Stakeholders are sounding the alarm on the future of real estate in BC as they say the costs are not outweighing the risks for developers right now, leading many to choose the US or Alberta for their major projects.
According to a recent release from the British Columbia Construction Association, the loss of prospective projects is to the tune of $4 billion. The association says BC contractors are suffering due to high labour costs, skilled labour shortages, and payment uncertainty.
While BC is booming, with stats showing a five-year trend increase of nearly 50% and an estimated value of current projects at a whopping $170 billion, labour shortage figures predict that there will be more than 6,600 unfilled construction jobs in less than 10 years.
Calling that “alarming” and “problematic” at a time when British Columbians have been promised housing, hospitals, and more key builds in the coming years.
“Since Spring 2024, the value of proposed major infrastructure projects has decreased in value by 5% and nearly 20% over the past five years, which makes the future of the industry look problematic as current major projects begin to wind down with no guarantee of being adequately replaced,” the association said in its October statistics outlook.
Ross McCredie, CEO of Canadian real estate company Sutton Group, is among those who agree that the sector needs a surge in support from government and policy changes. McCredie told Daily Hive that skilled labour shortages have a snowball effect and that in BC, they’ve meant intense pressures and alarming declines in major project investments, which he has already seen.
“About 55,000 people who live in BC have gone back to Alberta in the last year. When you talk about housing and affordability, it’s also the people that need to build that housing are having a really difficult time making ends meet in British Columbia right now,” he said.
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McCredie says skilled labourers are in such high demand that they are choosing to leave. Something as simple as paying for insurance on a work vehicle can cost significantly more in BC, making other provinces more attractive.
The average wage of a construction employee in BC is $72,000, which is far below what would be considered a living wage in Vancouver.
“There’s a definite shortage of skilled labour in the province. So there are just so many things for a developer to consider right now, the risk being pretty high,” he said.
“The cost of doing business in British Columbia has become very, very expensive,” McCredie told Daily Hive. “I don’t think BC is well-positioned.”
Adding that costs of concrete, drywall, windows, and more are all inching that price point above where it was making it further and further out of reach for the average person. Plus, the red tape by each city or district.
Development Cost Charges are the fees placed by the municipality to pay for new infrastructure to service the demands of that new structure. In Langley, it costs about $20,000 per dwelling unit in an apartment building. In Vancouver, the costs range depending on which area and the square footage of the build. There isn’t a universal payment model, and the costs are high, McCredie argues, making other jurisdictions more attractive.
“A big chunk of those developers have also decided to break ground in the US, rather than Canada right now, because, you know, it’s a little less uncertain. You can imagine breaking ground on a high-rise construction project in BC compared to Texas or Colorado, it’s like four to five, four to five times more times in BC than it is there. So they’re choosing to invest their money there,” he said.
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“There are guys that can afford it, the Beedies of the world and the Concert Properties, they’ll convert to rental housing in the meantime, [as they are] secure enough and ventured enough cycles to know how to handle it,” he said. “But the less experienced developers, or people that are fairly new to the business, they are really going to struggle. And I think we’re going to struggle for a period of time. I think it’s going to be another two, three years.”
All those factors compound to make the cost of doing business highly complex, McCredie argues, and in desperate need of government oversight.
“We should be supporting the development community. We should be listening in the development community. They should have a say at the table when they’re making their planning and they should base their information based on good information,” he said.
The BC government launched its Stronger BC action plan to fix zoning rules, speed up approvals, and deliver more housing, but the legislature is on temporary pause post-election, and there’s no date as to when the MLAs will return to discuss future housing strategies or make changes to existing ones.