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On behalf of owner Slate Asset Management, Colliers has leased approximately 180,000 square feet in the newly renovated Stephen Avenue Place to such businesses as WeWork and mCloud. Colliers says vacancy rates for such quality office space in downtown Calgary is much lower than the city’s overall vacancy rate.Slate

In what appears to be a sign of confidence that Alberta’s economy is making a comeback, investors spent a record amount on commercial real estate in the province’s largest city during the first four months of this year.

Calgary’s commercial real estate sales in Q1 2022 topped $1.6-billion, according to The Network research firm. While this can largely be attributed to the $1.2-billion sale of downtown’s iconic Bow skyscraper, the chart-busting quarter was preceded by “a dramatic increase in sales through the third and fourth quarters of 2021,” states The Network’s report, released in April.

Adding to higher sales is a “significant increase in leasing activity for commercial property in Calgary,” says Justin Mayerchak, executive vice-president and partner at Colliers’s Calgary office.

Calgary is in the midst of an industrial real estate boom.

Adam Grisack, director of valuation and advisory services at Colliers Canada

After enduring seven years of economic lethargy linked to the struggling energy sector, only to be further pummelled the last two-years by the pandemic, “Calgary has finally seen two consecutive quarters of positive absorption of office space,” says Mr. Mayerchak.

The vacancy rate is still the highest of Canada’s 10 major cities, at 28 per cent. But in this city, which has more office space per capita than any other in the country, vacancy has “compressed considerably” – to around 10 per cent – in higher-classed buildings. Occupancy for downtown AA space recently crossed the 13-million-square-foot mark for the first time in recent record.

“A 10-year high in oil pricing is sparking optimism in the energy sector and, by extension, Calgary’s downtown office market,” states Colliers’s Q2-2022 Downtown Office Market Report. “For the first time in several years, Colliers has seen companies in the energy sector looking to increase their overall office footprint, stepping away from the downsizing witnessed over the past few years.”

Meanwhile, Calgary’s industrial property market is “absolutely on fire,” says Mr. Mayerchak. Vacancy rates fell 50 per cent in the past year and now hover around 3.5 per cent – the lowest since 2014. Major players such as Amazon, Lowe’s, Home Depot, Canadian Tire and Walmart have made billions worth of investments in the province as they expand their industrial spaces.

According to Adam Grisack, director of valuation and advisory services at Colliers, “Calgary is in the midst of an industrial real estate boom.”

In a recent article published on Real Estate News Exchange, Mr. Grisack wrote: “Increasing job numbers have sparked renewed optimism in the city, making Calgary an attractive destination for businesses.”

After posting the second-strongest annual economic gain among the 10 provinces in 2021, the Conference Board of Canada projects that Alberta will lead the country in economic growth in both 2022 and 2023.

This optimism has driven more people to the province. According to Statistics Canada, Alberta welcomed 16,690 newcomers in the third quarter of 2021, the most in nearly seven years.

One of Calgary’s largest owners of multifamily buildings is reaping strong returns. Mainstreet Equity Corp., with 3,229 units in dozens of holdings, achieved 12-per-cent growth in Q1 2022, its fourth consecutive quarter of double-digit revenue increase.

The company expects more growth ahead. “Canadian oil production was the highest on record in 2021, and energy companies reaped their largest-ever revenues over the year – $158-billion,” states Bob Dhillon, president and chief executive officer of Mainstreet, in the company’s Q1 2022 report. “We believe this will help propel an influx of migration, extending the positive trend we have seen in recent months.”

Even with the global movement away from oil and gas, Mr. Dhillon remains optimistic about Calgary’s future. That’s because “Calgary’s economic foundation is becoming increasingly diversified,” he asserts, and this is another draw for workers.

Calgary’s commercial real estate sales in Q1 2022 topped $1.6-billion, a new record for sales in a single quarter.Jeff McIntosh/The Canadian Press

During Calgary Economic Development’s annual Report to the Community event, which took place virtually on April 28, the city’s mayor, Jyoti Gondek, spoke of Calgary emerging as a global hub for innovation in energy transition.

“Shifting our narrative and securing Calgary’s position as a leader in the energy transformation may be the most important thing we do for our city’s economic future,” said Ms. Gondek.

Calgary was recently recognized as a cleantech “ecosystem to watch,” ranking in the top 30 out of nearly 300 cities by the international innovation research firm Startup Genome, the mayor noted.

Greg Kwong, executive vice-president and regional managing director at CBRE’s Calgary office, recalls that only a handful of years ago, “people were saying, ‘I don’t know if I could ever go back there,’ " referring to Calgary. After all, in 2017, the Conference Board ranked Alberta’s economy third last in Canada.

“Now, you talk to any major economist from any financial institution and all their numbers point to Alberta having Canada’s strongest growth for the next 12 to 18 months,” he says.

“But I’d go further,” he adds. “I’d make that five to 10 years.”

Along with its soaring economy, the city’s low cost of living will continue to draw new business, says Mr. Kwong.

Calgary’s average home price, currently a record high of $605,000, according to the Calgary Real Estate Board, is still less than half of Vancouver’s at $1,374,500, or Toronto’s at $1,254,400.

It’s the same for commercial real estate: According to CBRE, office lease rates in Calgary cost $16.55 per square foot compared to $39 in Vancouver and $28.15 in Toronto. Industrial space is also nearly half the price compared to those two cities.

Mr. Kwong says Vancouver’s university graduates tell him they can’t afford to live in that city. “So, they’re moving here. In fact, [of] the last six people I’ve hired – three are from Vancouver.”

Canada’s average annual salary – $66,800 according to most recent StatCan figures – is not enough to save for a starter home in Vancouver, Mr. Kwong says.

“We’ve got smart, ambitious young people who are moving here. Those people don’t just sit in their heads. They’ll start businesses. They’ll work for people. They’re going to create.”

And when major businesses set up new locations, adds Mr Kwong, “they’re looking at two factors. One: Can they open up shop and hire 5,000 people? Two: What are the overhead costs? Then they look at everything else: logistics, support services, quality of life. But if they can’t find the staff and operating costs are too high, you get precluded from a lot of site searches.”

Mr. Kwong says that record spending on commercial real estate this year attests to investors’ “confidence in the long-term economy.”

These investors, Mr. Kwong concedes, are also following two adages, “that have always proven successful in real estate. Location, location, location; you’ve heard that many times.

“The other is, of course, buy low, sell high.”