West Coast woods are regular fodder for political discussions. Sometimes it involves negotiations with trading partners. Sometimes it involves social topics centering on high costs of real estate and allied concerns over homelessness. Here in Vancouver, the mayor’s aims of making this city the ‘greenest’ on the planet stirs an electorate with each new bike lane that is announced. So it is that a 24 hrs Vancouver columnist’s concern over costs involving the removal of one tree atop a condo tower caught a lumber trader’s attention, though it had nothing to do with NAFTA or SLA negotiations. See: Condo Tree
The cost of planting one tree (not on top of a condo building) is estimated at around $75. This means condo owners at Eugenia Place could effectively plant 7,300 trees for the price of the one they’ll be installing on their roof.
These days much of what constitutes Vancouver’s crazed real estate scenario is taking shape around the urban False Creek shoreline. Glassed-in condo towers in various stages of completion compete with new, nearby downtown towers, including one named Trump. This week I chanced upon what’s at the bottom of much of what’s going up around False Creek; buried treasure from years gone by. Logs. Huge logs.
In what was the industrial heart of Vancouver, over a dozen sawmills, planing mills, shingle mills and wood preserving plants once operated on this 66 hectare strip of waterfront land called Pacific Place. According to the BC Ministry of Environment, most of this land was created by filling in False Creek with construction debris, industrial waste, and fill from other downtown Vancouver building sites. According to the Pacific Place Remediation Project, studies conducted at Pacific Place show that the volume of fill material is enormous – more than two million cubic metres (enough to fill two BC Place-sized stadiums to the rim). The fill is up to 13 metres deep in some areas along the existing shoreline.
Construction workers and even one pedestrian lumber trader were amazed to note the size of some of the buried logs uncovered during present excavations for The Arc Vancouver condo tower on Expo Boulevard at the foot of the Cambie Street bridge. Interesting stories abound on the history of coastal sawmills and the forest industry that was the early economic engine in these parts.
with Clark Ellis, LMC Forest Products Expo (4 Nov 2016)
Frictional Factors are said to impede process or progress. One of the highlights each year of the LMC Forest Products and Building Materials EXPO in Philadelphia is the keynote speaker at Friday’s breakfast. This year featured Clark Ellis, Founder and CEO of Continuum Advisory Group, a management consulting firm that works exclusively with the homebuilding and construction industry. His hi-speed presentation explored ways to improve your business in a world of rising demand and constrained resources. While re-confirming that the biggest constraints in the U.S. housing market recovery are land and labour, he stressed the need to minimize frictional factors. “Complexity is the enemy of velocity!” declared Ellis. “Reduce complexity throughout your organization to increase velocity and enhance your flow rates.”
Ellis talked about the Margin vs Velocity Mental Model, explaining that because “margin is what we know and it comes naturally to us,” companies tend to focus too much on margin. According to Ellis, “in a resource-constrained environment, collaboration trumps adversarial cost-based selection every day of the week.” Rather than focus on ‘more work’ and margin, build strategic relationships with suppliers and customers. “Instead of asking for more, ask ‘how are we doing?'” advised Ellis.
Ellis stressed that feedback – from both employees and customers – is critical. “If you are not measuring employee engagement on at least an annual basis, you are missing one of the most powerful and critical indicators of future business results.” Ellis argued that customer experience must also be measured, tracked, and used to make better managerial decisions. “Mapping and optimizing ‘customer touch points’ is crucial.”
Continuum’s four biggest opportunities to improve your business in today’s constrained environment:
- Understand and visually represent your business processes
- Drive a velocity mindset through your company and its external network
- Change your concept of trade and supplier engagement
- Understand that employee engagement drives customer experience which drives business results.
The 2016 LMC Forest Products and Building Materials EXPO was brimming with lumber dealers feeling upbeat about 2016 to date and bullish on 2017. However a number acknowledged significant business was pulled forward/covered in advance of the October 12 standstill expiry. Moderating activity since that time also helps to explain the present supply-demand imbalance. The skittish tone and extreme hand-to-mouth buying patterns in evidence suggest dealers, wary of winter and working down inventories for year-end, are perhaps content to “run out the clock” on a good year.
My blogpost in early 2013 pointed to a news story about Blackstone, the largest private real estate owner in the United States. It was reported that in 2012 the company had begun spending $100 million a week buying houses. By 2013, those purchases had accelerated to acquire more than $2.5 billion in rental properties. See: Accelerated Purchases and related post All in.. On the U.S. Housing Recovery.
It’s interesting to learn this week Blackstone have in total amassed about 50,000 rental houses in the past four years. Housing as a commodity. But having first developed and adapted strategies as a buyer/landlord, the company is now adapting to changed market circumstances to become a seller. We’re told the company is beginning to sell “properties that have soared in value or no longer fit their business models”. Under a program called “Resident First Look”, renters get first look, enabling Blackstone “to benefit from having its own pool of ready buyers who are constrained by a market starved for affordable homes”.
On a related note, it’s revealing to see this list of price-to-rent ratios for American cities. According to Investopedia, a price-to-rent ratio of 1 to 15 indicates it’s much better to buy than rent, 16-20 suggests it’s typically better to rent than buy, and 21 or more means it’s much better to rent than buy. For example, with ratios below the 19.2 national average, a number of Texas markets are presently very favorable to homebuyers.
Observers of the bewildering real estate picture, in especially hotspots like Toronto and Vancouver (where the price-to-rent ratio is 55 in the east of the city and 72 on the westside), might be wondering how these patterns of housing dynamics could play out down the road in Canada.
Vancouver Forest is a unique 900-unit residential development – in Beijing! We’re told here the site was designed to replicate a mini west-side Vancouver neighborhood complete with west-side Vancouver-style housing, landscaping, trees – and bidding wars, presumably. A Google search reveals the plan was hatched in 2002. By 2006, construction had stalled however, when the Chinese government determined single detached homes were not in the collective interest of the country’s more than one billion people. By 2009, construction had resumed, and it’s reported that 900 homes of approximately 4300 square feet each have been completed. According to Business Vancouver, “North American single-family home subdivisions started emerging in China early this century following successful projects such as Orange County, which created a faux Los Angeles an hour’s drive from Beijing.”
So I read with interest a report today in The New York Times. According to the report, this trend of tacking on foreign names to developments around China could be coming to an end. We’re told concern over the foreign names was raised when a recent survey revealed that since 1986, “60,000 township names and 400,000 village names have fallen from use as a result of development and urbanization” in China. The minister of civil affairs has said names that “damage sovereignty and national dignity” or “violate the socialist core values and conventional morality” would be targeted. Meanwhile, developers argue the “international flavor helps sell houses”.
A story in this morning’s Maui News reports that Hawaiian lawmakers are considering a unique solution to the housing crisis there. A bill will be introduced in upcoming legislative session that would set aside land to build thatched homes aimed at alleviating homelessness. Senator Chun Oakland said “There is an interest in capturing some of the traditional ways of living among our people here in Hawaii.”
“This doesn’t make any sense,” said Shannon Wood, co-founder of the Windward Ahupuaa Alliance, a non-profit organization that advocates for smart growth solutions. “This is 2016, not 1616.” Wood asked whether there would be toilets in the huts. Senator Oakland said that all details have not been worked out.
HT: Ernie Harder
A pair of Harderblog questions for 2015 were answered this week:
Will Canadian household debt levels eclipse 170% of disposable income?
The answer came from Statistics Canada this week with the announcement that household debt compared with disposable income rose to 163.7 per cent in Q3, up from 162.7 per cent in the second quarter. In his Vancouver Sun column this week, Craig Wong reaffirmed earlier reports that household debt and Canadian housing market imbalances have been key concerns for economists and policy-makers. Interesting to note that while Canadian consumer debt levels in relation to disposable income have been increasing at what many economists consider to be a dangerous and alarming rate, U.S. patterns of household debt to GDP ratios at end of second quarter of 2015 were reported to be at 79.76 per cent.
Will the long-talked about ‘normalization’ of interest rates materialize in 2015?
It’s a tale of two economies. In the U.S., where household debt is falling and consumer confidence is rising, the Fed raised rates this week above their near-zero threshold for the first time since 2008. In Canada, we were told last week the BOC would consider pushing interest rates as much as a half percentage point into negative territory in the event of a crisis.
HT: The Greater Fool Blog