Think of 10 high-rises, each with 22 storeys and every floor measuring about 6,500 square feet. That’s the equivalent of what developers could put up in Vancouver with the available density supply—that is, if they’re building at all in this economic climate.
Vancouver has so much unused density that city staff have expressed concern about awarding more of it to developers in return for saving heritage buildings. Developers can either use the density they’ve earned or sell it to other builders.
This matter came to the fore at a December 18 deliberation by council on a proposal to restore the former York Theatre on Commercial Drive. Proponents had suggested a 100-percent density transfer, meaning that developer Bruno Wall would get a density bonus valued between $10 million and $11 million—the cost of rehabilitating the theatre—which he could in turn use on another project.
Staff disagreed, recommending instead that the city shoulder only a third of the restoration costs—and grant Wall density worth only a third of the $10 million to $11 million required to rescue the theatre. Staff argued that the federal and provincial governments should pick up the other two-thirds of the cost. However, council rejected this recommendation, and unanimously voted to “support in principle” a 100-percent city contribution to cover the cost of rehabilitating the York. The city would pay for this through a combination of property-tax forgiveness, a capital grant, and a density transfer—the details of which would be worked out later.
According to city planning director Brent Toderian, there are 1.4 million square feet of space in the city’s so-called density bank, which is basically a pool of the available density supply in the market.
“The bank is at a size that has led to concerns by staff, and we’re advising council on the implication of that,” Toderian told the Georgia Straight. “If there’s a down market and if people aren’t proceeding with projects, they have no reason to buy density.”
According to Toderian, the current value of density is $65 per square foot. Although there hasn’t been much trading activity, he said that prices haven’t deteriorated. Yet he noted that, based on past practice, the density bank’s volume is normally kept at about 500,000 square feet.
“When the bank got over a million square feet, staff began reporting the status of the bank to council,” Toderian recalled. “Recently, about a year or so ago, staff recommended to council to turn down the tap on additions to the bank.”
While it’s not the responsibility of the city to guarantee buyers for densities being held by developers, Toderian stressed, it is the city’s job to manage the bank properly.
To explain clearly what’s going on, real-estate and development consultant Michael Geller used air-mile credits as an analogy.
“There are literally millions of unused airline points, but there aren’t enough airplane flights to use up all the points,” Geller told the Straight. “In the case of the airlines, one could say it doesn’t matter. But in the case of the city, eventually one [developers] has to start using up all this density.”
And the big question, according to Geller, is this: where is all the density going to go?
“There’s nowhere to put it,” Geller said. “There aren’t many developments taking place that can use the density.” That’s because real-estate development has slowed in the city.
Lone Non-Partisan Association councillor Suzanne Anton noted that developers who want to dispose of their acquired densities but can’t get the right price will be in serious financial trouble.
The least the city can do, according to Anton, is to prevent the density bank from growing.
“We actually have to be responsible, because if we want developers to take up this density, we have to create the conditions for them to use it again,” Anton told the Straight. “It’s a two-way street. If all we do is keep adding to the bank without letting the bank be used up in any way, I think we’re letting down our side of the relationship as a city.”
Staff will be reporting to council in the first quarter of 2009 about the status of the city’s density bank. A review of how much more density downtown Vancouver can absorb will likely be completed by the end of 2009.
Source: Carlito Pablo, The Georgia Straight