Why 'land assembly' signs are popping up on several Kelowna streets
In the booming Kelowna real estate market, for sale signs proliferate in front of hundreds of single-family houses.
But of late, they’ve taken on additional “land assembly” signage or even come with full billboards indicating that a whole section of a street is for sale.
“It’s a totally different science than we’ve been used to doing for the last four decades,” Royal LePage realtor Joe Ungaro told iNFOnews.ca.
In years past, developers would look at quietly buying up a number of houses with plans to rezone to a higher density, like apartment buildings.
The “science” at that time was based on the number of units that could be built on the assembled land.
The thinking has now changed so developers are calculating how many square feet they will be allowed to build and, from that, calculate returns on their investments, Ungaro said. That takes into account things like construction costs, city fees, floor area ratios, profit margins and market demand, which leans more to rental these days.
While older apartments were in the 1,100- to 1,200-square-foot range, they are now sometimes as small as the 300-square-foot range.
While the unit cost is low enough to be affordable to more buyers, the price per square foot is higher for the small suites, which boosts the return on investment.
Another factor driving the increase in visible land assemblies is proposed new City of Kelowna zoning rules. As Ungaro understands it, the changes will allow six-storey residential buildings along major bus routes, referred to as "Transit Supportive Corridors" as long as they are 14,000 square feet or larger.
Realtors, therefore, are approaching groups of adjoining property owners who then agree to jointly market their properties to developers as one land assembly.
Ungaro has assembled three lots on Bernard Avenue and D’Anjou Street, beside the 17-storey Centuria tower. Together they cover 30,000-square-feet so easily fit that criteria.
His listed price is $6.4 million for the three properties and he has an agreement with a buyer for the sale, even though the new zoning rules have yet to be adopted by city council.
That’s expected to just be a formality when the new bylaw goes to council for final approval on Sept. 21.
Another example of a land assembly is 280-330 McCurdy Road, just west of Rutland Road.
Those four properties are listed for just over $6 million by Sage Realty agent Kara Rosart.
Her listing says they total 1.04 acres in size and have the “potential to build four-storey multi-family in Central Rutland within walking distance to many amenities.”
A third recent example is a 16-property land assembly by Safari Capital on Coronation Avenue.
Their proposal was a little different in that it required a rezoning that ran contrary to city plans because it called for three highrises well above the 12-storey designation for that area.
That project was rejected by city council but Safari expects to try again in the fall.
It has also bought another nine or 10 properties on the other side of Coronation Avenue.
READ MORE: Rejected proposal for three Kelowna highrises could be back before council in fall
These are just three examples of land assemblies that are happening throughout the city in anticipation of the bylaw being adopted.
That doesn’t mean they’re all viable.
“I’ve studied several of them,” Ungaro said. “A lot of them don’t make sense. They’re way overvalued.”
Part to the viability issue is the general slowdown in the national real estate market in response to higher interest rates and high inflation, he said.
“That’s definitely slowed down the appetite for this product,” Ungaro said. “That’s why you’re seeing a lot of signs out right now and not as many buyers for it, not as many developers for it.”
READ MORE: Loss of out-of-town buyers bringing Kelowna house sales to near record lows
That could change if the Bank of Canada, at its next interest rate announcement on Sept. 6, decides to keep its rate increase well below the 1% hike that shocked homebuyers in July.
“The demand is there,” Ungaro said. “A lot of these properties just got pushed into the stratosphere in price. That peaked in March. It’s been settling down. There’s been a fair sized correction already and we’ve got to see where this settles to, where it makes sense again. It made sense in 2021. Then that last push, from the end of 2021 into March of ‘22, that last push was more speculative in terms of the development properties. It needs to fall to where the risk and reward all make sense.”
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