CALGARY — Vendors remained firmly in the driver’s seat as Calgary’s commercial real estate market exhibited strong momentum in the first half of 2012, according to the RE/MAX Commercial Investor Report released Wednesday.
“Consumer confidence remains high, given the city’s and province’s solid economic footing, which continues to be bolstered by a robust oil sector,” said the report. “Most segments of the market are active, with the retail, office and investment components particularly busy.”
The report said there has been a considerable uptick in U.S. retailers and national big-box chains setting up shop in the city, sparking serious competition among smaller retailers to secure good locations in close proximity to these anchors.
“The strong demand has some hoping to capitalize — Calgary’s Chinook Centre, for example, has just applied for a land-use amendment to expand its premises, combining a mix of residential, office and hotel space.”
The report said the office segment of the commercial real estate market is also exceptionally healthy, with Calgary’s downtown vacancy rate hovering around three per cent, while Class ‘A’ space is even tighter, running near one per cent.
“The strength has much to do with the active oilsands sector, which — with numerous projects on the go — is sparking an increase in demand for office and industrial space. While a growing number of organizations are establishing their corporate head offices in Calgary, many are opting to lease instead of buy in order to invest maximum capital in their operations,” said RE/MAX. “This suits investors just fine, as properties with solid long-term tenants command a premium. The downtown area and the Beltline that immediately surrounds the city are most sought after. Conditions are expected to remain tight, with very few projects underway.”
RE/MAX said demand for commercial real estate continues to climb across the country.
The report highlighted trends and developments in nine Canadian centres — Greater Vancouver, Calgary, Edmonton, Regina, Winnipeg, London, Greater Toronto, Ottawa, and Halifax-Dartmouth. It found that almost all markets saw an increase in commercial sales and dollar volume over the six-month period ending June 30.
RE/MAX said Canadian and foreign investors are behind the push, snapping-up apartment buildings and small strip malls given continuing low interest rates and a generally bullish tone for the Canadian economy. Private investors, in particular, have gained a serious foothold in recent years, spurring demand for entry-level properties such as multi-unit residential, suburban and urban retail storefronts, and smaller office buildings, it said.
“Given the appetite for tangible investments with long-term revenue streams and potential for appreciation, commercial real estate has been gaining favour and is expected to be a top-performer well into the new year,” said Elton Ash, regional executive vice-president for RE/MAX of Western Canada.
“Despite the enthusiasm, demand is unlikely to be satisfied while those same benefits are prompting owners/landlords to hold on to their properties, especially with the prospect of capital gains taxes down the road. It’s a push-pull situation, yet buyers are forging ahead, hoping to ride the wave of year-over-year double-digit equity gains a little while longer.”