Under the radar

Industrial real estate market hopes to maintain momentum in 2018

When it comes to the Calgary commercial real estate market, downtown office space grabs all the headlines.
Just like in sports, where star players occupy the limelight and grinders are often overlooked, the struggles of the downtown office market continue to dominate discussions of commercial real estate, while the industrial sector has quietly weathered the economic storm over the past three years.

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Making a comeback

Calgary’s commercial real estate market could be poised for a rebound in 2018

All eyes will be on Calgary’s commercial real estate market this year, with hopes that the downtown office sector, which continued to struggle in 2017, will rebound in 2018.

The office market has grabbed everyone’s attention over the past three years, as vacancy rates have soared to historically high levels following the collapse of oil prices and the subsequent waves of layoffs that ravaged employment ranks in downtown Calgary. Thousands of people were cut loose, and a vast amount of office space suddenly became vacant in the downtown core.

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Thinking big

Commercial real estate investment represents unique set of challenges and rewards

Investing in commercial real estate could be considered the major league of real estate investment.
The skills required are greater, but so too are the potential rewards.

Greg Kwong, regional managing director for commercial real estate company CBRE in Alberta, says there is really no strict definition of commercial real estate – it can be a major office tower in downtown Calgary, a fourplex apartment building or anything in between.

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Calgary’s immovable skyline

No new downtown office towers for at least five years, say experts

Despite the number of construction projects currently on the go, it is unlikely Calgary’s downtown office market will see any new towers for quite some time.

Todd Throndson, managing director and principal for Avison Young in Calgary, says the millions of square feet of recently created new space, three new towers coming on line and a soaring vacancy rate will sideline any plans for more towers.

He says it will take several years – at least five – before the existing vacancy will be absorbed and a landlord will be prepared to take on the risk of constructing a new tower. Today, Calgary’s vacancy rate is about 25 per cent.

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Poised for growth

Calgary’s industrial market shows signs of turning the corner

While Calgary’s downtown office sector and its plunging vacancy rates overshadowed all commercial real estate activity in 2016, the city’s industrial market has better weathered the storm and is poised to grow in 2017, say experts.

According to Barclay Street Real Estate, vacancy for the industrial real estate sector finished 2016 at 7.76 per cent. It had peaked at 7.8 per cent in the third quarter of the year. In 2015, it was 6.57 per cent.

“Absorption was a negative 127,373 square feet for Q3. This was the only quarter of negative absorption we have had since the ’90s,” said Jon Mook, executive vice-president of Barclay Street Real Estate’s industrial division.

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