While commercial buildings rise, residential builds down due to higher interest rates

KAMLOOPS — An office development on McMaster Way, renovations at Royal Inland Hospital, and a commercial build in Dallas are among many projects helping the City of Kamloops boast $187 million worth of permits this year — including $38.6 million last month.

“We saw a broad range of projects go out the door. One was a conveyer project on Mission Flats Road between Kruger and Arrow to transport wood chips, there was a big project at KRCC [Kamloops Regional Correction Centre], there permits issued for a Canadian brewhouse that’s going to go in the Aberdeen Mall area,” said the city’s building and engineering development manager Jason Dixon. ”

June’s output accounted for 20 per cent of the annual permits to date, putting the city on pace to come close to the record-setting 2020 year with the Phil & Jennie Gaglardi Tower pushing the total to $416 million.

“This year, we’ve seen a broader range of big projects, but not of that scope obviously,” noted Dixon.

Meanwhile, residential construction rates are on the decline — in part due to the rising interest rates.

There are fewer units being built to date in 2022 with 264 compared to 307 by this time last year. Developers say higher interest rates — with the benchmark rate now at 2.5 per cent — are forcing them to be more cautious.

“Certainly as a homebuilder I’m concerned,” said incoming president for the Canadian Home Builders’ Association Central Interior Tom Calne. “To the point where we will not be starting some homes that we might have been starting. We’re watching our inventory and we want to make sure we don’t get too overextended.”

Calne says low interest rates caused a residential housing boom, especially during the pandemic, and now home builders have to rethink their strategy.

“I think what’s happening is as interest rates go up, product becomes more expensive for people, and at the end of the day, as a builder/developer, you just need to make sure you’re bringing on product in a responsible manner, so that you’re protecting your business but you’re also providing housing for the market.”