The High Demand for Townhomes
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Courting townhomes Mosaic Avenue Realty Ltd. has picked up a 7.1-acre development site in the Baycrest area of Burke Mountain in Coquitlam from Harwood Group for $15.3 million.
Mosaic must rezone the site prior to starting construction, but Coquitlam planning documents allow approximately 115 townhomes on the site, making it a rare opportunity for developers. The exclusive nature of the offering contributed to strong demand and pricing. Bids were received from eight parties, representing a broad spectrum of developers and investors.
“You can’t find that mass, pretty well anywhere north of the Fraser,” said Owen Yates, a partner in Frontline Real Estate Services Ltd., which represented Harwood in the transaction. “Townhouse is the form of development that everybody is seeking at the moment, and it’s hard to find sites and hard to make the numbers make sense on a lot of these assemblies.”
In this case, the availability of a single large site designated for a specific use made the opportunity appealing.
While the property has some constraints, including power lines crossing it and a need to realign roads to maximize the developable area, Yates said there’s plenty of upside for Mosaic.
“There’s value for them, in that they get in there, and they get to create what they want on the site,” he said.
Value chain The scramble for development sites this year has been well documented; RealNet Canada Inc. reported in September that deals for land continue at “peak levels,” while Avison Young’s semi-annual investment report attributed the active market to updates in the community plans of many municipalities.
But sometimes it just comes down to simple supply and demand – and demand definitely has the upper hand these days, prompting some owners to prep projects for development, then offer them for sale, and hungry buyers to make unsolicited bids for sites.
A few recent examples underscore the point: Avison Young has listed 4406 West 10th Avenue, which has an approved design for a proposed development, and 2050-2060 Alma Street, a permit-ready 22-unit development site at West 5th Avenue.
Similarly, this past summer Anthem Properties Group made an unsolicited offer through Frontline for 725 Marine Drive in North Vancouver, which Darwin Properties Ltd. had taken through rezoning. Anthem, eyeing an opportunity to add value, paid $9.2 million to take the project through development.
At the same time, Frontline was handling Adera Development Corp.’s purchase of three parcels in Surrey from Cressey Development Corp. totalling 9.6 acres.
The first parcel was acquired this summer, while the purchase of the final two closes this week. The total purchase price of $28 million reflects the strong demand for the parcels, which Cressey had steered through civic processes with a view to building townhouses.
“[Cressey] wasn’t looking to sell, but people were offering some aggressive pricing [and] they elected to sell,” said Frontline’s Yates.
Adera is proceeding with development of a first phase of 70 homes; the scale of subsequent phases is yet to be determined.
Townhome demand Underscoring the demand for townhome development sites was the suggestion by senior market analyst Robyn Adamache at Canada Mortgage and Housing Corp.’s recent housing outlook conference that townhomes are scarce enough to be the new single detached home. Just 297 townhouse units remain completed and unabsorbed in the market, fewer than any other type, while just two months’ worth of listings exist on the resale side.
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