Winnipeg | 300 Saint Mary Avenue | 14F | Mixed-use Apartments

[esquire]

Originally Posted by BlackDog204

This is happening in every city in north America. It's a direct result of the COVID pandemic. In 2019, one could argue that downtown was in better shape than at any point since the late 80s.

The residential population of down has increased each year since the late 90s.

Yes, I'm not saying that there aren't things going in the right direction. But we were arguably several rungs lower on the ladder than most Canadian cities of a comparable size, and we got knocked down that much lower. We had less to lose.

It's funny, you go to Vancouver, Halifax, etc. and hear people talk about how much the pandemic knocked those cities down. But wandering around the downtown streets there practically looks like a best case scenario dream world compared to the reality in our downtown.

[BlackDog204]

Originally Posted by esquire

Yes, I'm not saying that there aren't things going in the right direction. But we were arguably several rungs lower on the ladder than most Canadian cities of a comparable size, and we got knocked down that much lower. We had less to lose.

It's funny, you go to Vancouver, Halifax, etc. and hear people talk about how much the pandemic knocked those cities down. But wandering around the downtown streets there practically looks like a best case scenario dream world compared to the reality in our downtown.

Calgary was in big trouble by 2016, as there were several skyscrapers being built, and completed after the price of oil and gas collapsed in late 2014. Office vacancies were above 25% by 2017. covid has made the situation worse.

What works in favor of Calgary, is that the city built a slew of residential towers in the preceeding 15 years, so the downtown is more vibrant since it's always been looked as a desirable place to live.

COVID has probably made the vacancy rate worse. Combine that with the out of control meth and homeless problems, and increasing crime, it's definitely not once what it was.

[borkborkbork]

Originally Posted by zalf

No one has an oracle to consult, and two years ago was one of the most uncertain times of the last century, but one lesson from this might be that it sometimes might be better to have it fast than having it cheap. The developer might have have a revenue-earning asset right now just as he needed it most.

Also a lesson for the city about the permitting and variance processes. When the whole drawn out process of consultation with public works, community, zoning variances, appeals, etc. adds a lot of time, it changes the economics of the project.

A project approved close to its inception probably has a lot better chances of actually getting built than a project that is costed out, then spends a year before being approved, with costs soaring in the meantime...

[esquire]

^ Those delays always have an impact but I'm sure it has been exceptionally pronounced over the last 3 years. A project that might have been borderline in the spring of 2020 won't have any chance now.

[Gravity Wins]

This was the most exciting downtown project since 300 main. Now it's gone, just like that? Ah, what a joke... holding hope that someone jumps in and saves this.

[Labroco]

Very, very unfortunate…

The developer’s equity has evaporated. The quantitative surveyors should have been signing off on construction draws from the lender on a “cost to complete basis”. The contingency within the budget disintegrated and without cash for ongoing overruns from the sponsor, there could be no further construction draws.

He decided not to infuse further funds or did not have additional capacity.

One could assume most of the precast is sitting in a yard and the exterior doors and glazing is also manufactured.

Although a disaster, I am confident when the dust settles and the mortgage holder takes a haircut, The GC (Ackman) or Edison (WF) may step up and take it for their own portfolios.

Law of the jungle and in this case good bones and probably well designed by 10.

A little patience on this one…

Lots of financial pressure on the glazing and precast manufactures today.

[cllew]

I noticed coming into work this morning that the Ackman signs are all off the job site trailers. There were Ackman signs on a frame on the trailer roofs.

I wonder if the Donald / St. Mary intersection will be restored to normal as there are traffic control barricades to make a sort of office and lay down area on the north east side of St. Mary Ave.

[trueviking]

Labroco. You nailed it. There’s lots built that is not on site.

[Winnipegger]

Can someone with more knowledge than me please explain the economics of building multi-family dwellings in Winnipeg and why they seem to take so long and many projects mired in financial problems?

There are so many factors about the housing market in Canada and Winnipeg that I just don't understand how we can have a financially sustainable future for both developers and households. We know that:

1. Construction costs for housing are near all-time highs due to the lingering effects of supply chain issues brought about by COVID and a structural labour/trades supply issue that WILL NOT BE RESOLVED anytime soon;

2. Financing costs are also at recent highs due to recent hikes in interest rates. Barring (another) massive global crisis of some sort, I cannot see sizeable reductions (beyond 25bps) in interest rates within the next year or two;

3. At the same time, shelter costs (rent or owning) as a share of disposable household income is also near all time highs. I understand higher construction and financing costs will drive developers to ask higher rents which households will absorb because we all need a roof over our head. But the flip side is there is less disposable income left for everything else like food, clothing, transportation, and travel. So rents that are raised to offset construction and financing costs will lead to other parts of the economy to slow, which would lead to reduced wage growth;

4. Strong immigration, which is in part necessary to offset the aging population and declining birth rates, will continue to put pressure on housing demand but again, higher rents leave less of the consumption pie left over for every other sector;

5. Canadian and Manitoban households are among the most indebted in the western world, with debt to income ratios of about 160%. We just don't have a whole lot more room to leverage up, and increasing debt payments as a share of income means less to spend on everything else.

6. The higher period of inflation last year means real average wages have declined since 2020.

So what gives? What will the solution be? Developers can't afford to build housing at current construction and financing costs without raising rents, but rents can't move up too much since households face inflationary pressures on every front and are highly indebted already. Yet immigration must continue to prevent a shrinking labour force, and these people need a place to live too.

I just don't see how this is going to be a win for anyone, landlord or renter. Landlords can't afford to build without raising rents, and households can't afford much more rent without eating into other essential parts of their budget which will eventually slow the economy. Canada is in a very tough spot right now and the solutions (more housing supply at modest rents) are not really feasible.

[esquire]

^ Good questions. Does government have to intervene? Could this be the time for an aggressive federal housing program, i.e. actually building MURBs, and not just vague and indirect rebate/subsidy/tax credit schemes to incentivize private sector development?

[optimusREIM]

Originally Posted by Winnipegger

Can someone with more knowledge than me please explain the economics of building multi-family dwellings in Winnipeg and why they seem to take so long and many projects mired in financial problems?

There are so many factors about the housing market in Canada and Winnipeg that I just don't understand how we can have a financially sustainable future for both developers and households. We know that:

1. Construction costs for housing are near all-time highs due to the lingering effects of supply chain issues brought about by COVID and a structural labour/trades supply issue that WILL NOT BE RESOLVED anytime soon;

2. Financing costs are also at recent highs due to recent hikes in interest rates. Barring (another) massive global crisis of some sort, I cannot see sizeable reductions (beyond 25bps) in interest rates within the next year or two;

3. At the same time, shelter costs (rent or owning) as a share of disposable household income is also near all time highs. I understand higher construction and financing costs will drive developers to ask higher rents which households will absorb because we all need a roof over our head. But the flip side is there is less disposable income left for everything else like food, clothing, transportation, and travel. So rents that are raised to offset construction and financing costs will lead to other parts of the economy to slow, which would lead to reduced wage growth;

4. Strong immigration, which is in part necessary to offset the aging population and declining birth rates, will continue to put pressure on housing demand but again, higher rents leave less of the consumption pie left over for every other sector;

5. Canadian and Manitoban households are among the most indebted in the western world, with debt to income ratios of about 160%. We just don't have a whole lot more room to leverage up, and increasing debt payments as a share of income means less to spend on everything else.

6. The higher period of inflation last year means real average wages have declined since 2020.

So what gives? What will the solution be? Developers can't afford to build housing at current construction and financing costs without raising rents, but rents can't move up too much since households face inflationary pressures on every front and are highly indebted already. Yet immigration must continue to prevent a shrinking labour force, and these people need a place to live too.

I just don't see how this is going to be a win for anyone, landlord or renter. Landlords can't afford to build without raising rents, and households can't afford much more rent without eating into other essential parts of their budget which will eventually slow the economy. Canada is in a very tough spot right now and the solutions (more housing supply at modest rents) are not really feasible.

And any injection of liquidity into the market by a government wishing to subsidize housing will also drive inflation, it's a vicious cycle.

[thebasketballgeek]

Originally Posted by esquire

^ Good questions. Does government have to intervene? Could this be the time for an aggressive federal housing program, i.e. actually building MURBs, and not just vague and indirect rebate/subsidy/tax credit schemes to incentivize private sector development?

Well having 40 pages of development fees there’s bound to be some ridiculousness involved.

https://legacy.winnipeg.ca/ppd/fees/...ges.pdf#page22

For example on page 4 the area fee to build multi-family housing (including rowhouses) is double the rate to build a single-family or secondary suite per sqm when it should be the opposite.

That’s not including the development, rezoning, and variance fees which again are way too strict. This takes thousands of extra dollars that could be used for better material, larger building massing, to a better GC and labor unit, or simply just to reduce the huge burden on inflation. While it might not effect larger developers, it presents a massive barrier for smaller scale infill developers who don’t have access to nearly as much capital.

[Winnipegger]

Originally Posted by thebasketballgeek

Well having 40 pages of development fees there’s bound to be some ridiculousness involved.

https://legacy.winnipeg.ca/ppd/fees/...ges.pdf#page22

For example on page 4 the area fee to build multi-family housing (including rowhouses) is double the rate to build a single-family or secondary suite per sqm when it should be the opposite.

That’s not including the development, rezoning, and variance fees which again are way too strict. This takes thousands of extra dollars that could be used for better material, larger building massing, to a better GC and labor unit, or simply just to reduce the huge burden on inflation. While it might not effect larger developers, it presents a massive barrier for smaller scale infill developers who don’t have access to nearly as much capital.

For years Conservative voters have called for "governments to run like businesses", so 40 pages of development fees is one of those results: the government charges people for a service they provide on a cost-recovery basis, just like a business (minus the profit).

While I generally agree that excess permitting fees and red tape can present a barrier to development, it's not like inspections and enforcing building code standards is costless. And typically the larger the building, the more time and effort the municipality needs to dedicate towards checking plans and doing inspections, so it makes sense that development size is correlated with higher fees.

So unless you want the general taxpayer to subsidize developers for the cost of approvals and inspections, the current "government operating like a business" mentality has gotten us to where we are today. How many businesses do you know that provide free services to people? Probably none. Funny how conservatives want governments to be "more efficient" and "operate like a business" until, lo and behold, it actually ends up costing people money just like a business. Everyone wants to have their cake and eat it too.

[building_lover]

Originally Posted by Winnipegger

Can someone with more knowledge than me please explain the economics of building multi-family dwellings in Winnipeg and why they seem to take so long and many projects mired in financial problems?

There are so many factors about the housing market in Canada and Winnipeg that I just don't understand how we can have a financially sustainable future for both developers and households. We know that:

1. Construction costs for housing are near all-time highs due to the lingering effects of supply chain issues brought about by COVID and a structural labour/trades supply issue that WILL NOT BE RESOLVED anytime soon;

2. Financing costs are also at recent highs due to recent hikes in interest rates. Barring (another) massive global crisis of some sort, I cannot see sizeable reductions (beyond 25bps) in interest rates within the next year or two;

3. At the same time, shelter costs (rent or owning) as a share of disposable household income is also near all time highs. I understand higher construction and financing costs will drive developers to ask higher rents which households will absorb because we all need a roof over our head. But the flip side is there is less disposable income left for everything else like food, clothing, transportation, and travel. So rents that are raised to offset construction and financing costs will lead to other parts of the economy to slow, which would lead to reduced wage growth;

4. Strong immigration, which is in part necessary to offset the aging population and declining birth rates, will continue to put pressure on housing demand but again, higher rents leave less of the consumption pie left over for every other sector;

5. Canadian and Manitoban households are among the most indebted in the western world, with debt to income ratios of about 160%. We just don't have a whole lot more room to leverage up, and increasing debt payments as a share of income means less to spend on everything else.

6. The higher period of inflation last year means real average wages have declined since 2020.

So what gives? What will the solution be? Developers can't afford to build housing at current construction and financing costs without raising rents, but rents can't move up too much since households face inflationary pressures on every front and are highly indebted already. Yet immigration must continue to prevent a shrinking labour force, and these people need a place to live too.

I just don't see how this is going to be a win for anyone, landlord or renter. Landlords can't afford to build without raising rents, and households can't afford much more rent without eating into other essential parts of their budget which will eventually slow the economy. Canada is in a very tough spot right now and the solutions (more housing supply at modest rents) are not really feasible.

If the goal is more housing supply at modest rents...
The short answer is that relying on a financialized, highly speculative, profit-driven market will only ever be a disaster. We live in a house of cards.
We have to grapple with the fact that housing people is not necessarily good business, but nonetheless people believe they have the right to housing. How do we square the circle?

The state apparatus long ago abdicated its responsibility to house people, but the current trajectory will only make the situation worse. As aggregate demand drops and we enter a recession, there needs to be big, big public works spending to restart growth, and housing seems like the obvious target.

"We're all Keynesians in the foxhole"...

[Spocket]

There are a number of factors that go into the cost of housing and currently, they've combined at their most severe to create the perfect storm and made the basic necessity of housing outside the reach of the average person.

Development fees typically cost something like %40 of the cost of new housing. I don't know how accurate that is but I haven't heard differently and I'm sure it varies by jurisdiction.

Secondly, most new housing of the single family home type is of the luxury variety. Your average worker is never going to be able to afford to buy such housing. However, there are smaller units in higher density developments. The issue with those is that they get snapped up as investments which has essentially turned housing into a commodity to be traded like pork bellies. Investors (overwhelmingly domestic in the majority of the country) drove prices up to astronomical levels for a number of reasons. The interest rate hikes we've seen recently have had a minor impact on housing investment but until the government steps in with some sort of legislation, the moment the interest rates drop, they'll be right back.

Supply chain disruptions were certainly a factor but in the overall scheme, a minor one in terms of what drove housing costs up so dramatically. For that matter, in this area, supply chain disruptions are almost never cited as the driving force or even a notable factor. Perhaps it should be but nobody seems to have promoted the idea.

We also have a government that has decided to shirk its responsibility to the public in terms of housing (among so many other things) Whether we're talking about funding affordable housing, some kind of building program or whatever, all levels of government have completely failed to address the housing crisis. At most, they've provided feel-good measures and done nothing. And don't bother blaming any political stripe for this: It goes back a lot further than any government you care to name. The only blame for this now is on whoever is in charge at all levels of government no matter where they are. You'll find that it covers all of them.

[rrskylar]

Originally Posted by BlackDog204

Calgary was in big trouble by 2016, as there were several skyscrapers being built, and completed after the price of oil and gas collapsed in late 2014. Office vacancies were above 25% by 2017. covid has made the situation worse.

What works in favor of Calgary, is that the city built a slew of residential towers in the preceeding 15 years, so the downtown is more vibrant since it's always been looked as a desirable place to live.

COVID has probably made the vacancy rate worse. Combine that with the out of control meth and homeless problems, and increasing crime, it's definitely not once what it was.

Work from home, inflation, lack of amenities, changing city demographics, rampant crime = living downtown no longer attractive~

[bomberjet]

Last time I was downtown (a week or so ago), the bus shelters on Graham were still takin over by people. Sheets up on the windows, beds or couches inside, bus shelters in disgusting condition. With people lounging about. WTF. I'm not about shuffling people off to other unseen locations. But that is just unacceptable. Bus shelter are not housing. Get those people out.

[Winnipegger]

Originally Posted by Spocket

Development fees typically cost something like %40 of the cost of new housing. I don't know how accurate that is but I haven't heard differently and I'm sure it varies by jurisdiction.

This might be true in every other city that has development fees, but Winnipeg doesn't have any so no impact there. And if you are referring to permits, there is no way permits are 40% of the total construction cost. If that was the case, 300 Main would have paid $66 million in permit fees to the City ($165M construction cost). In reality, a building of that size pays about $500k to $1M in permits during construction, not $66M.

[thebasketballgeek]

Originally Posted by bomberjet

Last time I was downtown (a week or so ago), the bus shelters on Graham were still takin over by people. Sheets up on the windows, beds or couches inside, bus shelters in disgusting condition. With people lounging about. WTF. I'm not about shuffling people off to other unseen locations. But that is just unacceptable. Bus shelter are not housing. Get those people out.

Yea it was very evident when I headed on the blue line a few days ago at night. The shelter by CLC had 5 different homeless people in it cramped and trying to sleep.

Very sad state of affairs, but these people need to be housed. So much for Canada being a first world country. When I was in Amsterdam in February, I counted 3 people on the streets and I was there for an entire week exploring the entire city.

[rrskylar]

Originally Posted by bomberjet

Last time I was downtown (a week or so ago), the bus shelters on Graham were still takin over by people. Sheets up on the windows, beds or couches inside, bus shelters in disgusting condition. With people lounging about. WTF. I'm not about shuffling people off to other unseen locations. But that is just unacceptable. Bus shelter are not housing. Get those people out.

Societal breakdown with apathetic politicians unwilling to do anything!

No one should have to exist like that living in a F'n bus shelter!