Vancouver’s condo market is seeing low margins, rising inventory and paused projects, with developers trying different strategies to manage the current downturn, according to a Wednesday report by PwC and the Urban Land Institute.

“Some [clients] that are in stronger financial conditions can look to ride out slower times like this. They can also look to participate in maybe lower-margin projects to keep their people busy,” said David Neale, a Vancouver-based partner with the global accounting firm.

“But then we also have some that are in a tougher spot, and they’re being forced to look to sell assets and lay off staff, unfortunately. So you have companies and organizations sort of running the full spectrum there as they’re dealing with this downturn.”

Some developers are pivoting to purpose-built rental, and some well-capitalized ones are buying up insolvent projects. Some contrarians are even “musing this might be a time to initiate projects again” to prepare for an expected lack of supply in several years, said the Nov. 12 report.

“If and when things turn around, people that are active or maybe pursuing projects sooner than others could benefit from having projects ready in a market where demand comes back,” Neale said.

But the consensus is that it’s still too early to resume business as usual, said the PwC report.

The Vancouver market is in “a time of transition,” Neale said. While people have historically left Vancouver for smaller, more affordable markets in BC and Alberta, big changes to federal immigration policy mean that international immigration may no longer make up for those outflows, he said.

“It’s sort of bizarre to think about, but you’re going to see a population decline in Vancouver for the first time in 40 years, which is a different dynamic than obviously we’ve been seeing in BC for a long time,” he said.

Some developers may try to tap into government funding for Build Canada Homes (BCH) and other programs, though Neale said the federal budget unveiled Nov. 4 was underwhelming to some observers. The budget allocated $7 billion for BCH toward a five-year commitment of $13 billion.

“We are still hopeful that the further investment in that [BCH] program can drive that change or at least keep some of these developers busy and healthy during this downturn so that they’re in place and ready to build as things come back,” Neale said.

“But I think there [are] questions as to whether the actions that were taken, and the actions that are being taken, are sufficient to drive that significant an increase in homebuilding.”

Investors are considering other asset classes, Neale said. Industrial is a “pretty safe bet” due to the region’s land limitations, while office is seeing brisk leasing for high-quality inventory. It will take time to solve the region’s hotel shortage, though the FIFA World Cup could add momentum for more hotel supply, he said.

The PwC report also said retail remains resilient, particularly grocery-anchored assets and essential services in mixed-use and suburban projects.

“We think slow times for condos for the next couple years, steady for office, industrial and retail … and just a lot of questions around what can be done ….. to get some of these developers active again,” Neale said.

PwC Report : Vancouver Condo Market Could Struggle for Next Two Years by Jami Makan | BIV