairs, so you’re really building for about $1,000 per sellable square foot. Assuming you want to make a profit of 15% of costs*, you need to sell for about $1,150 per square foot.

    As a bit of a further add on to this, to understand why it’s so hard to build rental downtown, you can basically only pay about $180-200 per foot for land – maybe even less – even for buildings that would have the highest rent in the city (by that I mean $1850 for a 500 square foot 1 bedroom). Not a lot of land owners are willing to sell their land for half the value someone else will give them to build condos. This is why the City gives breaks on fees or CACs for those building rentals, even ones most people might think are high end. Without those breaks, no rental will be built to the enormous value gap between building condo instead of rental.

    *industry standard. The City recognized this as acceptable profit margin for CAC negotiations.

    • Thanks for the additional commentary, Brendan. To understand the affordability challenges in Vancouver the more people who have literacy in these things the better.

      • Big takeaway that everyone should understand is that even if land were free, a 800 square foot two-bed condo can cost up to ~$490,000 or $610 psf (still talking downtown, so this is the high end), which is probably more than a lot of people think a condo should cost even when accounting for land.

Leave a comment

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s