With the Vancouver Real Estate Forum on the horizon, Clayton Brown, Peakhill’s Vice President, Financing for BC markets, has broken down the key trends impacting commercial real estate which continue to impact developers in the area.
As economic headwinds and uncertainty remain at the forefront of the industry, Peakhill looks to analyze market trends while acknowledging that they are subject to change.
Policy Changes: Opportunity Meets Delay
In the wake of policy shifts, such as Bill 44 and The Broadway Plan, Vancouver has experienced a surge in transactions and development applications. Bill 44, which spurred municipalities to allow multiplex developments on single-family lots, has gained traction since the required zoning changes were formalized in 2024. The City of Vancouver has committed to streamlining multiplex permits in early 2025, aiming to cut permitting times by 50% through a refined Development Building Permit application pathway.
Enacted in 2022, the Broadway Plan was designed to stimulate housing development around the new Broadway Subway line, but the first approvals didn’t occur until late 2024. While approval timelines may present challenges for developers eager to capitalize on such policies, the recent proposal announced on March 5 to rezone specific areas along the line is a step toward simplifying the development process.1 We remain optimistic that these new policies will help accelerate progress moving forward despite delays in the approval pipeline.
Financial Strain: Rising Input Costs and Tightened Capital
High construction costs and limited access to capital are squeezing developers. As a result, we are seeing a decline in housing starts and stalled projects. Much like Toronto, Vancouver is experiencing a soft presale market, forcing developers to hit the pause button on many projects. In contrast, Vancouver has slightly more compressed cap rates on new construction for multi-family, 3.90%-4.50%, reported for Q4 2024.2 This has created a challenge for developers to get adequate leverage, as loan amounts are constrained by cash flow at lower loan amounts. As financing remains a hurdle, many developers have delayed or shelved their plans.
Government Programs: Creative Solutions for Financial Relief
In response to rising costs, developers are turning to government-backed programs to keep multi-family housing projects moving. As new developments slow, developers have looked to incorporate affordability, energy efficiency, and accessibility to qualify for incentive-laden CMHC programs. CMHC’s MLI Select and ACLP Program continue to be popular choices for developers who look to benefit from their favourable lending terms. These programs provide increased leverage and reduced costs for developments while aligning with social benefits—and they’re proving to be a key tool in navigating financial headwinds.
Capital Constraints: Navigating Loan Challenges
Capital remains constrained, and developers are seeing loan amounts capped on their projects due to proforma cash flow restrictions despite rising costs. For developers, this means smaller loans and lower leverage—an obstacle to moving projects forward.
Rental achievement holdbacks on CMHC MLI Select construction loans are becoming increasingly common as CMHC takes a more risk-based approach to underwriting. As a result, CMHC construction loans which include these holdbacks will have reduced leverage during development and higher equity requirements until lease-up is achieved. With these holdbacks as a possibility, developers may opt for conventional financing and go back to CMHC for a takeout loan at project completion. This is especially true for developers who remain bullish on future rental rates as this could enable a higher CMHC takeout loan in the future.
“Capital constraints are impacting borrowers across the country, and the Lower Mainland is no exception. On the heels of credit parameter tightening in the uninsured market beginning in mid-2023 and through 2024, the application of structured holdbacks in the insured lending market poses a point-in-time funding gap. For developers, this means on-the-fly changes to project modelling and added variables in an uncertain time.
Peakhill’s core values make us well-suited to adapt to ever-changing market conditions. We are committed to supporting new development across the country, and as we face new challenges, we navigate innovative solutions with our borrower clients.”
Innovative Financing: Bridging the Gaps
With financing becoming more restrictive, developers and investors are getting creative. Bridge loans, second mortgages, and mezzanine financing are helping developers meet their financing requirements for their projects.
Bridge loans offer a quick, flexible solution to finance projects while developers and investors wait for permanent-term financing. This strategy helps project owners stay on schedule even when traditional financing is currently out of reach. For developers looking to unlock more capital, second mortgages are becoming a go-to, especially for developments impacted by rental achievement holdbacks imposed by CMHC. As the market adapts to a greater prevalence of holdbacks, options are becoming available in the market for mezzanine financing to alleviate capital constraints until holdback release.
Developers can benefit from these additional financing options which allow them to increase their leverage and move projects forward in a tight market.
Looking Ahead
Vancouver’s real estate market comes with its share of challenges, including rising costs, slow approvals, and tight capital. Yet, we believe that it also presents plenty of opportunities. Although obstacles can be tough and uncertainty exists, government incentives and flexible financing options offer ways for developers to stay ahead. By adapting quickly and thinking creatively with financing solutions, developers can successfully navigate today’s market and build beyond the challenges.
Let’s continue the conversation
Footnotes
- City of Vancouver. (n.d.). Broadway plan. Shape Your City Vancouver. Retrieved April 7, 2025, from https://www.shapeyourcity.ca/broadway-plan ↩︎
- CBRE. (2025, January 22). Canadian Cap Rates & Investment Insights Q4 2024. CBRE Limited. Retrieved from https://www.cbre.ca/insights/reports/canada-cap-rates-investment-insights-q4-2024 ↩︎
