Tropical
Active Member
Thank you, and this is roughly what I understood. My question is more what CHANGED relative to the recent phase of high rise construction.
- Thread starter Daveography
- Start date
Thank you, and this is roughly what I understood. My question is more what CHANGED relative to the recent phase of high rise construction.
IanO
Superstar
Assuming that you are referring to Parks, Eleanor/Laurent, Falcon etc?
A few likely were too far along, with too much invested to pause or cancel; with the others possibly needing to deploy capital somewhere with a very long-term horizon on it.
A few likely were too far along, with too much invested to pause or cancel; with the others possibly needing to deploy capital somewhere with a very long-term horizon on it.
Tropical
Active Member
Sorry, not to go on and on. I'm not asking why these projects weren't cancelled. I'm asking what changed in the economics that shifted highrise projects from greenlit (aka. forecasted as the most profitable form), to sidelined in favor of 6'ish stories. Make sense?
IanO
Superstar
Ah yes. Construction labour and material price escalation that makes low-rise more competitive, higher interest rates ie. low-rise you can get in and out in much faster which minimizes your interest payments and the erosion of the really core 'downtown' buyer which often meant concrete high-rise.
David A
Senior Member
I believe interest rates are already coming down now and will likely continue to do so for the next year or two, so isn't the rationale of high interest rates planning for the future based on the past?
IanO
Superstar
Prime rate cuts certainly help, but individual project risk reviews can erase those gains, depending on your terms, conditions and profile.
Out of Towner
Active Member
There's substantial risk for a high rise condo developer that needs to pre-sell units to qualify for funding from a financial institution. Consider for example a developer that needs to pre-sell 70% of a project. By pre-selling their project it means that 70% of their revenue is fixed but it doesn't mean that 70% of their costs are fixed. Interest rates, material costs, labour costs, and permit fees can all escalate on 100% of the project and only 30% of the units are left to recoup the cost to complete. Selling the remaining 30% at a higher price than what 70% of the building sold for can be a challenge too. Particularly if there if there is competing product selling at the 70% price which in Edmonton there appears to be. A large well heeled developer can mitigate some of the risk of a large project with futures contracts or by off-loading it onto sub-trades. Others will often put an option clause into their pre-sales contracts that allows them to return a purchasers down payment and cancel a sale at the developers discretion.
That being said, the cost per unit on a large project is less than the cost of a small project assuming everything including land is the same because all of the basic and discretionary amenities are spread out among more units.
At the moment its the risk profiles between high rise and mid rise projects that's different.
David A
Senior Member
These current pre-sales issues are definitely not unique to Edmonton. I understand a number of projects have been cancelled in Toronto and Vancouver because high interest rates over the last two years have increased financing costs and reduced demand.
I feel this may change soon as interest rates come down, but if not I wonder about the wisdom of or success of pouring so much money into developing the Park in hopes of spurring development, if only one larger building has been built.
I feel this may change soon as interest rates come down, but if not I wonder about the wisdom of or success of pouring so much money into developing the Park in hopes of spurring development, if only one larger building has been built.
CplKlinger
Senior Member
Alberta’s booming rental market braces for change
The province has seen more than 30,000 purpose-built rental units break ground between the first quarter of 2022 and the third quarter of 2024
www.theglobeandmail.com
"Next year, Mr. Edgar plans to begin construction on a purpose-built rental project located three blocks west from Maclab’s The Parks, in downtown Edmonton. Capitalizing on the City of Edmonton’s investment to revitalize Warehouse Park, Autograph Group’s proposed 300-unit building would cater to the higher end of the rental market.
Mr. Edgar’s vision, however, is significantly different to the initial plan for the site, which included two high-rise towers and 780 rental units. 'We just feel that [300 units] is a more appropriate level of density to build on the site,' he says. 'With the demand we’re forecasting, we feel really optimistic about the success of a building of that size.'"
degrandprix
Active Member
Great news!
Since the original plan was two towers at 35 and 37 stories, sounds like they are going to just do a single 30-storey instead?
(And possibly tower 2 in the future if demand increases?)
Since the original plan was two towers at 35 and 37 stories, sounds like they are going to just do a single 30-storey instead?
(And possibly tower 2 in the future if demand increases?)
Gronk!
Senior Member
That Globe author is clearly not a local journalist. The Shift is 2 blocks east of The Parks, not 3 blocks west.
MacLac
Senior Member
That's what it sounds like OR perhaps Ian knows something as he alluded to the fact that these might be cut down to "10 storey buildings," if that's the case then maybe 3 X 10 storey buildings?
MacLac
Senior Member
Clearly not as it's a Calgary based author writing it.
MacLac
Senior Member
Where's the "It's happening" GIF when we need him?Alberta’s booming rental market braces for change
The province has seen more than 30,000 purpose-built rental units break ground between the first quarter of 2022 and the third quarter of 2024
"Next year, Mr. Edgar plans to begin construction on a purpose-built rental project located three blocks west from Maclab’s The Parks, in downtown Edmonton. Capitalizing on the City of Edmonton’s investment to revitalize Warehouse Park, Autograph Group’s proposed 300-unit building would cater to the higher end of the rental market.
Mr. Edgar’s vision, however, is significantly different to the initial plan for the site, which included two high-rise towers and 780 rental units. 'We just feel that [300 units] is a more appropriate level of density to build on the site,' he says. 'With the demand we’re forecasting, we feel really optimistic about the success of a building of that size.'"
David A
Senior Member
Well you know, 80% or more of Edmonton is NW, so it must be a bit confusing for someone from the city to our south.
Although it is nice to see while this article is about both of Alberta's major cities, Edmonton seems to get a of the coverage in it. Pardon the pun, but it feels like a bit of shift happening here.