Calgary rebounds as CRE sales rise and office vacancy rate falls

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Calgary’s 20 largest commercial real estate sales in the first quarter of 2022 topped $1.5 billion, with some tied to a perception of bargain-priced real estate in Alberta’s largest city

A combination of higher oil prices, pent-up demand and what are seen as favorable real estate prices have pushed Calgary commercial sales into record territory in the first three months of 2022.

Including the previously announced sale of the Bow office tower, which closed on Jan. 25, the top 20 deals in the first quarter of this year reached $1.53 billion, according to the firm. The Network studies. That compares to $910 million in the first quarter of 2021, if all 162 deals at that time are included.

Network President Nathan Gettel suspects that when the final Q1 data is complete, it could reveal a record pace in Calgary, led by the office, industrial and multi-family sectors.

Office sector

Oil prices, at their highest level in 10 years in the first quarter of 2022, boosted Calgary’s downtown office market, which fell from a national high of 30% for most of 2021 to 28 .9%.

The overall vacancy rate has fallen to 25.4%, according to Avison Young, from 26% at the end of 2021.

The assumption of class AA offices in downtown Calgary in the first quarter of this year reached 400,000 square feet, bringing the total rental or sale of prime space to 13 million square “for the first time in recent history,” Avison Young noted.

In addition to the closing of the historic Bow Building sale, the first quarter of 2022 also saw the $18.5 million cash purchase of a 50,000 square foot office building on 9th Avenue. downtown by Calgary Technologies Inc.

“Activity in the office market is moving away from short-term merger-and-extension or stopgap-type deals, and back towards large-scale moves as tenants gain confidence,” Colliers suggested. .

Industrial

There were six multi-bay industrial sales in the first quarter, but the purchase of 68.6 acres of industrial land by Vancouver-based Beedie Developments could signal an acceleration of the move to Calgary by west coast developers.

Beedie, through Beecal Developments Ltd., a grant, purchased the industrial site at 6502 106 Avenue SE, from the City of Calgary on February 24 for $38.2 million, or $557,000 per acre.

By comparison, a vacant 17-acre industrial site was sold by the city of Burnaby, British Columbia, in December for $136 million, or $8 million per acre.

Beedie is no stranger to Calgary. It made its first foray into Alberta 11 years ago when it purchased 220 acres in northeast Airdrie to develop Highland Park Industrial. He has since developed the Glenmore Corporate Center, a 235,000 square foot center in Frontier Business Park and the 93,000 square foot Ironside Business Center and most recently 170 acres of land in Rocky View County to the east. from the city.

Other Vancouver developers, including Anthem Properties, are also active in Calgary, at least in part due to what are seen as relatively low prices for commercial and industrial land.

But, in its first-quarter 2022 domestic market snapshot, Colliers Canada noted that low land values ​​are only part of Calgary’s appeal as oil prices rise above US$100 a barrel.

“The steadily declining vacancy rate and increasing demand for industrial products in Calgary continue to put upward pressure on asking rental rates,” the Colliers report said.

The industrial vacancy rate in Calgary is 3.5%, compared to 4.6% in Edmonton and a shockingly low 0.4% in Vancouver. Industrial rental rates are now averaging $9.00 per square foot, up nearly $1 from Q4 2021, but still the second lowest among cities in Western Canada.

More than 1.4 million square feet of new industrial space was completed in Calgary in the first quarter of 2022, and 7.65 million square feet are under construction, much of it in speculative lease developments that will open next year .

Several families

Mainstreet Equity Corp. of Calgary, one of Canada’s largest owners, is extremely confident in the Alberta multifamily market.

Last year, Mainstreet recorded 7% growth in rental income and a 5% increase in net operating income.

“Canadian oil production was the highest on record in 2021, and energy companies earned their strongest revenues during the year,” said Mainstreet Founder and Chairman Bob Dhillon, who believes the Soaring oil prices will increase immigration to Alberta this year. year.

Alberta welcomed 16,690 newcomers in the third quarter of 2021, the highest number in nearly seven years, according to Statistics Canada.

On January 4, Mainstreet paid $38.1 million in cash for a 239-unit walk-up apartment complex at 641 Meredith Road in Calgary’s Bridgeland/Riverview neighborhood, a price of approximately $159,400 per door.

Avenue Living, also of Calgary, has also been aggressively buying rental properties in the city.

As reported here last month, Avenue Living purchased 764 apartments in three separate Calgary rental complexes on March 7 for $138 million. Then, on March 31, the company purchased another 86 units in the Setton neighborhood of Calgary.


Retail

Calgary is seeing redevelopment of older malls this year and its resilient retail market — Alberta retail sales have held steady at an average of $7.6 billion a month throughout the pandemic — is attracting shoppers. investors.

The former Stadium shopping center site on 6.5 acres near Foothills Hospital is being redeveloped into a mixed-use project that will retain retail businesses, including a flagship grocery store, as part of a planned of Western Securities.

Northland Village Mall is also being redeveloped into a mixed-use residential and commercial village.

On February 4, 2022, the 120,250 square foot London Town Square was purchased by a Richmond, BC investor for $36 million, one of Calgary’s largest recent retail deals.

Hotel market

On March 29, Coast Hotels announced the purchase of the 120-room Regency Suites hotel in downtown Calgary from SM2 Capital Partners.

This is a rare positive sign for Calgary’s hard-hit hospitality sector, according to the Canadian Hospitality Industry Outlook just released by CBRE. According to CBRE forecasts, Calgary and Edmonton will lag the market this year.

“Calgary and Edmonton are expected to increase revenue per room (RevPar) by more than 50%, but lingering supply impacts and fundamental economic challenges remain. Nonetheless, CBRE expects Calgary to reach $62 in RevPAR for 2022,” according to CBRE Hotels Director Nicole Nguyen.

But rising oil prices and the opening up of in-person travel and conferences could surprise on the upside in 2022.

“The good news is that we expect hotels across Canada to be back to full strength by the end of this year,” Nguyen said. “In fact, depending on the extent of the rebound in consumer confidence and the recovery in business travel, the hospitality industry may even exceed expectations. That would be good news for a change.

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