High density, mixed-use development projects are becoming increasingly common and popular with developers, governments and the public. While the attractions and advantages of these types of projects are significant, it is crucial to note that one day these developments will reach the end of their lifecycle and will need to be demolished or redeveloped. Governments and the development industry should now be proactively considering how to remove legal obstacles and offer some practical remedies, for the benefit of both cities and landowners, when the problematic redevelopment of mixed-use sites is needed in the future.
Canadian cities are undergoing rapid transformations, often involving multiple uses of urban development sites. Increasing populations, limited supplies of feasible development sites, desires for ecological efficiencies and evolving standards of desirable living space necessitate creative use of land space.
Here in British Columbia, our cities are quickly catching up with the dense urban developments which have existed and succeeded in other major world cities. Vancouver's urban core and various regional town centres are now at the forefront of creative mixed-use development designs. Some of Vancouver's most prominent and successful real estate projects have involved mixed uses of offices, hotels, retail, and entertainment complexes, often combined with residential units. Most often, the economic driver to these projects has been the opportunity to create airspace parcels within mixed-use projects, and to further subdivide airspace parcels into residential condominiums.
The benefits of these projects are obvious and easy to market: they are energy-efficient, affordable, vibrant, transit-oriented and have a reduced carbon footprint, among others. Often, such developments also offer other advantages, such as shared use of recreational amenities with hotel projects, convenient access to retail, restaurant and entertainment facilities, and connections to neighbourhood energy utilities.
Thinking Long Term
Subdivision approving authorities ensure that mixed-use developments involving airspace subdivisions functionally accommodate construction, repair, maintenance and operation of interdependent components. Inevitably, however, every new gleaming project will ultimately deteriorate and require redevelopment, demolition and replacement. Most developers and investors consider only immediate horizons and self-interest in planning, marketing and completing projects. Few are motivated to consider long-term uncertainties that will necessarily arise from projects involving multiple legal parcels owned by many separate parties and requiring coordinated redevelopment.
Any component of a mixed-use project can, if not efficiently maintained and replaced, endanger, devalue and in some cases render worthless the remaining components. Owners of commercial developments, with long-term objectives and duties, are most at risk from potential stalemates in redevelopment, especially when dealing with multiple condominium owners, who can be unpredictable.
Solutions Needed
Current BC legislation is likely inadequate to address the issues arising from future redevelopment of interdependent development parcels. Practically, options to repurchase lands cannot exceed 80 years. Ground leases of land parcels for residential condominium developments are available only through a limited class of leasehold landlords (such as municipalities, universities and First Nations). Typically, the market discounts the sale values of leasehold condominiums, when compared to fee simple ownership of condominiums.
Looking into the distant future, it is foreseeable that the redevelopment of many of the most prominent mixed-use development sites on the Vancouver skyline may be stalled through the absence of effective legal rights to reconsolidate and re-acquire title from many different owners. There are potentially billions of dollars at risk and many parties affected by potential stalemate in the redevelopment of key urban lands.
Solutions are available, if and when these issues are recognized. However, every possible solution requires enlightened analysis and courageous balancing of competing interests and objectives by present political leaders, albeit for the benefit of future generations.
