Economic conditions might not be ideal, but the proponents behind two of Victoria’s largest mixed-use developments insist they are still forging ahead with the projects.
Both Focus Equities, which is behind the Roundhouse project in Vic West, and Starlight Investments, which has plans to re-imagine a large swath of the Harris Green neighbourhood, say despite the headwinds of high interest rates and the rising costs of labour and materials, the projects remain on track.
Ken Mariash, principal at Focus Equities, said after devoting more than 25 years to the Roundhouse project he’s not about to fold his tent.
“I might as well finish the thing,” he said.
Howard Paskowitz, Starlight Investments vice-president of development, said they intend to start construction on the 1000-block of Yates Street before the end of this year.
That kind of confidence has not been flowing freely in the development community.
Kathy Whitcher, chief executive of the Urban Development Institute, a national non-profit association of the development industry, said the economic landscape is troubling.
“The economics are not working still and yet municipalities continue to bump up fees,” she said, noting Victoria recently adopted new development cost charges that in some cases could more than double the fees developers pay for required infrastructure upgrades to handle new development.
“Developers are starting to pull out,” she said, noting many projects have been on the edge of either going ahead or put on pause. “I’ve heard a few developers have pulled right out of the business.”
Whitcher said for some developers in Victoria the future of their projects depends on where they are in the process.
If the projects aren’t far enough down the road they may get hit with the increase in development cost charges which could tip them into unprofitable territory.
Developer Mike Miller, founder of Abstract Developments, said he knows of some developers who are on the edge and in danger of going out of business, while there are a lot of projects that are forging ahead with no hope of finding a profit at the end.
He said the cost of construction is the biggest killer, followed by interest rates.
Miller said inflation since the pandemic has all but wiped out the profit margin in many projects, including at least one of his own.
“In one instance I hope to get out even at the end of the project,” he said.
Miller said a lot of the projects currently underway were committed before the costs started to increase, and with any delay along the way the chances of making a profit ebbed.
Miller, who has 300 residential units being built at six locations, with another 500 units planned, said there may be some relief with the central bank cutting interest rates.
“That will help with consumer confidence,” he said.
The Roundhouse project, which includes 1,870 residential units in nine towers ranging from 10 to 32 storeys, was given approval by Victoria council in January.
Mariash said work on the site at 251 Esquimalt Rd., 210 Kimta Rd. and 355 Catherine St. is dependent on working out details and ironing out wrinkles with the city.
While he had hoped to get shovels into the dirt this year, he does not expect an agreement with the city until the end of this year or early next.
He admits in any other city he may not be forging ahead having spent millions in carrying costs for the site he bought 25 years ago.
“If someone had told me it would be $200 million and not $50 million, who knows,” Mariash said. “When I started this I was 49, now I’m 77.”
Starlight’s Paskowitz would only say that “plans remain on track with the development of Harris Green Village.”
That project, approved in the spring of 2023, aims to reimagine the 1000 and 900 blocks of Yates and View streets in a project that’s expected to unfold over three phases.
The plan is to tear down all the commercial buildings on the two blocks to make way for a project that will include five residential towers with about 1,500 rental suites, about 100,000 square feet of commercial buildings, and green space.
The first phase of the project, at 1045 Yates St., which used to house an auto dealership, will have purpose-built rental residential towers of 21 and 20 storeys, nearly half an acre of green space for a community park, a daycare and retail. The old buildings are demolished, but the site has been largely idle for months.
Rory Kulmala, chief executive of the Vancouver Island Construction Association, said the industry has been working flat out for years with the push to add housing everywhere and it may be running into a capacity issue.
“We’ve got a lot of big projects that are either going or are wrapping up and until we kind of finish what’s on our plate, it’s pretty tough to kind of go back to the buffet and load it up again,” he said. “Ultimately there’s a tonne of work that has to be done, but our labour force hasn’t really changed in 15 years.”
Kulmala said the construction tempo has more than doubled at the same time, so they are doing more with fewer bodies.
“We can only build so much, so fast right now,” he said.
