Despite a downturn in oil prices, commercial real estate developers in the Canadian city of Calgary are not experiencing a downturn in investment – instead they report increasing opportunities.
Investors who found that prices were previously out of their range are getting the chance now that prices have moderated, according to the city’s mayor, Naheed Nenshi.
“Our downtown commercial market is very strong and we’re getting a lot of folks saying they had been priced out of Calgary and now here’s their chance,” he said.
“I’m told by these very, very large skyscraper builders and commercial property developers, mostly backed by pensions, that they are patient money, and they make their money by building at this point in the cycle.”
The oil boom gave rise to a clutch of skyscrapers as employment surged, including H&R REIT’s The Bow (pictured), designed by Foster + Partners.
Now, despite lower crude prices, the commercial and residential construction industries have been kept busy as the population increases.
Last year, the city’s population increased by 40,000 to 1.2 million people. Growth in manufacturing, energy and retail jobs kept unemployment rates below the national average.
The commercial vacancy rate has increased to double-digit levels and is now about 11 per cent. This is a “healthy” level, according to Mr. Nenshi, after a number of years of tenants finding it difficult to find space to rent.
According to Cushman & Wakefield’s most recent quarterly report, Calgary’s office vacancy was 8.5 per cent in Q1, up from 6.3 per cent last year. Toronto’s rate was 7.7 per cent in Q1; in its financial core the rate is the country’s lowest at 4.8 per cent. Calgary’s central core boasts a 9.8 per cent vacancy rate.
The oil industry is predicted to have a “difficult” second quarter in Calgary before moving into recovery in Q3, according to Mr. Nenshi. In the meantime, he said, it’s important to continue attracting people from outside the country to ensure that the city “maintains it economic growth.”
