Not enough demand to justify building more 3-bedroom condos, says developer

Should Calgary follow in the footstepsof New Westminster and mandate real estate developers to build a certain percentage of three-bedroom condominiums? That's an idea being floated by Calgary Coun. Gian-Carlo Carrathat's generated buzz on social media.

On Thursday, real estate developer Chris Ollenbergerspoke to David Gray on theCalgary Eyeopener to present hisperspective on the idea.

Q:What's the No. 1factor?

A:Land price is the No. 1 input to any dwelling unit, actually, within the city ofCalgaryandmost North Americancities. Beyond that arethe usual construction costs: financing charges, interest, profitand regulatory costs imposed by government on housing.

• New Westminsterbedroom bylaw forces developers to build family homes

Q:Why would three-bedroom condos be more expensive to build than two-bedroom ones?

A:I'm going tobe very simplistic. Picture an apartment building as a tall rectangle. You have a base number of things you have to build no matter what, before you even install the first unit. You have to buy the land. That's biggest cost input. You have to build a parkade, generally,so you're going down into the ground, [where] each stall [costs]$40,000 to $60,000per stall.

You have [to pay for]the elevator core, service shafts, stairwells, emergency systems, life safety systems, heating systems, cooling systems, the whole concrete structure if it's a concrete building or wood framebuilding otherwise. Before you've even built a unit, there's a very large sunk cost.

'The most efficient way to use that rectangle'

Now the most efficient way to use that rectangle I described earlier [is to] have units that are squares to fit in our square building, [so that] they can occupy all of that space very efficiently. That's how you get your lowest-cost unit. Now as youarticulate buildings, and put in dips anddives andthings like that becausepoliticians want to make them look prettier, and the market wants to see a better looking building as well you have to work around columns, you have to work around the concrete core base. Now you're trying to manipulate differentshapes within that building in order to make them fit. Three-bedroom [units]are the hardest to make fit.

Q:Is there a way to cut something to make them more affordable? Like, say, parking?

A:Parkingis oneway we could potentially look at (saving money). There are a number of municipalities in Albertathat assign parking ratios by bedroomcount. Calgarydoes it slightly differently. It's very common to have parking assigned by bedroomcount so on a three-bedroom, you just added $60,000 foran underground stall. Even a surface stall is probably fiveto $10,000, depending on land price.

'That's a conversation that might be very encouraging to have'

Q: Is there any hope for this idea?

A:We could certainly look at density bonusing for example, if a developer could say [to the city], "I will build more three bedroomapartmentsin my building. Will you give me more density, more floors to build that on?" That's a conversationthat might be very encouraging to have.

Q:Is there a market demand for this product?

A:I would say there isn't tremendous demand.There's a lot ofpeople in Calgarythat would like to raise a family in theinner city but by far and away most people's preferences are for ground-oriented product. Whether it's a duplex, a townhouse or a single family [unit], becauseit avoids the whole parkade, [and] condo fee, which adds to the monthly cost that youhave to pay things like that. The number of people out there looking for a three-bedroomapartment/condo in a tower I'd say is relatively limited in a market like Calgary,which is why you don't see many of them built. They're more expensive to build and harder to sell.

This interview has been edited for clarity and brevity.

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With files from the Calgary Eyeopener