Stalled construction projects are inevitable
Expanding cities like Kelowna – one of the fastest growing in Canada – are bound to experience growth pains.
When things proceed as normal, cranes dot the cityscape as commercial projects move from design through municipal approval and onto construction.
However, Kelowna residents might also be familiar with projects that don’t reach that final stage for a long time. Many of us will remember the high rise on Sunset Drive that sat half-built for a decade, with a bird-covered crane hovering overhead.
Incomplete buildings can remain in that state for years, and they don’t make the city more beautiful to look at, especially in highprofile areas like downtown.
Higher interest rates in Canada, unstable international financial conditions, lingering effects of the COVID-19 pandemic and labour shortages, all make things tricky for developers.
Which also means some unfinished buildings are inevitable, says Kelowna director of planning and development services Ryan Smith, because some property developers simply can’t find the funds to launch a project, or will run out of money mid-project.
“There’s been so much change with international finance and interest rates, and there’s never been more uncertainty and more variables at the same time,” explained Smith. “Economic downturns mean it’s not abnormal to end up with an unfinished project or a foundation that sits for a few years. Developers take massive financial risks and when the economy turns, they have to pivot, and some pivot faster than others. Some developers can wait out a difficult time but sometimes another developer else has to come in and finish it.”
So should people be concerned about recent news that work on a wine centre project in Kelowna’s downtown, halted for the past two years, will not move forward?
The Water Street building’s heritage façade (the former Daily Courier building) remains supported by scaffolding, but work on the project has stopped and plans for the wine centre have been scrapped. Mark Anthony Group owns the site and says it’s working on a new plan for it but didn’t offer a timeline for when a new project will move forward.
Some residents might wonder why the city doesn’t step in to force a company to finish a project, but Smith said it’s not within the city’s power to do that.
Completing unfinished projects is not the city’s business either.
“The city tries to provide a consistent permitting environment, but that’s not always going to be enough. We have a very strong regulatory environment here. But you can’t force somebody that has no money to finish a project,” he said. “People ask why we don’t take them over and finish them, but you have to be careful with taxpayer’s money.”
Then there’s the long-delayed WestCorp hotel project on the former Willow Inn site, perhaps the highest-profile spot on Kelowna’s waterfront.
WestCorp bought the site in 2013, applied for and received the appropriate city development permits, but has never managed to move the project further than the hole they dug on the site.
Late last year the company again applied for permits to build its 33-storey hotel there, but nothing’s happening, said Smith.
“Westcorp has permits for footing and foundation but nothing’s going on right now. They have a development permit that lapses later this year. If they don’t get it started later this year they’ll have to start from scratch again,” he said, adding that the COVID-19 pandemic, with national and international travel restrictions, may have created too much uncertainty for Westcorp to begin construction on a major hotel.
Another thing that municipalities can’t do is get in front of potential bankruptcies by looking at a developer’s financial health before a project begins.
“We have no ability to assess how deep their pockets are, and we don’t have the expertise. And what threshold would you use even if you could? And you might be penalizing first-time developers who have the capability but don’t have the history,” said Smith.
The City of Kelowna doesn’t maintain a list of unfinished projects but tracks them through their permitting processes and inspection milestones, said Smith. He also said the city helps to manage unfinished projects while they’re dormant.
“We do work with property developers where it’s necessary, and we are always available to help them figure out what the next steps are. In some cases that means securing the property with fencing, or helping with removing cranes and that type of thing if they won’t be used for a while,” he said.
On the bright side, most unfinished projects do get to completion in the end. Eventually a developer stepped in and finished that half-built high-rise in 2018. Another eyesore, The Conservatory seniors residence project on Glenmore Road ran into financial problems and was left as a hole in the ground for years until new ownership took over, finished off the building and converted it into rental apartments.