The November sale “set a new record for price-per-buildable-square-foot” at $402, according to Colliers International. CM Bay paid $15.8 million for the 0.36 acre (15,714 square foot) site. The development and construction company plans a 12-storey, mixed-use condo and retail complex on the land near the Oakridge Canada Line station.
As the deal suggests, land is now the biggest and boldest speculative play in the Lower Mainland, with developers, spurred by higher density potential, bidding values to spectacular levels.
With a dollar volume in excess of $3 billion in 2014, land accounted for more money spent on commercial real estate in the Lower Mainland than all the office buildings, shopping malls, industrial buildings and multi-family rental property sales combined.
The dollar value of land sales posted a 35.9% increase from 2013, according to the Commercial Edge report from the Real Estate Board of Greater Vancouver. The 628 land deals represented an average price per site of $4.7 million – but many sold for much more.
“[Land] has been trading at much higher values as some owners are being incented to sell,” noted James Lang, market intelligence manager for Colliers in its latest LandShare report.
The developers are drawn by potential density increases, as witnessed in downtown Vancouver where the city’s West End Community Plan now encourages higher floor space ratios.
Last fall, Bosa Properties paid $120.5 million for a one-acre development site at 1500 West Georgia. The deal’s skinny capitalization rate of 3.49% can only be justified by a potential increase in density, analysts say.
Simon Lim of Colliers quarterbacked the $83.5 million sale of an entire block – nearly an acre – on Alberni Street to Wall Financial last year.
The major incentive to buy land is for residential projects, the Colliers survey showed.
These deals now represent half of all Lower Mainland land sales, up from a third in 2013. Most of the developers are acquiring dirt for low-rise wood frame condominiums and townhouses, according to Colliers.
One of Vancouver’s emerging areas for land speculation is along Kingsway Avenue south of King Edward Avenue. Spurred by a city plan that encourages a shift towards multi-family development, land prices have increased an average of $46 per square foot over the past year.
Third Properties Ltd., for instance, recently paid $8.3 million for less than half an acre in the 2400-2600 blocks of Kingsway; and Intracorp Developments Ltd. paid $314 per square foot for small lot in the same area.
Avison Young principal Bal Atwal, who closed the sale of a well-tenanted shopping mall at No. 3 Road last August for $78.4 million, said the price was all about the 5.4 acres of land. The buyers are a Mainland China investment group looking at a long-term development potential, perhaps 10 years down the road, he said.
“Underlying land values have outpaced income values on properties along or near virtually every major commercial corridor in Metro Vancouver where land is designated for higher density uses,” Atwal explained.