Between 2005 and 2008, the average price per square foot of land was $84.14, numbers from commercial real estate services firm CB Richard Ellis show.
Since 2008, that figure has climbed to $153.39 per square foot.
“Developable land within the Greenbelt is in short supply. There is little to none left,” says Nico Zentil, a senior sales associate at CB Richard Ellis.
He says the industry tends to look closer at the price per unit, or the cost per square foot of buildable space on a site, in evaluating the value of a land parcel.
Since 2008, developers have been paying an average of $22,963 per unit in terms of land costs. That’s stayed relatively constant over the preceding three years, suggesting developers are paying higher prices for raw land, but are offsetting those costs by building higher-density projects.
Zoning plays a major role in determining land values. Industry observers have lamented the difficulty in predicting the future density of a site, as development proposals are frequently rejected by city council. However, the Ontario Municipal Board often overrules those local decisions.
Mr. Zentil says vendors who want top dollar for their land must often take the property through the rezoning process prior to sale, or sell it at a 10- to 25-per-cent discount to an investor who will take on the risk.
Across the city, CB Richard Ellis says there is an “unprecedented” demand for condominiums. Given the low level of existing supply, the firm expects the market to absorb these units without saturation.
Part of this demand is coming from retail investors, who are purchasing roughly one out of every five new condominiums to lease or rent out.
With 25 condominium projects either pre-sold or under construction, and another 26 additional projects under construction, an increasing number of out-of-town investors and developers are taking notice of the Ottawa market.
“There are groups sitting on the sidelines looking for a conduit into this marketplace because they see good opportunity here,” he says.
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