Commercial condos catch on in Calgary
Sales, initially robust, have slipped but only because of limited supply, Colliers notes
The concept of the commercial condo is fitfully gaining recognition in some markets, including Calgary. Yet, it continues to catch on, and the city is said to be benefiting from a spillover effect from the exceptionally strong industrial strata market in Vancouver.
Commercial condos, industrial strata projects – there are a few different names bandied around for generally the same concept, namely offices owned by tenants, rather than traditionally leased office space. Think residential condo, but instead of being an apartment, it's an office.
Colliers notes in a recent report that the number of sales transactions of commercial office strata projects in Calgary has declined, but the real estate company says it is more a question of scarcity, rather than diminishing demand.
After a recent jump in the number of sales transactions in Greater Calgary (90 commercial strata sales transactions in 2013, 85 in 2014 and 90 again in 2015), the number has since fallen. In 2016, it dropped to 40 transactions. For 2017, Colliers forecasts just 35. The size of those available commercial strata properties has also dropped significantly.
However, their price has risen to more than $200 a square foot, on average, this year and last.
The decrease in sales volume was "due to a lack of available supply, not so much the increase in value," says Paul Marsden, executive vice-president of industrial sales and leasing at Colliers in Calgary. "Since the [regional economic] downturn started in 2014, developers have been apprehensive to build new strata units, and this has reduced the supply."
Yet, prior to that, a considerable amount of construction had been taking place, adding to the supply of available property a few years ago, he notes. "This increase in activity demonstrates that when good new developments are constructed, they do sell."
The spillover from Vancouver has also been a prime driver. "Most of the developers developing industrial strata in Calgary are Vancouver-based development companies, such as Hungerford [Properties]. The Calgary market has historically not had a track record of resales for industrial units, and therefore that puts doubt in businesses's minds of the security of the investment," he says.
But as the track record builds, Mr. Marsden foresees Calgary getting more used to the concept of commercial condos.