British Columbia will see limited new multi-family rental-housing development over the next two years as elevated construction costs, restrictive financing conditions and excess inventory continue to weigh on project feasibility, says a Cushman & Wakefield broker who specializes in the asset class.

David Venance, a senior vice-president based Cushman & Wakefield’s Vancouver office, told Connect that developers have largely stepped back from new projects because profitability has become difficult to achieve in the current environment.

“Development is becoming increasingly challenging in our region,” he said. “Construction costs remain elevated, and financing conditions are very restrictive.”

Venance made the comments after his company released its latest B.C. multi-family report, which found the sector continues to show resilience despite rising supply, economic headwinds and short-term pressure on rents and vacancy rates. He noted that developers are shifting away from high-rise concrete projects toward rental buildings and more affordable ground-oriented housing because concrete construction has become too expensive.

“Over the last couple of years, we’ve seen a lot of stress in the land market and sales, and developers have really taken a step back because they’re not seeing a path forward to profitability,” Venance said.

While a significant amount of new housing supply is currently being completed, he said much of it stems from projects launched between 2017 and 2022. That inventory has not been absorbed as quickly as anticipated, leaving both condominium and rental markets with excess supply.

“In the meantime, there is really going to be limited new development,” Venance said. “Once that standing inventory is absorbed, then there’ll be limited new supply coming on the market in a couple of years.”

He expects the market to begin rebalancing as absorption improves and construction activity continues to slow.

“Over the next two to three years, we expect the market to rebalance as absorption catches up and construction activity continues to slow down,” he said.

Looking further ahead, he forecasts renewed pressure on housing supply by 2028.

“That’s when we’ll see modest growth again, and probably more demand for land and housing starts at that point,” he said.

Venance added that long-term fundamentals remain favourable for multi-family development in B.C., citing population growth, constrained land availability and high replacement costs as factors that will eventually drive the next growth cycle for rental housing.

Pictired: Vancouver

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