YYC & YYZ OUTPERFORM

Calgary and Toronto office markets outperform
Calgary has nearly 6 million square feet under construction
BY MARIO TONEGUZZI
CALGARY HERALD SEPTEMBER 25, 2014

CALGARY - Lacklustre job creation continues to impact demand for commercial real estate in Canada, but office markets in Calgary and Toronto are outperforming the rest of the country, according to the CBRE Limited’s National Office and Industrial Third Quarter 2014 Statistical Summary released on Thursday.

The report said tepid job growth has undermined office leasing activity in Canada, but has been unable to stem an historic industrial construction boom.

“The Canadian economy may not be firing on all cylinders, but the Toronto and Calgary office markets turned out quite a performance last quarter,” said John O’Bryan, chairman of CBRE. “It was a bit of a have or have not summer. The standout office markets were exactly that, while other areas were fairly quiet. One assumes that strong office leasing activity in core markets will translate into more widespread office demand in the year ahead.”

The national office vacancy rate dropped for the first time in two years, retreating 10 basis points to 10.3 per cent in the third quarter. Office vacancy had been increasing at a slower pace in recent quarters. Demand for downtown office space in Toronto and Calgary tipped the scale and resulted in a long awaited drop in vacancy, said the report.

Calgary’s overall office vacancy rate of 10.1 per cent fell from 10.6 per cent in the second quarter while in Toronto it dropped from 9.6 per cent to 9.2 per cent. Calgary’s downtown market saw vacancy drop to 9.1 per cent from 10 per cent and Toronto’s downtown market dipped to 5.3 per cent from 6.1 per cent.

In the third quarter, Calgary’s office market had 511,021 square feet of positive absorption and Toronto’s was 712,564 square feet.

Office space currently under construction is 5.6 million square feet in Calgary and 7.1 million square feet in Toronto. Nationally, there is 21.7 million square feet of office space under construction.

Greg Kwong, executive vice-president and regional managing director with CBRE in Calgary, said the drop in vacancy in Calgary is a positive sign but on the negative side the amount of sublet space in the downtown as a percentage of the overall vacancy is at a fairly high level.

For example, in the downtown that percentage was 41.6 per cent in the third quarter, up slightly from 40.4 per cent in the second quarter.

“Any time it’s over 35 per cent of the overall vacancy that means there’s a lot of companies mostly oil and gas that are giving up space. If that continues, that will create negative pressure on the downtown core,” said Kwong. “But overall there seems to be a good sense of optimism. There are deals happening.”

The CBRE report said the Canadian industrial market continues to be characterized by limited availability as tenants remain hungry for industrial space across the country. Demand outweighs supply in most areas, especially for modern distribution facilities.

The overall industrial availability rate fell 10 basis points quarter-over-quarter to 5.3 per cent. In Calgary, it is 4.5 per cent, down from 4.6 per cent in the previous quarter.

There is 4.4 million square feet of industrial space under construction in Calgary and 19.9 million square feet across the country.

“The industrial market is very solid,” said Kwong. “In every size, category or asset class, there’s leasing activity whereas a year ago that was not the case. There was only hot spots in certain size ranges.”

GREY SKIES ARE GONNA CLEAR UP

Flood zone businesses reporting brisk August traffic
Owners relieved by customers’ return
By Amanda Stephenson
Calgary Herald August 14, 2013

CALGARY - In the immediate aftermath of the June flood, Vine Arts was not a busy place.

The Victoria Park wine and spirits store had no water damage, but its regular customers — residents of the many highrise condos and apartments in the neighbourhood — had been evacuated. They weren’t out shopping, and people from other parts of the city weren’t venturing into the flood zone either.

“It was definitely slower. People weren’t sure if we were open or if the street was open,” said Vine Arts owner Jesse Willis.

Fast forward less than two months, and it’s a different story. The shop’s customers have returned, and then some.

“Our sales are really strong, even higher than expected or projected,” Willis said.

Vine Arts’ experience is not unique. Shopping and dining districts around the city — from Inglewood to Kensington to Chinatown — are reporting a strong August so far.

“The general consensus is things are as good, or even a little better, than can be expected. August is usually a slow time for everybody, but it seems like there’s just a little bit more activity around than what people normally experience,” said David Low, executive director of the Victoria Park Business Revitalization Zone.

The extra traffic comes as both a surprise and a relief. Calgary Economic Development estimates 4,000 businesses were affected in some way by the June flooding. Even businesses that experienced no water damage suffered due to prolonged power outages or a simple lack of customers.

“Many of our small businesses lost $10,000, $20,000, even $30,000 in revenue,” said Mary Moran, vice-president of marketing and communication for Calgary Economic Development. “Even though a lot of them were open, they were seeing traffic returning at a very slow rate ... Even in early July, we had some people who were reporting up to a 45 per cent decrease (in sales) year over year.”

Moran said there are likely several reasons traffic might be up in August — including the fact that some flood-affected Calgarians likely cancelled their summer vacations and stayed closer to home this year. Weary of cleaning out basements, they’re finally taking the time to go out to eat and socialize again.

However, Moran said she also hopes businesses are also benefiting from the Rediscover Our City campaign, a massive advertising blitz launched by Calgary Economic Development in late July to drive visitor traffic to flood-affected neighbourhoods.

The campaign — which will soon start promoting communities outside of Calgary like Bragg Creek and High River — aims to clear up misperceptions about the state of certain areas. On social media, the campaign goes by the hashtag #yycisopen.

“We needed to encourage people — give them the confidence that there is enough open for them to have an enjoyable time,” Moran said.

Low said he thinks a lot of Calgarians are being driven by a sense of community to support local businesses that have been through a tough time.

“I think the flood has kicked the idea of supporting local into people’s consciousness just a little bit higher,” he said.

Photo By: Carl Delzer

CALGARY TOPS

Calgary tops global list for real estate performance
Total annual return on investment of 19%
By Mario Toneguzzi
Calgary Herald April 19, 2013

CALGARY — Calgary’s commercial real estate market was the best performing one in 2012 among 32 cities analyzed in a report by the Investment Property Databank.

Calgary’s total annual return on investment was 19.0 per cent, outperforming San Francisco (18.0 per cent), Houston (16.0 per cent) and Perth (13.7 per cent).

In 2011, Calgary’s return of 21.6 per cent was also best among 60 international cities surveyed by the IPD.

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.

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."