Not enough demand to justify building more 3-bedroom condos, says developer
18 January 2018
Should Calgary follow in the footsteps of New Westminster and mandate
real estate developers to build a certain percentage of three-bedroom
condominiums? That's an idea being floated by Calgary Coun. Gian-Carlo
Carra that's generated buzz on social media.
On Thursday, real estate developer Chris Ollenberger spoke to David
Gray on the Calgary Eyeopener to present his perspective on the idea.
Q: What's the No. 1 factor?
A: Land price is the No. 1 input to any dwelling unit, actually, within
the city of Calgary and most North American cities. Beyond that are the
usual construction costs: financing charges, interest, profit and
regulatory costs imposed by government on housing.
Q: Why would three-bedroom condos be more expensive to build than two-bedroom ones?
A: I'm going to be very simplistic. Picture an apartment building as a
tall rectangle. You have a base number of things you have to build no
matter what, before you even install the first unit. You have to buy
the land. That's biggest cost input. You have to build a parkade,
generally, so you're going down into the ground, [where] each stall
[costs] $40,000 to $60,000 per stall.
You have [to pay for] the elevator core, service shafts, stairwells,
emergency systems, life safety systems, heating systems, cooling
systems, the whole concrete structure if it's a concrete building or
wood frame building otherwise. Before you've even built a unit, there's
a very large sunk cost.
'The most efficient way to use that rectangle'
Now the most efficient way to use that rectangle I described earlier …
[is to] have units that are squares to fit in our square building, [so
that] they can occupy all of that space very efficiently. That's how
you get your lowest-cost unit. Now as you articulate buildings, and put
in dips and dives and things like that — because politicians want to
make them look prettier, and the market wants to see a better looking
building as well — you have to work around columns, you have to work
around the concrete core base. Now you're trying to manipulate
different shapes within that building in order to make them fit.
Three-bedroom [units] are the hardest to make fit.
Q: Is there a way to cut something to make them more affordable? Like, say, parking?
A: Parking is one way we could potentially look at (saving money).
There are a number of municipalities in Alberta that assign parking
ratios by bedroom count. Calgary does it slightly differently. It's
very common to have parking assigned by bedroom count—so on a
three-bedroom, you just added $60,000 for an underground stall. Even a
surface stall is probably five to $10,000, depending on land price.
'That's a conversation that might be very encouraging to have'
Q: Is there any hope for this idea?
A: We could certainly look at density bonusing — for example, if
a developer could say [to the city], "I will build more three-bedroom
apartments in my building. Will you give me more density, more floors
to build that on?" That's a conversation that might be very encouraging
Q: Is there a market demand for this product?
A: I would say there isn't tremendous demand. There's a lot of people
in Calgary that would like to raise a family in the inner city — but by
far and away most people's preferences are for ground-oriented product.
Whether it's a duplex, a townhouse or a single family [unit], because
it avoids the whole parkade, [and] condo fee, which adds to the monthly
cost that you have to pay — things like that.
The number of people out there looking for a three-bedroom
apartment/condo in a tower I'd say is relatively limited in a market
like Calgary, which is why you don't see many of them built. They're
more expensive to build and harder to sell.