The quick sell-out of Phase 1 of a Penticton condo project reveals pent-up demand in B.C.'s South Okanagan market, with potentially thousands of others eager to join the city’s buyer pool, say the teams behind the two-building development.

Sokana, by Chilliwack-based Kerkhoff Develop-Build, is a two-phase, two-building project with studios, one-, two- and three-bedroom homes tailored for a mix of long-term residents and investors.

The project is located near the Penticton Channel at the Okanagan Lake end of the city.

The first phase of Sokana sold out in 72 hours. 

In Penticton, a city of about 36,000, owners can rent out their home on a short-term basis with proper licensing. The development will include an outdoor pool, hot tub, co-working space and a fitness centre, and is located within walking distance of Penticton's downtown core.

The property is located within the North Gateway Plan area — a redevelopment strategy for the city’s northwest corner that includes plans for boutique shops, wide multi-use paths, tree-lined streets, a variety of housing types, hotels and entertainment and recreation amenities.

The plan aims to add 1,750 to 2,250 new housing units, five to 10 per cent of which would be for employee housing.

It also calls for up to 350 new hotel rooms, almost 30,000 square feet of new commercial space, two new ice surfaces and expansion of convention space.

Penticton experienced a nine per cent population increase from 2016 to 2021. 

Sokana, Penticton and multiresidential development

"We're probably one of the first projects that is already capitalizing on those expansion plans that the city has (developed)," said Bruno Jury, vice-president of development for Kerkhoff Develop-Build.

Jury told RENX in an interview Penticton has been "underserved" by new multiresidential developments and appears ready for a wave of development to meet the demands of locals as well as investors keen to capitalize on short-term rentals in a market popular for summertime sun-seekers, lake-lovers and wine enthusiasts. 

Sokana’s first phase will have 96 units ranging from studios to three-bedroom homes. The second building will have 138 units with a similar range of options. 

Construction of the first phase is planned to begin this fall and would take roughly two years to complete.

The company plans to launch sales of Phase 2 soon, and if that project achieves 50 per cent sales in short order, there's the potential to build both phases together over roughly 30 months, Jury said. 

Jury said pricing wasn't overly aggressive although it did hit new standards in Penticton for price achieved per buildable square foot.

He said that demonstrates an appetite among buyers in a market that remains modestly priced compared to Kelowna and the Lower Mainland. 

Penticton generates sense of nostalgia among buyers

Many of the buyers in the first phase are from the Lower Mainland, said Shane Styles, president of Epic Real Estate Solutions, which led the marketing for Sokana. 

During the pre-sale process, many buyers expressed a sense of nostalgia for Penticton, having visited the community during summers past, often staying at the motels and resorts scattered between Skaha and Okanagan Lakes.

"Everybody had a story about that," Styles told RENX. "They were aligning that nostalgia of yesteryear and their fond memories, with their penchant for real estate, real estate investing and their future desire of living in the Okanagan."

There hasn't been much new multiresidential development in the city, especially in and around the Gateway District, Styles agreed. 

He said the ability to operate short-term rentals in a vacation-centric community also helped with Sokana.

"That goes against the grain of a lot or most of the communities in the province and it's going to help supercharge (Penticton's) economy and other developments." 

Future projects could pull from sizeable buyer pool 

Styles estimated there are another 4,000 to 5,000 people in the overall buyer pool — from inside and outside the market — that would be interested in owning similar real estate in Penticton. 

He said elevated interest rates are on people's minds, but buyer behaviour around Sokana suggests people expect property values to climb within the next couple of years and for interest rates to stay flat or decline when the project completes and it's time for mortgage financing to start flowing. 

"The Okanagan has been underpriced compared to other markets like . . . Greater Vancouver,” Jury said. “People see the value in investing there; they get more square footage for their money."

Kerkhoff, which has a Kelowna office, has two divisions: development and construction.

Jury said the construction side of the business is "very busy right now" building rental homes and condos for other developers.

He said the team has roughly six projects under construction with more than 600 units in the Okanagan Valley.  

Meanwhile, the development arm of the business is also focused on launching a new high-rise this fall in downtown Kelowna called One Varsity.

One Varsity is a planned 36-storey mixed-use tower that would include 341 condos ranging from micro suites, studios, and 1-2 bedroom homes along with commercial space.

The One Varsity site is located across the street from the downtown UBC Okanagan Campus, which is under construction and set to complete in 2027.