Apartment developers paying close attention to lower building costs

Declining construction costs have piqued the interest of potential apartment developers, but have not yet pushed many into taking on new projects in Metro Vancouver, according to David Goodman of Macdonald Commercial Real Estate Services.

Statistics Canada, in its latest measure of the cost of building new apartment projects, calculated a 4.7-per-cent decline in Metro Vancouver from the third to the fourth fourth quarter of 2008.

That was the second largest quarterly drop in apartment construction costs among six major metro markets that Statistics Canada tracks.

Edmonton experienced the deepest decline at 6.1 per cent, and Ottawa/Gatineau the biggest increase at 0.9 per cent.

Nationally, Statistics Canada's composite index of apartment construction costs declined 2.8 per cent from the third to the fourth quarter of 2008.

However, builders in Metro Vancouver started work on only 729 apartment units in 2008, Robyn Adamache, a market analyst with Canada Mortgage and Housing Corp. said, which was less than four per cent of regional housing starts.

In 2007, Adamache said Metro builders started work on just 482 apartment units.

Goodman, publisher of the apartment-market-watching Goodman report, said the decline in construction prices "is getting [developers] thinking about" building rentals.

"Construction costs have come off, land prices have dropped," Goodman said, but with all the costs added up and developers aiming for monthly market rents of $1.75 to $2.75 per square foot, he said "the numbers scarcely work."

Goodman said more could be done to encourage apartment construction -- from municipal councils giving developers breaks on development costs to the federal government forgoing GST on rental construction.

(prepared by Derrick Penner/Vancouver Sun)