Can Vancouver Grow in a Shrinking Economy?

As things continue to tighten up with inflation on the rampage and the Fed trying to throttle the economic engine, the question of whether all the exciting progress in America’s Vancouver can continue under these conditions.

The last time we had a recession it was a pretty big one. That downturn was much different than what we see now. There had been a buildup of bad loans in housing that led to the near collapse of the financial markets. In fact, several really big banks effectively failed, national giants like Wachovia and region giants like Washington Mutual succumbed to the weight of a bad portfolio of loans.

That is not the case here. Lenders have been under much tighter federal guidelines regarding mortgages, and this scenario is more about runaway federal spending than unstable banking. COVID 19 saw the US government make the largest deficit enlargement since WWII and that has simply pushed too much money into the already bloated system. I feel like we are in for a soft landing on this, but of course anything can happen.

The stock market has been pretty fat for several years and a major correction was not only inevitable, the powers that be knew it was coming. It should be noted that money flows and when it leaves one market it flows to another. Many investors are currently holding cash and generally holding cash is temporary. That cash will flow somewhere and real estate is often the place it lands when Wall Street takes a beating. Large projects like the real estate development happening right now in Vancouver is ideal for parking cash in a volatile paper market. Real estate like its name implies, is “real.” There is a hard asset backing the paper.

Seattle faired quite well during the recession in 2009-2012. Real estate values there slowed down and even suffered some equity losses, but compared to the rest of the state and west coast they got off with not much more than a scratch. Seattle had such a roaring economy going into the recession and billions of dollars had already funded large developments that were underway when the wheels fell off the economic cart.

Vancouver could be poised for a similar scenario in this upcoming recession. The city is ripe for quality development and close to a billion dollars are already funded for projects working through the system. We still look like a sure bet for financiers looking to park cash to weather this new bear market on Wall Street. Our city leaders would be wise to speed up the bureaucracy and get these projects approved ASAP. Once funded they have a great chance to be completed and will provide good quality jobs during the downturn that will help soften the effects locally. It totally worked in Seattle last go round, it will work here this time.

I am about as optimistic as possible considering the financial climate is rather gloomy overall. Vancouver USA is great place to live and invest, and it seems investors lately are proving me right.

I’ll have the updated statistics for urban condos mid week; I am out of town today.

More inventory welcome sight for weary buyers

Again last week new listings outpaced new pending sales. This has been the trend over the last several weeks and with inventory levels coming off the tightest ever recorded, buyers can take a breath and actually feel confident their offer will be accepted. We are by no means in a buyer’s market, but we are headed towards neutrality. I am seeing overpriced listings with some price reductions each week.

Interest rate hikes have already put a wet blanket on the red hot market, but prices are still holding and sellers can still do well as this summer approaches. Sellers need to lower the expectations of large price increases as the flattening curve is already a reality. Summertime in Downtown Vancouver and along the Waterfront is always exciting and filled with activities. Urban condos benefit from that buzz that creates extra marketing power.

Hurley is now underway at 400 Washington on the full block 6 story, 186 unit apartment building. A new 7 story mixed use proposal will be pitched at the pre-app conference later this week for a 3/4 block on East 13th and Main. Demand for urban apartments and condos continues to be strong enough to attract investors and that bodes well for our city center even as darker news looms over the economy in general.

It appears that Zoom Info is ready to break ground on their giant multi-block double high-rise project to house their new HQ at Terminal One. The entire area is fenced off and recent improvements to the BNSF access ramp will allow the room for developer LPC West to get started.

The Columbian recently published an article about a new Pasta restaurant coming to the Waterfront. Grasse is a Portland restaurant that has acquired a lease in the Riverwest building on Block 6 and tenant renovations are underway now. That will be a nice addition to the current slate of restaurants at the Waterfront.

Things are still rosy in Vancouver USA.

Western States Pondering New Parking Ratios for Housing

According to a recent article in the Columbian, Oregon and California are considering serious changes to requirements on parking ratios in urban areas. Our southern neighbor seems to be leading the charge. At this point Washington appears to be a spectator in the debate. This concept however could lead to lower cost housing for those willing to forego the car or at least to share a car between multiple residents.

Locally the commission charged with oversight for the new Interstate Bridge project has approved rail transit connecting Downtown Vancouver with Portland’s MAX light rail system. This will extend the Interstate Transit Corridor into Vancouver and allow for high density development with fewer parking spaces to actually work.

But there is more to it than that. Downtown Vancouver still lacks some essential services in the core. Although New Seasons is erecting a supermarket in Midtown at 15th and Main, that is still quite a long walk for those living in lower Downtown and on the Waterfront. The city would need to fast track developers that are willing to bring in the services that remain outside a comfortable walking distance and perhaps create a Downtown/Uptown trolley either on rails or wheels. All of this could be done to support more urban housing in the city center and less dependence on cars.

It is good to see the government at least looking at alternatives and that is a good thing. It is also important to remember that there is only a small segment of our population that is willing to give up the independence of the automobile. I could see a thriving share-rental system in large buildings with say a dozen cars that belong to the landlord or HOA and can be “borrowed” by residents for those occasions when they need to travel where public transit is unavailable or extremely inconvenient. It will be interesting to see what becomes of these ideas.

While I am on the subject of transit and the new bridge; I can’t say it enough, our leaders need to insist that the new bridge have some aesthetic accoutrements to keep the entrance to our great city beautiful. The city and county also need to put their foot down on Tri-Met and insure that our public transit entity(s) dictate the policies on MAX on our side of the river. Stepping off the soapbox now 😉

Condo activity continues to accelerate with inventory gains outpacing new pending sales. The shift is healthy and at this point not alarming.

AC Marriott at Terminal One Set to Open Next Week

It took a while to get built what with the extensive ground work, COVID 19, along with supply and labor shortages. According to the Columbian, Vesta Hospitality expects a soft opening on June 15th for the new hotel that will overlook the new Vancouver Landing park and cruise ship dock. There will be a restaurant and bar as well as a 4th floor patio overlooking the river. This is the first project to complete at Terminal One. A groundbreaking for the twin high-rise project for Zoom Info should happen soon and later on he new dock, market and additional buildings that will complete the vision at Terminal One.

Meanwhile next-door to the west a large high-rise apartment tower is set to rise and ground breaking on that could be a soon as six months, depending on how staging goes for the Zoom Info development.

On the condo front, inventory rose for the third straight week. Prices are holding but overpriced units are seeing reductions on the MLS for the first time a handful of years. The buyers are not biting on listings that are at the top of the range like they were when inventory was at the tightest levels in decades. We are still well into the seller’s market however as inventory will need to fatten up quite a bit before buyers take control of the market. For condo buyers, now is a good time to get in as seller’s will become a little more flexible and rates have the potential to rise further as the year progresses. With inflation firmly in place lower rates are not in the cards right now. Sellers are also on the hot seat. With rising rates and increasing inventory the top of the market could be right now.

Vancouver USA continues to dominate the regional area with its amazing waterfront, fantastic downtown, and an economic boom that seems to be as strong as ever.

rod@sonic.net or 360-737-4600

In Memoriam

Today is Memorial Day. We honor those that gave their lives in defense of our country. These men and women fought for the values and freedoms we all enjoy and they were people of all races, nationalities, classes, and backgrounds.

Some wars are just others not so much, but the soldiers that fight them are invaluable members of our society. When the war is found to be unjust, our anger should be aimed at the politicians that start them not the soldiers that finish them.

I am grateful that over the eons we have been able to rise to the occasion to defend our shores as well as those of our allies. May we continue to do so and in so doing learn from past mistakes to ensure that our soldiers are fighting for freedom and justice, rather than purely political causes.

I will return next week with an update on local projects and urban condo trends in Vancouver.

Inventory Levels Finally started to creep up

Over the last few weeks I have noticed a gain in inventory each week. Although this normally is a sign of a slowing market, in our case inventory has been so tight it has actually hurt the market rather than help. A little easing on inventory is a good thing. However we all should pay attention to this stat because there comes a point where inventory levels can reach critical mass and lead to falling prices.

I have mentioned numerous times in recent months that the strong seller’s market has been almost entirely built on a lack of supply rather than an abundance of demand. As supply levels increase and lending rates rise, supply is increasing at the same time demand is falling.

For urban condo owners in America’s Vancouver we very well may have peaked for our units in the city center. So peaking is not necessarily the precipice of doom but could simply mean that prices may soften a bit of the properties may sit a little longer before receiving offers. This is a normal cycle. But for those looking to capitalize on the highest possible price, now could very well be the time. One never knows how the future plays out, but the data shows trends towards a slightly more friendly market for buyers.

I was unable to catch the CCRA review of the Waterfront Block 21 Modera project but I will review the video feed as soon as the City releases and report on how the CCRA ‘ruled’ on its design.

Kirkland Tower had a pending unit return to active this past week. It looks like occupancy is delayed again until July and that may have been the last straw for the buyer, or perhaps the interest rate got too high and the buyer was priced out. Kirkland has had a little tougher time than other builders in getting this project to the finish line. It will be the crème de la crème when complete, but they better get it done soon, financing conditions are worsening and the stock market took a sniper shot to the head this month.

Over all things remain solid and secure in Downtown Vancouver’s urban market.

High End Condos Still Hot

A number of recent listings in the very high-end Tidewater Cove have had little trouble selling lately. Despite higher rates and an inflationary cycle, these units seem to be doing well. The question is who is buying them and where are the sellers moving? If you are curious about this condominium community there is a page dedicated to it here: Tidewater. These units tend to sell well above $1 million and some of the larger units in excess of 4000 SF fetch many millions. Several smaller and mid size units are listed and some are pending, yet a few more closed in the $1-$2 million range recently.

Where are these new buyers coming from? Some from Portland as we have all seen a bit of an exodus from Rip City. Some could be renters in the many new luxury apartments that have gone in over the last few years. They are making the decision to stay with a commitment to buy rather than rent. Vancouver’s urban core and waterfront areas extending east to Tidewater are very desirable locations for many reason discussed ad-nauseum on the site.

I can’t help but wonder if at least a few of these recently listed ‘mega-condos’ are owned by people moving into Kirkland Tower in the next several weeks. Kirkland will be the most exclusive and unique condominium project in the entire metro area as the only true condo-hotel lifestyle setup. Portland’s Ritz-Carlton will be the second when it opens in late 2023 or early 2024. Kirkland is smaller than the Ritz, but frankly is in a better location at the Heart of the Waterfront.

The luxury market success tends to help boost commerce and business that all residents can take advantage of. Here’s to the success in Vancouver’s urban core.

This Thursday the CCRA will do its design review for the Block 21 Waterfront ‘Moderna’ Project. This will be the tallest structure thus far on the Waterfront and the largest apartment building expected to have roughly 270 units on 14 floors. I should have more information next Monday.

This Summer could be ‘Boomin’

I reported earlier that construction is underway on the 12 story Springs Living project on Waterfront Block 18. That is a large project, easily the largest thus far at the Waterfront. It isn’t the height that makes it a big deal, in fact it will be substantially shorter than the Kirkland Tower on Block 4 wrapping up next month. It is also a tad shorter than both proposed high rises on Blocks 1 and 2. This project is however going to cover the entire block, the largest block in the entire waterfront development at 1.29 acres. The block has an irregular shape and the new building will follow that shape making the structure itself unique among all projects thus far proposed for the neighborhood. This is a very nice bit of architecture we will see rise up over the next two years.

A great deal of new development is about to break ground over the next few months. LPC West is tasked with erecting the new Zoom Info HQ at Terminal one covering both blocks A and C. Word on the street is they intend to break ground this summer in Q3. This will consist of two high-rise buildings separated by a public space and connected by a skybridge. It is a nice project and the east building will also follow a curved path to fit tightly on the irregular shaped Block A.

For a bit it looked like LPC West might break ground first, on the more recently announced Block 1 and 2 project at the Waterfront. Both of those lots were abruptly cleared of all construction trailers and related equipment. Block 2 is totally vacant and Block one is being used as construction parking. I have not however, heard any rumors of a groundbreaking on that multiple high-rise project taking place before Zoom Info. It just appeared that way based on the physical status of the blocks in question. We shall see how that plays out.

LPC West has become a significant player in Vancouver’s urban real estate over rather short period of time. Not only did they land the Zoom Info deal a large 350,000 + square foot development, but they quickly created the solid two block proposal for the Waterfront, mentioned above. They also recently won the Master Developer award from the City of Vancouver to run the development of the future ‘Gateway District’ along the north side of the railroad berm.

Next month should usher in the grand opening of the Holland HQ and attached apartments at Block Ten Downtown, The Indigo Hotel, and Kirkland Tower. Later this year or very early in 2023 we should see several other urban projects finish up including the first phase of the Aegis project at the Academy.

It’s not just luxury apartments either. Adding to Vancouver’s already impressive count of income restricted urban developments, there is Jefferson Street Apartments, Residences at Arnada, and Miles Terrace; all three are designed for lower income and working class residents and the former opened last month, the latter two will open next month, and in Q3 respectively.

Economic diversity is a critical part of a successful urban community. Urban communities need to offer services within a short distance to create the city vibe, and counter dependance on personal transportation to thrive. In order for all that commercial services infrastructure to function, housing to support entry level and mid level service sector workers is invaluable. Those workers that provide the services that attract affluent residents can participate in the experience of the community, not relying on a long commute. Living and working in the same neighborhood can be a wonderful experience. This is especially true when that neighborhood is a desirable spot to be like Downtown Vancouver.

Vancouver absolutely deserves some serious kudos for providing that opportunity with well over 1000 units of income restricted and affordable apartments in the city center and hundreds more in the pipeline.

I’ve added a new page to track Vancouver over the rest of this decade, Vancouver 2030, click here.

The Condo Yo-Yo is a Thing

It seems every other week it’s slow then busy, slow then busy… last week I reported rather stagnant transaction situation, the week before was busy and lo and behold, there was a fair bit of activity in the local urban condo market this past week. Yes the spring real estate yo-yo is in effect. There was a positive gain to inventory last week for the first time in quite a while and that will help keep the reigns on a very hot market. Take a look at the individual activity for any of the condo projects in the urban core a see where it’s popping’ and where it’s not. Activity is picking up at Tidewater and Shorewood which lie at opposite ends of the pricing spectrum. It seems the market is showing little preference for price.

Meanwhile activity in the construction market Downtown continues at a robust pace. I still worry a bit about the local bureaucrats taking too long to approve projects as capital is drying up in this inflationary cycle. One of the ways that Seattle weathered the horrific recession 12 years ago was due at least in part to the huge pipeline of projects with funds already committed to construction. Projects under construction during economic down cycles can provide much needed high paying jobs that can help carry a region through with lesser economic pain. Vancouver is in a very good spot to get projects committed before any economic downturn can dry up resources.

Our fair city has invested large sums of taxpayer money into infrastructure and tax deferrals to help generate this amazing boom. In fact the city has done an admirable job in this regard through multiple mayoral administrations. But there remains a duty to the public to ensure that those funds result in the fruition of the ideas presented to the public when taking these steps and making the public investment. It is here, where the city can act quickly to secure projects that can carry us through a slower economic cycle that may be lurking on the near horizon. This will allow the city in return to collect far more taxes on the increased value of real estate in the area.

They have been taking run down former industrial sites that were providing little or no taxes to the city and in some cases even creating a liability for the taxpayers, then converting them into powerhouse revenue generators allowing the city to fund needed upgrades to city services that benefit all Vancouver residents. This is a good thing. Taking the lesson from 2009-2011 when the recession hit and construction all but died for five years, is well advised. A few projects that opened in those years were those that were funded prior to the market collapse. The city is in a prime position to get public and private projects funded prior to any downturn. These projects can literally carry a city through slower economic times. Cities are also equally capable of delaying projects to the point of eliminating them all together. The salty stock market right now is pushing cash into other investment vehicles including real estate. City officials and developers need to get in gear and grab that capital while they still can. Large real estate projects have been known to capture capital and carry it through a recession.

Here’s hoping for a soft landing at ‘Economics International’ 🙂

MAX is Coming

According to an article in The Columbian on April 21st, the commission for the new bridge has selected light rail as the mass transit option for the project. The article suggests that MAX will be extended into Vancouver as part of the new bridge project. It seems that Mayor Anne, C-Tran, and of course the big winner Tri-Met all agreed. I have mentioned that I have no issue with light rail in Vancouver so long as it stays in the urban core where the high density development supports it.

This is still early and there is time for the City Council and Mayor to grow some spine and stand up for us by negotiating a deal where all trains bound for Clark County are run by C-TRAN rules rather than the Tri-Met criminal wonderland express rules they use in Portland. We shall see.

I have a page dedicated to light rail, here. I think a stop as close to the waterfront as possible is needed since that district will almost certainly be Vancouver’s most dense residential neighborhood even before it is built out. They expect 3300 residential units at build-out and seem to be on pace for that number. The project covers just 32 acres and and with a likely population of nearly 10,000 that is serious big city levels of density. The math works out to 312 people per acre. That kind of density allows light rail to thrive. Another stop near Esther Short Park is also important as densities in that area exceed 100 residents per acre. The park also serves as the defacto ‘center of town’ with events, concerts, businesses, conventions, etc all immediately nearby.

I do hope the council thinks long and hard about what light rail IS and IS NOT. Light rail is inflexible. Once it is built it is essentially PERMANENT. You can’t just get all giddy and happy about it and all the money it represents. Remember, politicians love spending OUR money more than any other career group, yes, even more than Wall Street Bankers 😉 Light rail is not cheap and mistakes can set a city or county back decades. Busses are flexible as the demographics change bus routes can easily and inexpensively be changed to compensate. Rail is fixed in place and is catastrophically expensive to move.

One of my suggested routes for MAX Vancouver

I feel like I need take a new assessment on a light rail route from the simple one I had on the light rail page mentioned above. Based on both current residential density and projected future density the route and stops shown here could work. I originally suggested running a loop up C street to McLoughlin then down Washington Street and back on I-5. It seems the commission wants a stop along I5 near McLoughlin so perhaps a freeway Park and Ride so I modified it to comply with that. I am also presuming that Vancouver will have one way rail traffic once across the bridge. Honestly I am kind of hoping for it so only a single set of tracks is required on the city streets. It is also why I thought running the train up C and down Washington was a good idea before this latest decision by the bridge committee.

The stops need to be close to high density housing to make the train as convenient as possible. All of the stops on this illustration meet that accept the McLoughlin at I5 stop which again is likely intended to serve Clark College and a future Park and Ride facility. According to data complied by the Federal Highway Administration most people are willing to walk five to ten minutes to transit. That said, 85% of people will walk five minutes but it does drop to 40% as it passes beyond ten minutes. Here is a list of stations I am suggesting although many things beyond just density go into these matters so keep that in mind. Also this is my brainstorm and is not in any way shape or form ‘official’.

Evergreen Station: Evergreen Blvd at I-5. This station could serve the Fort Vancouver National Historic Site and the Academy as well as a surprising number of nearby units either built or under construction. There are currently close to 400 units built or nearly complete within a five minute walk of this station. Another 200 units is already proposed and I project a total of nearly 1000 units by 2030. The large Library Square development would certainly add a couple hundred all by itself.

Clark College: McLoughlin and I-5. This station could also be a Park and Ride station. There is not a lot of residential nearby here I would estimate less than 200 units in that five minute walk window, but the Park and Ride plus Clark College angle probably makes up for that. 2030 could see another 200 units in future high density development but none is proposed at this time in the immediate area.

Uptown Station: McLoughlin and Main. This would draw from several high density projects in Uptown and Midtown with 168 units in the Uptown apartment building alone. The total number of current units either built or under construction within a five minute walk of this station is around 400. I would project a 2030 total of 700 units. This stop would also benefit the Uptown Village merchants bringing in some outside visitors.

Midtown Station: Mill Plain and Columbia. This stop is situated among several existing high density projects serving a wide variety of residents including senior citizens and income restricted units for lower income earners. There are currently well over 700 units within a five minute walk and proposals for at least 200 more in the pipeline. I project close to 1200 units by 2030. The station would also serve the nearby County Government center.

Esther Short Park Station: West 6th and Columbia. This station obviously serves the Park and all the events associated with it including the Farmer’s Market. It serves the Vancouver Convention Center and a large number of retail and commercial businesses nearby. This is also a very high density residential area with over 1000 units already built or nearing completion within a five minute walk. I would project another 300-400 units by 2030 to boost the total up towards 1400 units. A stop here could also help reduce traffic and parking demands for events in the area as those often attract Portland residents who currently drive to get here.

Waterfront Station: Columbia Street at Columbia Way. This station sits right in front of the location of Zoom Info’s proposed HQ and some 2500 jobs. It also serves the new Terminal One businesses and future open air pier and market. It would serve the Waterfront as well but the Grant Street pier is pushing the five minute walk window a bit at closer to 7 minutes. The west end of the Waterfront would need closer to twelve minutes to reach the station. The waterfront will be Vancouver’s highest density neighborhood by far, and one of the most densely populated neighborhoods in the entire metro area. Terminal One, the Waterfront, Kirkland’s new Waterfront East, and parts of the new Waterfront Gateway District would provide this station with at least 700 units inside that five minute walk by 2030 and well over 3000 units within ten minutes walk by 2030.

So I was really heavy on the importance of density to support rail. No honest broker will say otherwise, density is critical to the success of a rail transit system. With the sole exception of the NYC subway every single rail transit system in the United States operates at a deficit and requires subsidies to survive. NYC by the way is one of the world’s mostly densely populated cities sporting a city wide population density 14 times greater than our Vancouver USA. So once this thing is built and serving Downtown it will be only a few years before the greedy politicians start pushing for it to go to Orchards, or Cascade Park, or Salmon Creek. Just say no to suburban rail. Busses are the answer in the burbs 🙂

On the condo front, urban condos last week had just one transaction; a new pending sale. Wow after a flurry of activity the week prior last week was very quiet.