By Erika Siegert, Senior Analyst, National Research Insights | August 20, 2020

Calgary’s land and industrial markets dominate market share in depressed second quarter

As the COVID-19 pandemic continues to affect all aspects of modern life, the second quarter results for Calgary’s commercial market provide a glimpse into the initial impacts. The second quarter of the year saw 84 transactions amounting to $390 million in volume, bringing the total for the first half of 2020 to $1.2 billion – down 9% from the first half of 2019. The activity observed in the second quarter represents a 15% drop from Q2 2019, and a 50% drop from Q1 of this year. One notable difference in Q2 2020 was the lowest transaction total observed since Q2 2015, a quarter which marked the beginning of the provincial recession due to the oversupply of global oil markets and subsequent price drops. May and June showed the first significant drop off in activity due to the restrictions brought on to slow the advance of COVID-19, and the general pause that the market took in concert with those measures. The pandemic has had a compounding effect on the local economy which has recently suffered several years of recession due to shocks in global oil prices and constraints on the ability to supply the market with Canadian oil. These factors have resulted in curtailments within the energy sector, along with the numerous spur-off effects that impact the commercial real estate market.

(Calgary property transactions – all sectors by year)

Calgary property transactions all sectors by year H2 2020

The most active sector in the second quarter was residential land with a 35% share of activity. Most of this share was due to one large transaction consisting of development land located in Calgary’s northern suburbs. When residential land is combined with ICI land, total land assets accounted for almost half of all the activity in Q2. The next best performer was the industrial sector, composing 29% of total Q2 activity with 24 industrial transactions recorded, totaling $112 million in value. The industrial sector looks to remain active in the short term and Calgary’s strategic location in distributing goods for Western Canada will keep some interest among investors looking to capitalize on the acceleration in e-commerce. The struggles for the office sector continued in Q2 with only one registered transaction amounting to $1.5 million. Meanwhile, the retail sector posted 13 transactions representing $54 million in volume. The retail sector has been facing challenges related to tenant defaults, vacancies, the implementation of COVID-19 protocols, and pressure from online shopping. According to Altus Group’s Investment Trends Survey for Q2 2020, Calgary cap rates are rising across all major benchmark asset classes alongside overall cap rates rising nationally as well. The location barometer has Calgary remaining negative on the buy/sell ratio, but with a slight uptick in momentum.

(Calgary market area cap rates – Q1 2005 to Q2 2020)

Calgary overall capitalization rates - Q2 2020

Notable Calgary investment transactions:

Cochrane City Centre – Retail

Cochrane City Centre is a four-building retail plaza, totaling 60,255 square feet. The majority of tenants are national business and the complex is anchored by a Shoppers Drug Mart. The acquisition price was $22,500,000, with the buyers being a group of local investors.

7007 54th Street SE – Industrial
One of two acquisitions by Skyline Commercial REIT in Q2 2020, 7007 54th Street SE is a two-building, multi-tenant warehouse and distribution centre acquired for $28,370,000, representing a price per square foot of $160. The property is located in Great Plains Industrial Park and features modern style warehouse buildings with 28-foot clear ceiling heights.

85 & 89 Freeport Boulevard – Industrial
85 & 89 Freeport Boulevard is the second acquisition by Skyline Commercial REIT in the quarter, and also consists of a two building multi-tenant warehouse and distribution centre, featuring 24 to 28-foot ceiling heights and varying bay sizes. Totalling 207,993 square feet, the property was acquired for $23,880,000. Approximately 77,589 square feet are available for lease.

Qualico – Residential Land
Located north of the city within the Area Structure Plan of Glacier Ridge on Panorama Road NW, Qualico is a future mixed-use community with varying housing types, retail, parks and employment centres. The plan area encompasses 3,348 acres and is planned to support a future population of 58,800, along with 12,400 jobs. The site acquired in this transaction encompasses approximately 490 acres and was acquired by Qualico from Dream for a price of $171,313 per acre.

(Calgary property transactions by asset class – H1 2019 vs. H1 2020)

Calgary property transactions by asset class H2 2020

The COVID-19 related impacts noted during this quarter include a drop in transaction count due to the market pause which occurred when the pandemic hit, and the resulting drop off from a strong Q1. There was also a notable shift to investment and development land over improved assets, along with the relative strength in the industrial sector continuing to be a factor. It is expected that these trends will continue into the third quarter of 2020 as cautious reopening measures begin to take effect over the summer.

 

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Our solutions are used by real estate industry stakeholders to gain market intelligence, identify and validate opportunities, benchmark, strategically plan, manage risk and more.

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For more information on Data Solutions, please visit www.altusgroup.com/data.

 

ABOUT ALTUS GROUP LIMITED

Altus Group Limited is a leading provider of independent advisory services, software and data solutions to the global commercial real estate industry. Our businesses, Altus Analytics and Altus Expert Services, reflect decades of experience, a range of expertise, and technology-enabled capabilities. Our solutions empower clients to analyze, gain insight and recognize value on their real estate investments. Headquartered in Canada, we have approximately 2,500 employees around the world, with operations in North America, Europe and Asia Pacific. Our clients include some of the world’s largest real estate industry participants across a variety of sectors.  Altus Group pays a quarterly dividend of $0.15 per share and our shares are traded on the TSX under the symbol AIF.

For more information on Altus Group, please visit: www.altusgroup.com.

 

MEDIA CONTACT:

Elizabeth Lambe
Manager, Communications
Altus Group
(416) 641 – 9787
elizabeth.lambe@altusgroup.com

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