SECOND TO ONE

Calgary’s 8th Avenue S.W. second most expensive street for office space in Canada
Toronto’s Bay Street tops in average street rent
By Mario Toneguzzi
Calgary Herald November 28, 2012

CALGARY — Calgary’s 8th Avenue S.W. strip is the second most expensive street in Canada for office space, according to a report by Jones Lang LaSalle.

The company said Toronto’s Bay Street comes in at No. 1 with average rents running at around $68.91 per square foot and the top rent on the street at $82.28 per square foot.

Calgary’s 8th Avenue S.W. follows with average office rents of $55.33 per square foot and the top rent on the street at $76.50 per square foot.

“It is clear from our ranking that companies are keen to pay a premium to be in the most prestigious locations,” said Brett Miller, president of Jones Lang LaSalle Canada. “Our figures also prove that demand is not abating and rents have moved up year-over-year in every city confirming the strength of the Canadian office market.”

Calgary’s 8th Avenue S.W made its debut this year to reach second on the list. Last year, Calgary’s 3rd Avenue S.W. was in fourth place.

This year’s list after 8th Avenue S.W. with their average street rent and top street rent includes: Vancouver’s Burrard Street, $54.75, $65.41; Ottawa’s Albert Street, $53.18, $53.18; Edmonton’s 101st Street NW, $49.40, $55.25; Montreal’s Rene-Levesque Boulevard West, $46.46, $56.19; and Halifax’s Upper Water Street, $35.57, $35.78.

Maggie Schofield, executive director of the Calgary Downtown Association, said the high Calgary rent along 8th Avenue is due to the existence of office skyscrapers Bankers Hall and Eighth Avenue Place.

“We’re certainly not surprised that the rates would be very high. It’s all about location. These are very, very high demand properties and the market is certainly driving it. There’s a great deal of appetite for high level, the top class, real estate in the downtown core from the office perspective,” said Schofield.

“A number of companies are trying to take advantage of the fact that they can now get into some of these newer properties and get contiguous space which has been a real challenge for a lot of companies that are trying to expand. So they’re looking at these opportunities and they’re willing to pay that price to get all their people in the same office building rather than being scattered in three or four or five separate towers depending on which company you are.”

Other advantages include the number of amenities along 8th Avenue, particularly in retail, great access to transit and available parking spaces in newer buildings, she said.

Commercial real estate firm CBRE said the vacancy rate in the downtown Calgary office market for Class AA space was 0.5 per cent in the third quarter of this year. It has dipped after being 10.6 per cent at the end of 2009.

According to CBRE, the average net asking rent for Calgary downtown Class AA office space was $23.50 per square foot in the second quarter of 2000. It peaked at $54.48 in the second and third quarters of 2008 then dipped to $33.78 in the first quarter of 2010.

In the third quarter of this year, the average net asking rent for Calgary downtown Class AA office space was $42.00.

The Jones Lang LaSalle report indicated that the differences between the average market rents and the average street rents this year were 133 per cent for Bay Street and 63 per cent for 8th Avenue S.W.

In 2011, it said Bay Street had an average street rent of $52.09 with a top street rent of $78.19. For 8th Avenue last year it was $49.94 for the average street rent and $54.19 for the top street rent.

Photo By: Tony Tran

COMMERCIAL LEASING REMAINS STRONG

Demand for Calgary downtown office space remains strong
Second Eighth Avenue Place tower nears being fully leased
By Mario Toneguzzi
Calgary Herald April 27, 2012

CALGARY — Continued demand for Calgary downtown office space has been so strong that the latest skyscraper project is getting closer to being fully leased.

Joe Binfet, managing director for Colliers International in Calgary, said the commercial real estate firm has received “tremendous traction” in leasing the West Tower of the Eighth Avenue Place development.

“There are only seven unencumbered floors left on which we can do lease deals on and remember this is a 40-floor, 841,000 square foot office tower. So that’s a significant sign of the strength of the Calgary economy downtown,” he said.

There’s about 150,000 square feet of vacant space in the second tower on the site which just recently began construction.

The owners of the project, which comprises a 49-storey tower on the site of the former Penny Lane block, recently said initial occupancy on the 40-storey second tower is planned for the spring of 2014.

The project is co-owned by Alberta Investment Management Corp., Ivanhoe Cambridge and Matco Investments Ltd.

The existing 49-storey tower, comprising 1.1 million square feet of office space, was completed in early 2011. Its construction began without any pre-leasing.

“There’s continued demand for AA and A space,” said Binfet.

“It’s not a frenzied pace like we were seeing earlier in the year but we are seeing cautious optimism in the marketplace and that bodes well for downtown office space right now.”

A downtown office report by Colliers said there has been 866,351 square feet of absorbed space in the first quarter of this year, marking the 10th consecutive quarter of positive absorption. The overall downtown vacancy dropped from 4.49 per cent in the previous quarter to 4.20 per cent “despite projections that the completion of The Bow, Encana and Cenovus’ new head office, would push the vacancy rate up across all building classes,” said Colliers.

It said AA and A class markets remain very tight with the AA vacancy rate at just 0.59 per cent. This is the lowest AA vacancy rate since 2006.

“Many companies with a long-term outlook for Calgary, and Alberta alike, are looking to new developments as their best leasing solution, given the limited availability within existing buildings,” added Colliers.

A downtown office market report by Avison Young said new office construction is not just possible but necessary.

“Vacancy models assuming even modest annual absorption in the area show downtown vacancy below three per cent for the next five years,” it said.

“It is likely that given the modest absorption rate we will reach sub one per cent vacancy in the downtown by mid-2013. What this means is that at least some major developments currently in pre-leasing will likely commit to construction within the year.”

Avison Young said this has already happened with Cadillac Fairview’s City Centre project while other major downtown developments could move ahead as well.

“Likely candidates include: Brookfield’s Herald Block, Oxford’s Eau Claire Tower, Aspen’s Palliser West and H&R REIT’s Bow South. All these developments are on a four-year or longer timeline so vacancies will remain very low.”

Photo by: Surrealplaces

CORE VALUES

Downtown office space fills up at record rate
Central core vacancy drops to 5.7 per cent
By Mario Toneguzzi
Calgary Herald December 22, 2011

Demand for Calgary downtown office space reached new heights in 2011 with record leasing activity.

A report by CBRE Ltd., published Wednesday, says the downtown market saw net absorption - the change in occupied space - of close to 2.6 million square feet in Calgary in 2011. That pushed the overall central core vacancy rate down to 5.7 per cent in the fourth quarter of this year from 7.0 per cent in the third quarter.

A year ago, the downtown office vacancy rate was 13.0 per cent.

"The fourth quarter capped a stellar year for Calgary," said Greg Kwong, executive vice-president and regional managing director for Alberta for CBRE. "The delivery of The Bow in 2012 will mark the continuation of our momentum and will symbolize the bright future that lies ahead for Calgary.

"Office demand was high again this year for the same reasons as 2010. The oilsands sector is booming again and related companies are leasing space to accommodate expansion. . . . We should get at least one more new building announced next year."

The Bow and its nearly two million square feet of office space will be home to energy giants Encana and Cenovus.

On Tuesday, the owners of Eighth Avenue Place announced they were going ahead with the second tower on the downtown site, a 40-storey, 850,000squarefoot office building that should be ready for occupancy in 2014. A 49-storey, 1.1 millionsquare-foot office tower exists on the site of the old Penny Lane complex.

Oxford Properties is in the pre-leasing stage for a proposed 25-storey, 615,000-square-foot tower.

Susan Thompson, business development manager of real estate for Calgary Economic Development, said the downtown office market is primarily driven by the oil and gas industry. "And we've seen fairly strong growth in that category this year. They're obviously growing and looking for more space," Thompson said.

"Every indication is there that it will continue to grow in the new year."

In its report, CBRE said the overall Calgary office market, including the suburban category, saw its vacancy rate drop to 7.1 per cent in the fourth quarter from 8.0 per cent in the previous quarter and 13.2 per cent in late 2010.

CBRE said the Calgary industrial market added 900,000 square feet of space this quarter, the most since the fourth quarter of 2008 as developers look to take advantage of economic growth in the region.

The overall availability rate in Calgary's industrial real estate market rose to 4.9 per cent in the fourth quarter from 4.3 per cent in the third quarter.

In its National Office and Industrial Trends Fourth Quarter 2011 Summary Report, CBRE said total absorption of office space across the country was just under eight million square feet, up from five million square feet in 2010.

The vacancy rate for Canadian downtown offices fell from 6.3 per cent last quarter to 6.1 per cent in the fourth quarter. The suburban market, however, saw vacancy rise by 10 basis points to 10.7 per cent, the second quarterly increase this year.

"Despite the apparently never-ending problems in Europe, the Canadian commercial real estate market continues to move forward, albeit slowly," said John O'Bryan, vice-chairman of CBRE.

ROBUST RETAIL

Calgary demand for new retail space ‘unprecedented’: Colliers
More than 10 million square feet proposed
By Mario Toneguzzi,
Calgary Herald October 31, 2011

CALGARY — Demand for new retail space in Calgary has reached an ‘unprecedented’ level, says a report by Colliers International.

The commercial real estate firm says 27 projects comprising just over 10.7 million square feet throughout the city are in the planning, permitting or construction stage.

“The momentum of the Calgary retail market in 2011 can be best described as resilient and very robust,” says the report. “The overall vacancy rate has remained unchanged over the past 12 months at 1.45 per cent.

“Calgary has the distinction of having one of the lowest, if not the lowest, retail vacancy rates in all of North America.”

With the influx of both Canadian and international retailers, all vying for a “slice” of the Calgary market, the retail market is expected to remain very strong into 2012, with vacancy rates approaching 1.3 per cent, says Colliers.

“The retail development community is actively pursuing new projects throughout the city, including a push into inner-city mixed-use developments,” says the report.

A FRENZIED PACE!

Calgary office leasing activity a sign of prosperity
Employment growth expected to follow
By Mario Toneguzzi
Calgary Herald October 27, 2011

CALGARY — It is a symbol of both current and future prosperity.

And judging by the record, frenzied pace of leasing activity in the downtown office market, Calgary’s economic fortunes appear to be looking good right now - and down the road.

The leasing activity is sure to lead to future employment growth.

“Companies don’t snap up office space just to lounge in it — if energy companies are expanding their office footprint, they plan on growing their business. This means more drilling, more investment, more jobs and more economic growth for Alberta moving forward,” said Dan Sumner, economist with ATB Financial in Calgary.

Greg Kwong, executive vice-president and regional managing director of CB Richard Ellis Ltd., who moderated a panel discussion on the topic Wednesday at the Calgary Real Estate Forum, said so far this year absorption in the downtown market is 2.2 million square feet.

“To put it into perspective, the average over the last 15 years has been about 750,000 square feet annually. So unbelievable in that respect,” said Kwong. “Why is it happening? Probably two factors. One is if you talk to the oil and gas companies and energy-related services companies that are taking space ... they’re banking space again.

“The second factor is that there was an unusual amount of lease renewals that came up for expiry in the last couple of years and they took advantage of what was deemed to be a slower market.”

Kwong said the difference in the oil and gas industry between today and 30 years ago is that capital budgest and decisions involve billions of dollars being laid out over 10, 15 or 20 years.

Todd Throndson, managing director of Avison Young in Calgary, said many companies are making plans for the long term.

“They want to protect themselves for projects that they may have in six months, in 18 months, in 24 months. Down the road, they’re thinking big picture,” he said. “A lot of companies back in 2006 and 2007 were put in very compromising positions because of their real estate needs. They weren’t able to get the space they wanted. They had to pay a lot more money for the space than what would have been ideal.

“So a lot of them with strong balance sheets are making sure they protect themselves and get their space for their corporate needs going into the future.”

That’s reflected in the downtown office vacancy rate. According to Avison Young, it’s reached its lowest level since early 2009. Over the last three months, downtown office vacancy has dropped from 7.4 per cent to 6.2 per cent.

The addition of skycrapers Eighth Avenue Place and the Bow have not spiked the vacancy rate as was feared a couple of years ago. And demand is fuelling talk of more new development on the horizon.

Bryan Slauko, managing director of Base 10 Capital Advisors, said the amount of absorption implies significant growth in the number of office jobs in Calgary that would be needed to fill those seats. And filling all those seats requires new employees which would mean population growth in Calgary. But population growth can’t match that level of employment growth.

“It begs the question: if there’s not a ton of new office employment currently compared to the historical level to absorb all that office space then in my opinion it seems to mean . . . it’s for speculative growth. They’re planning on growing into that space in the future if the economy holds up and their hiring plans continue,” said Slauko.

“But that comes with a fair amount of risk to the office market because we see today in the economy there’s a lot of global economic uncertainty and I don’t believe Canada is immune and Alberta’s not immune because there’s a lot of risk to the natural resource prices that we depend on.”

And if the economy heads south then potentially a lot of office space will be coming back onto the market for lease.

THE FUTURE OF MAINSTREET

Stampede mainstreet retail development moving forward
Leasing activity for the project picking up
By MARIO TONEGUZZI
Calgary Herald February 2, 2011

CALGARY - A turnaround in the local economy has the Calgary Stampede's mainstreet retail and entertainment development back on track as leasing for the project has picked up in recent months, the Herald has learned.

Alberta Development Partners Inc., based in Denver, is working on the mainstreet project along the current Olympic Way that leads into Stampede Park and will include Jimmy Buffett's Margaritaville restaurant. Prior to this year's Stampede an announcement is expected on a construction start date for the project, which had been delayed due to the recent recession.

"We've had a couple of years here dealing with the downturn that slowed things down," Bryan McFarland, principal-development of Alberta Development Partners Inc., told the Herald.

"Things are now swinging back the other direction in a much more positive way. We're seeing some significant (activity) in the lease-up velocity for the retail space. We're encouraged to have this project moving forward this year to be able to announce some concrete financing and delivery milestones."

McFarland said the development permit was submitted with the city a long time ago but the company has stayed in touch with the city on a regular basis about the project.

On its website, Alberta Development Partners describes the project as a mixed-use development that will provide daily shopping, dining, socializing, learning, entertaining and hospitality experiences. Stampede Trail will preserve and advance the Calgary Stampede's western heritage and values, it says.

"Grand amenities will create a procession of activity all along Stampede Trail and will include a fire pit, architectural monuments, chiming carillon bells, a dramatic sculpture fountain, a plaza for gathering and majestic entry gateways," says the website.

Eventual plans for the 6.5 hectares include 150,000 square feet of retail space, 100,000 square feet of office space and a 300-room hotel, says the company on its website.

"Probably a new deal comes across our desk every couple of weeks which really has picked up over the last six months," added McFarland. "It's been strong. We've got 150,000 square feet of retail space. Of that I'd say we've got about half of that under binding offer right now.

"I would expect ... that we'll have some announcements here to make prior to Stampede about the final schedule, the actual construction start date and opening dates."

Warren Connell vice-president of park development and operations for the Calgary Stampede, said mainstreet is a critical piece of the organization's master plan.

He said that in the world of tourism a common mistake is that places gear developments towards tourists when in reality tourists go to the places where the locals want to hang out.

"And the whole idea of mainstreet is that it is a place where Calgarians will bring their guests and visitors as well as themselves," he said.

Michael Kehoe, an Alberta-based retail specialist with Fairfield Commercial Real Estate Inc., said the proposed Stampede Trail retail and restaurant project will be an important part of the overall Stampede Park redevelopment.

"The shoppertainment/eatertainment formula on this scale is unproven in Western Canada. However I feel that the critical mass of year-round entertainment and sports events generating foot traffic at the Scotiabank Saddledome and the adjacent BMO Conference Centre will ensure that the project will be viable over the long term."