Calgary Investment Transaction Stats – Q4 2019
Published February 24, 2020
The Industrial Market Stands Tall in Sluggish 2019
Q4 saw 120 transactions worth $1 billion, bringing the annual total to $2.7 billion, a 26% decrease from the previous year, and the lowest annual total since 2015. Transaction counts were down by 19% in 2019 from 2018.
The 2019 results were not unexpected as the province entered the year facing economic and political uncertainty with the continued struggles of the energy sector and elections at the provincial and federal levels. Additionally, provincial economic growth was forecast to slow in 2019 with growth in 2020 expected to improve. Investment activity in the commercial real estate market reflected these realities, as activity was limited to strategic asset classes with immediate upside. Altus Group’s most recent Q4 2019 Investment Trends Survey (ITS) shows investors maintaining focus on the spread of safe and stable assets for their portfolios, with Toronto being the only market with an uptick in momentum for investor preference.
(Calgary Property Transactions – all sectors by year)
Contrary to the overall view on the market, the industrial sector had a strong year and set all-time records for both annual transaction value and value in a single quarter. 2019 saw 104 industrial transactions worth $932 million, a 24% increase in volume over the previous year. The majority of this activity occurred in Q4, where 31 transactions totalling $479 million were recorded. Annual investment in the industrial market has continued to rise since 2015 at an average pace of 21% per year. Industrial accounted for a 34% share of all market activity in 2019 and 46% of activity in Q4.
The sale of two portfolios were the largest contributors to the industrial total in 2019. Summit Industrial Income REIT’s acquisition of PIRET’s Alberta assets and Crestpoint’s purchase of assets from AIMCO. The Summit transaction included 37 properties across Alberta for a total value of $588 million, 14 of which being in the Calgary market. The Crestpoint acquisition consisted of a 50% interest in 10 industrial buildings and four development sites acquired for a price of $230,750,000. Calgary’s industrial market has continued to gain strength from relatively healthy vacancy rates and diversification within the sector in the form of logistics and e-commerce uses.
(Calgary 2019 Property Transactions – Total $ Volume by Sector)
With the exception of the industrial and hotel markets, decreased sales volumes were seen throughout 2019 in all other asset classes tracked. Notable decreases were observed in office, residential land, apartment and retail sectors. Most noteably, the office sector dropped to a new low in volume not seen since 2015. In 2019, the office sector recorded 30 transactions, worth $338 million, representing a 65% decrease from the previous year.
In the office market, the suburban areas recorded the largest transactions of the year with buyers ranging from institutional to local private investment groups. Stagnant activity in the downtown office sector is reflected in the Q4 2019 Investment Trends Survey, with cap rates for downtown class AA office cap rates remaining flat.
The retail sector saw 70 transactions worth $310 million, which is a 30% decrease from 2018. Following broader trends, the retail sector is trying to adapt to the effects of e-commerce, coupled with the local economic downturn. The 2019 total for retail was the lowest total seen since 2015.
Apartment transaction volumes totalled $233 million in 2019, down by 33% compared to 2018 levels and the lowest level since 2014’s $223 million. While the rental market has remained strong with a healthy vacancy level, this did not translate into strong sales on the multi-family investment side. One factor contributing to this has been competition from new purpose-built rental construction which has taken up a more prominent share of residential development.
“While the overall market remained sluggish in 2019, industrial continues to lead the way into the new year. Improved growth rates for the provincial economy in 2020 should translate into more activity in Calgary’s commercial market,” noted Ben Tatterton, Manager, Data Solutions at Altus Group.
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