Dale Cameron occupies a modern two-bedroom, two-bathroom condo warmed by a gas fireplace in Dartmouth’s developing King’s Wharf—where infill meets the harbour and views of the Halifax skyline sell units. Dartmouth may tempt the joke, but that view is no longer its biggest draw. Increased development and low housing prices are luring young professionals, new families and retirees over the bridge.
Cameron, a realtor who sells units in the development, says buyers are drawn by the proximity to the peninsula, the restaurants and bars that have filled empty spaces and the community feel of the Alderney Landing’s farmer’s market. Those who work in downtown Halifax can bike, hop a ferry or bus, or drive for 10 minutes. In past years, King’s Wharf has posted impressive sales. Its first building has eight of 88 units left to sell. A slightly newer building with 79 units is sold out. A third hasn’t been built yet, but is 80 per cent sold. “We’re a little ahead of the trend,” Cameron says.
But the condo market is softening, with December 2013 sales down as much as 25 per cent from a year earlier. In previous years, Cameron’s customers—retirees and empty nesters—downsized from larger homes and fled to chic neighbourhoods within reach of the downtown. And young people, especially female university graduates, invested in starter flats after landing well-paying jobs. Cameron still sees those people at King’s Wharf, but last year the large homes those 50-somethings hoped to unload sat on the market a little longer, and the sellers opted to rent high-end apartments more often rather than investing in condos. And in 2013, the young folks faced declining employment figures and increased out-migration. Tighter bank lending policies discouraged sales as well.
On the other side of the harbour, Halifax’s North End is still a hot market. The Agricola Street corridor is especially toasty with older two-storey homes listed at around $300,000. The area seems to birth a new cafe, boutique or eatery each week, driving interest and optimism. However, Polycorp Group recently dropped its prices by as much as $100,000 on some units in the much-buzzed-about Q-Lofts condo development located a block from Agricola Street. Developer Peter Polley said he was passing construction savings along to consumers, but the slowing condo market may have forced his hand.
Since Halifax Shipyard won its celebrated $25-billion naval shipbuilding contract in late 2011, buyers scrambled in 2012 to sign for North End properties, knowing workers in need of housing would soon arrive. Workers won’t be building ships until 2015, though, creating a buying hangover that’s projected to continue this year.
Still, North End assessments continue to rise, homeowners are renovating and rents are shooting up, pressuring lower-income residents to compete for affordable units, or move to cheaper neighbourhoods. Artists, long considered the canaries in the coalmine of urban renewal, are scrambling to find affordable rental and studio space. Slowly lower-income earners are beginning to turn their heads further north, or to Dartmouth, where rents are cheaper and homes cost a little less.
And in the South End, where rents have stabilized, another new trend is emerging: The stately homes of the city’s elite are up for sale. On the Northwest Arm a sunshine-yellow two-storey, four-bedroom home with a famous garden that’s been featured in multiple magazines is, well, sitting on the market. With an asking price of just under $1 million, the house isn’t overvalued, but it isn’t in demand either.
Realtor Sandra Bryant, an upbeat and talkative salesperson, says she recently sold the bare land next to the home for $850,000. The yellow home, however, needs a bit of work, and therefore requires a new owner with deep pockets. Its sellers lived beneath its roof for two or three decades, Bryant explains. Now they’re following their age group’s trend toward simplifying.
Bryant sells South End castles and new downtown condos. She’s feeling a slight loss of momentum on both markets, but is optimistic things will start moving again in 2014. If you’re on the peninsula, there will always be a buyer, she says. “You know what honey, it’s been proven in the history, and Halifax is growing.”
According to the Canadian Mortgage and Housing Corporation (CMHC) projections from the first quarter of 2014, economic conditions are expected to improve this year and next due to growth in manufacturing, the Irving shipyard and production of natural gas. The CMHC expects housing sales to increase by 2.3 per cent this year, and another 2.9 per cent next year.
Nationally, residential sales are projected to increase by two per cent, and the average price of a home will jump by three per cent to $390,000, according to ReMax’s housing market outlook for 2014, released in late December. In HRM, according to this year’s CMHC first quarter report, the average price of a home is projected to rise from $274,800 to $276,000 this year, and $278,000 in 2015.
“Although the current economic climate is lackluster, Halifax-Dartmouth’s future is exceptionally bright,” reads ReMax’s outlook. Shell Canada’s exploratory drilling is slated to begin in 2015 along with shipbuilding on the Halifax waterfront, meaning next year is looking up. Banks offering lower interest rates due to a less vigilant new Finance Minister (Joe Oliver, who recently took over the job) may also encourage prospective buyers into the market. First-time buyers have taken the time to save up for a larger down payment too, ReMax believes. By the end of 2014, its outlook predicts the number of homes sold will climb by five per cent.
The CMHC predicts, however, that new housing starts will remain steady this year only to drop 13.4 per cent in 2015. New multiple-dwelling starts, including condos, will increase slightly this year before dipping 20 per cent in 2015, the report forecasts. So, while prospective owners may show themselves this spring, the market may yet decline.
Prospective buyers seeking deals after the thaw may want to visit open houses in the North End and Dartmouth—or hold onto their hard-earned pocket money for just a little longer.
Outside, looking in
In other cities, downtowns are commercial real-estate leaders. In Halifax, the suburbs are in front
Cranes loom over downtown Halifax, marking the spots where the Nova Centre and a handful of its new neighbours will soon stand, offering hotel rooms, convention space and offices ripe for the picking. The number of non-residential projects under construction in the core is comparable even to some of the country’s larger cities, however that doesn’t necessarily mean tenants are busting down doors seeking space downtown.
Unlike other major Canadian cities, Halifax’s suburban office market outperforms the downtown. Business parks and offices in suburbia are still considered more appealing than the downtown due to lower rents and proximity to decades of residential sprawl that continues to spread.
And since Halifax isn’t a head-office market, “the desire or need to be clustered in the downtown core is not as great as it is for other cities,” CBRE senior vice-president and senior managing director Robert Musset writes in the company’s Canadian market outlook for 2014. While Class A commercial space remains a draw for accounting firms, law firms and banks, most of them are already situated downtown.
According to recent HRM market reports, the seepage of commercial tenants into business parks and office buildings in the suburbs continues, and the downtown office rental market further weakened in 2013. The CBRE projects the availability of downtown office space will increase by 210,000 square feet in 2014 as projects wrap up, and the downtown office vacancy rate is expected to increase from 8.3 per cent last year to 10.9 per cent in 2014.
In Toronto, that vacancy rate is projected to rise from 6.1 per cent last year to 7.3 per cent in 2014. That’s below the forecast national average vacancy rate for 2014 of 8.4 per cent, up from 7.8 per cent last year. When compared nationally, Halifax’s downtown isn’t looking so healthy. “People like the downtown and it’s a lively place, but to move the downtown office sector back into balance is going to take years,” Musset says. “It starts with more residential density.”
A few residential projects are arriving on the scene, and could put bodies in the core. The recently completed Trillium offers some retail and office space below and 84 condos above. Demolition of the historic Roy Building on Barrington Street is underway, soon to give way to a 150-condo development, with pre-sale units listed between $419,000 and $1.5 million. Plus, the mixed-use YMCA-CBC development across where the Public Gardens meet Citadel Hill is expected to add 165,000 square feet of residential space to the area when it’s complete three years from now. Whether buyers will fill them, however, remains to be seen.
Within walking distance of the downtown, the North End is seeing a residential boom. Demand is increasing with urbanization and low interest rates, and new developments are increasing supply. Following the residential trend, commercial spaces have filled rapidly and rents have increased due to rising assessments.
Additional residential developments are springing up across the peninsula, which should give a boost to retailers in coming years. Already they’re enjoying a renters’ market. Demand for commercial space is also increasing across the water in downtown Dartmouth.
In suburban areas of HRM, the CBRE anticipates commercial vacancies will increase to 13.4 per cent in 2014 from 11.1 per cent last year. For instance, Dartmouth Crossing, which CBRE named a development to watch in 2014, continues to grow, but because Halifax is home to higher retail density than the national average, Musset expects the development of big-box retail centres to give way as smaller-box infill opportunities arise.
Across HRM, according to an extensive February survey by Turner & Drake, office rental rates have remained relatively stable for Class A, B and C space over the last five years, while vacancy rates for Class A office space have increased from 8.55 per cent in 2012 to 9.55 per cent in 2013 due to increased supply. (Class A is the most highly sought office space, with new amenities and good IT infrastructure.)
The survey anticipates the overall office vacancy rate for Halifax will increase further, from the current rate of 10.28 per cent to nearly 13 per cent by next year as more projects are completed, which could cause rental rates to flat line, or even slide. The city’s lowering of residential and commercial tax rates as of April 1 could offer slight relief, though not much since property values jumped $1.86 billion this year.
Current Class A office rental rates for downtown Halifax are $17.56 per square foot, according to Turner & Drake, up slightly from last year. The CBRE by comparison said the net rates for the same commercial rentals were $18.14 in 2013, projected to increase to $19.33 this year. The national net rental rate for Class A, according to the CBRE, was $25.68 in 2013, projected to increase to $26.73 this year. Turner & Drake didn’t survey national rental rates.
Michael Turner, president of Turner & Drake, predicted the downtown would decline as commercial and office centres moved. Now tenants have moved from the downtown to the suburbs, and those left over are switching out of older buildings into newer offices. Across North America there has been a trend toward moving back downtown, “but you need a unique environment” for that to happen. New and better policies are needed to encourage people to move downtown, and right now they’re counter-productive, he says.
Reflecting expectations for the residential market in HRM, the CBRE expects large-scale projects such as the Bedford waterfront development, Irving’s shipbuilding contract and the Deep Panuke offshore natural gas field to give the economy a boost, and potentially encourage demand for office space.
Keep your eyes on those cranes. The new library, the waterfront centre, the TD expansion and the Nova Centre should excite the downtown commercial market in the years to come.