Q&A

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

Three-bedroom condos are expensive, complicated and harder to sell, says a Calgary real estate developer in response to Coun. Gian-Carlo Carra's suggestion they should build more of them.

'They're more expensive to build and harder to sell,' says Chris Ollenberger

A proposed condo development to be built on 16th Avenue N.W. by Calgary's Quantam Place Developers. Quantum's managing principal, Chris Ollenberger, says three-bedroom condominiums are too expensive to build and demand is low. (Quantum Place)

Should Calgary follow in the footsteps of 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 Carra that's generated buzz on social media.

On Thursday, real estate developer Chris Ollenberger spoke to David Gray on the Calgary Eyeopener to present his perspective on the idea.

Q: What's the No. 1 factor?

A: Land price is the No. 1 input to any dwelling unit, actually, within the city of Calgary and most North American cities. Beyond that are the usual construction costs: financing charges, interest, profit and regulatory costs imposed by government on housing.

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

A: I'm going to be 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 $60,000 per 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 frame building otherwise. Before you've even built a unit, there's a very large sunk cost.

Real estate developer Chris Ollenberger weighs in on the debate over whether developers should be required to build a certain number of three-bedroom condos. In his view, there isn't sufficient demand in Calgary to warrant it. (QuantumPlace Developments)

'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 you articulate buildings, and put in dips and dives and things like that — because politicians 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 different shapes 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: Parking is one way we could potentially look at (saving money). There are a number of municipalities in Alberta that assign parking ratios by bedroom count. Calgary does it slightly differently. It's very common to have parking assigned by bedroom count — so  on a three-bedroom, you just added $60,000 for an underground stall. Even a surface stall is probably five to $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 bedroom apartments in my building. Will you give me more density, more floors to build that on?" That's a conversation that 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 of people in Calgary that would like to raise a family in the inner 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], because it avoids the whole parkade, [and] condo fee, which adds to the monthly cost that you have to pay — things like that. The number of people out there looking for a three-bedroom apartment/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.


With files from the Calgary Eyeopener