Calgary commercial real estate market update – Q1 2025

In the first quarter of 2025, Calgary saw a boost in commercial investment, marking a 14% increase year-over-year

Calgary’s commercial real estate market demonstrated resilient growth in the first quarter of 2025, with robust investment activity prevailing despite broader economic headwinds. The total dollar volume transacted reached an impressive $1.2 billion (Figure 1), marking a 14% increase compared to the same period in the previous year. This notable growth positioned Calgary as a strong market for commercial investment, supported by continued population growth and a strategic shift in investor preference toward stable assets.

Figure 1 - Property transactions - All sectors by year

A primary driver of this resilience was Alberta’s continued strong population growth, which consistently fuelled demand across various sectors and necessitated rapid expansion. The City of Calgary projected its population would reach 1.56 million in 2025, underscoring the underlying demographic strength that provided a crucial foundation for commercial real estate. This consistent influx of new residents ensured a steady demand for housing, as well as for both retail and industrial spaces, creating a favourable environment for sustained commercial development in the region.

Despite these robust demographic fundamentals, investor confidence was tempered by significant macroeconomic developments. Notably, the Bank of Canada (BoC) implemented a 25 basis point reduction in the overnight rate to 2.75% on March 12, 2025. This policy adjustment was largely attributed to concerns regarding heightened trade tensions resulting from tariffs imposed by the United States, which were anticipated to impede economic activity and potentially escalate inflationary pressures within Canada. Consequently, many investors adopted a cautious approach to capital deployment at the beginning of 2025, deferring major investment decisions until greater clarity emerged in the economic and political landscape. This cautious sentiment also led some investors to reallocate their portfolios strategically, redirecting their focus towards more resilient asset classes perceived as less susceptible to market fluctuations and economic downturns. Additionally, as historically higher-priced markets such as Toronto and Vancouver experienced increased volatility, a segment of investors actively sought opportunities in more affordable regions, including Calgary, to diversify their holdings and mitigate risks. This flight to quality and affordability underscored Calgary’s growing appeal as a strategic investment destination.

In line with this strategic shift, Altus Group’s Q1 2025 Canadian Investment Trends Survey (ITS) confirmed Calgary maintained its fourth-place ranking in investor preference from the preceding quarter. This consistent ranking highlighted the city’s enduring attractiveness among investors. Investors strategically favoured food-anchored retail strips, single-tenant industrial, and suburban multiple-unit residential as the top three preferred product types within the Calgary market. This preference reflected a clear appetite for stable assets with strong income-generating potential, which were often underpinned by essential services and robust demographic demand.

Retail

The retail sector in Calgary demonstrated relative stability in the first quarter of 2025, with $207 million in dollar volume transacted. However, this figure represented a 5% decrease, indicating a somewhat subdued start to the year for the sector’s investment activity. This plateau in transaction volume was primarily influenced by escalating trade tensions between the US and Canada, which disrupted supply chains and impacted consumer demand, contributing to a deceleration in investor confidence. Despite this, according to Altus Group’s Q1 2025 Canadian ITS, food-anchored retail strips emerged as the most sought-after property type in the Calgary market. The sustained appeal of these assets stemmed from their inherent defensive qualities, driven by consistent consumer demand for essential goods and services. This stability translates into reliable cash flow generation, positioning these properties as resilient investments capable of weathering economic downturns and mitigating the disruptive impacts of e-commerce. Their consistent performance over the past several years has established them as a mainstay for many investment portfolios, offering a comparatively secure refuge in an otherwise uncertain market.  However, despite the increasing investor demand, Calgary’s retail market remained exceptionally tight, particularly in this highly favoured category, limiting acquisition opportunities.

Furthermore, a significant disruption loomed over the horizon for the retail landscape as Hudson Bay filed for creditor protection on March 7, 2025. The potential closure of five Hudson Bay department stores in the Calgary market presented a considerable challenge in absorbing the resulting large-format vacant space. This situation mirrors past large-scale retail closures, such as those of Target and Sears. While these events were unprecedented for the retail sector at the time, they ultimately created opportunities for landlords to fundamentally transform these outdated spaces to reflect the evolving expectations of the modern consumer. Such transformations historically included the diversification of retail offerings, often incorporating experiential elements, mixed-use components, or a curated selection of smaller, more specialized retailers to attract new customers and drive foot traffic. Therefore, the agility and innovation demonstrated by landlords in adapting to these vacancies will be crucial for mitigating their market impact and ensuring the continued dynamism of these key retail hubs.

Industrial

Calgary’s industrial sector showed signs of moderation, with a slight decline in dollar volume, totalling nearly $136 million, a 7% decrease compared to the previous year. This moderation occurred as the market began to align supply with demand following the significant surge of completions over the past two years. According to Altus Group’s Q1 2025 Canadian Industrial Market update , Calgary’s industrial availability rate increased by 110 basis points to 6.9% year-over-year, which signified an ongoing rebalancing of supply and demand within the sector. Additionally, investor confidence waned amid softer domestic economic conditions and trade tensions with the US. Despite these hurdles, Calgary remained a robust market for industrial activity, evidenced by predominant periods of positive absorption observed throughout the past several years.

On the development front, the first quarter of 2025 saw no new industrial spaces. Looking ahead, five industrial spaces remained under construction. Of this future supply, 63% is available for lease, indicating a pullback in pre-leasing activity and a more cautious approach to new commitments. A potential rebound in overall industrial demand for Calgary will largely hinge on the performance of the broader Canadian economy, including key indicators like a clearer direction regarding Canada-US trade policies, as continued uncertainty in this critical relationship can impact supply chain stability and dampen investor sentiment for industrial real estate. Furthermore, robust retail sales and strong employment figures will be crucial, as these directly correlate with consumer demand for goods, subsequently driving the need for warehousing, logistics, and distribution spaces.

Multifamily

The multifamily sector experienced the most notable decline in investment volume, with nearly $309 million in dollar volume transacted. This figure represented a 17% decrease compared to the same period in the previous year, reflecting a discernible shift in the market’s supply-demand dynamics. While Calgary continued to witness high levels of new construction aimed at supporting its ongoing robust population growth, this significant influx of new supply, particularly in the rental market, diversified the selection available to potential buyers. Concurrently, it contributed to a stabilization of both pricing and rental rates for newly available units.

In response to these market shifts and to address the underlying supply-demand imbalance, Calgary continued its proactive city-wide efforts. Specifically, a key initiative was the city-wide rezoning reforms introduced in 2024. These reforms were designed to streamline application processes for developers and permit a greater number of infill projects across the entire city. By encouraging multifamily development, especially condominiums and multiplexes, these reforms aimed to increase housing density and ultimately provide more housing options. This strategic regulatory intervention is expected to further influence the market’s trajectory by fostering more balanced growth and potentially impacting future investment patterns.

Hotel

The hotel sector experienced the most significant year-over-year increase in investment volume during the first quarter of 2025, with $125.5 million in dollar volume transacted. This represented a notable 619% year-over-year increase, highlighting investors' confidence in Calgary’s hospitality and tourism industry.

This substantial uptick in activity can be primarily attributed to a single, high-value transaction, the acquisition of the Hyatt Regency Calgary. This prominent 355-room downtown hotel, directly connected to the Calgary TELUS Convention Centre, was acquired by the Niagara-based Fallsview Group. This acquisition marked a strategic expansion for Fallsview Group, signifying their first venture into Western Canada and a notable extension of their operations beyond their traditional base in Ontario. The sale underscored the continued appeal of well-located, full-service hotel properties in key urban areas. The transaction also demonstrated a long-term investment perspective from the purchaser, capitalizing on Calgary’s underlying economic fundamentals and its position as a significant business and tourism hub.

Office

Calgary’s office sector recorded a significant year-over-year increase in investment volume, with $144 million transacted, representing a substantial 459% year-over-year surge. This remarkable upward trajectory in investment volume strongly reflected the ongoing “flight to quality” phenomenon, where both investors and tenants increasingly prioritized prime, high-quality assets. Furthermore, this growth was significantly bolstered by the city’s successful initiatives in transforming underutilized office spaces into residential units or other productive, high-value alternative uses, thereby removing obsolete inventory from the market and enhancing overall market health.

The office market has demonstrated encouraging signs of recovery, marked by six consecutive quarters of positive absorption. This sustained period of positive absorption indicates that while demand for premium Class A office space remained robust, existing vacancies were actively being filled or strategically removed from the market’s inventory through the Downtown Calgary Development Incentive program. This positive trend was evidenced by Calgary’s overall office availability rate, which, according to Altus Group’s Q1 2025 Canadian Office Market update, experienced a significant decrease of 190 basis points year-over-year, settling at 20.7%. This reduction in availability reflected a healthier balance between supply and demand.

Moreover, the limited development pipeline further aided in the downward trajectory of availability rates, preventing an influx of new supply that could otherwise exacerbate vacancy challenges. In terms of new development, the first quarter of 2025 saw no new office completions, indicating a disciplined approach by developers to new construction. Looking ahead, only one office building, the Westwind Business Campus III, totalling just over 72,000 square feet, remained under construction. Notably, 100% of this future space is available for lease, indicating a cautious approach to new commitments from tenants and a preference for existing, proven spaces or those readily convertible to other uses. This measured pace of new supply, combined with the successful adaptive reuse strategies, positioned Calgary’s office market for continued, albeit gradual, stabilization and improvement.

Land

The land sector in Calgary, encompassing both residential and ICI land, flattened in the first quarter of 2025. The total transaction volume for this period reached nearly $303 million, marking a 1% increase year-over-year. A closer examination revealed nuanced trends within its subsectors. The residential land sector plateaued, with transaction volumes totalling nearly $157 million, representing a 1% year-over-year decrease. This stabilization came despite Calgary’s continued strong population growth, suggesting that while the underlying demand for residential land remained robust, other market dynamics were at play. Specifically, elevated interest rates were impacting developer financing costs and, consequently, potential buyer affordability, prompting a more cautious approach to new land acquisitions and project launches. Furthermore, the growing inventory of multifamily housing reaching completion provided a temporary increase in available housing stock, which slightly eased the immediate pressure on land acquisitions for new residential builds, allowing developers to assess absorption rates.

In contrast, the ICI land sector experienced a slight increase, recording $146 million in dollar volume transacted, a 5% rise year-over-year. This sub-sector’s resilience highlighted ongoing demand for sites suitable for commercial, industrial, or institutional development. This demand was likely driven by specific project needs and business expansions across various industries. Notable examples included the persistent need for logistics and e-commerce facilities, fueled by the continuous growth of online retail and Calgary’s strategic location as a Western Canadian distribution hub. Additionally, there was sustained interest in land for manufacturing and light industrial facilities, data centres supporting increasing digitalization, and sites for infrastructure-related projects vital to the city’s overall growth.

While broader economic caution has resulted in developers postponing commitments to new projects in other major markets, the relative stability in Calgary’s land sales was primarily attributable to the city's persistent need to meet the demands of a rapidly growing population. The continuous influx of residents necessitates ongoing construction across all asset classes, thereby sustaining developer interest in acquiring suitable land parcels. This fundamental demographic pressure acted as a strong counterbalance to the wider economic uncertainties impacting land markets elsewhere.

Figure 2 - Property transactions by asset class (Q1 2024 vs. Q1 2025)

Notable Calgary property transactions

The following are the notable transactions for the Q1 2025 Calgary commercial real estate market update:

730 58th Avenue SW (Elbow 5-Eight) - Apartment

In a transaction that closed in March 2025, Boardwalk acquired Elbow 5 Eight, a six-storey, 255-suite apartment complex located in the Windsor Park community. The purchase price was $93 million, equating to $364,706 per suite with a market capitalization rate of 5.75%. Positioned within walking distance of Chinook Centre and offering convenient access to downtown, the property was approximately 23% leased at the time of the agreement. The units were branded as Boardwalk Lifestyle, an affordable luxury community, and feature in-suite laundry, air-conditioning, and other modern amenities.

85, 87, 89 Quarry Park Road SE (deVille at Quarry Park) - Apartment

Fiera Real Estate, through its CORE Fund, has acquired the deVille at Quarry Park for $120 million, marking one of the largest multifamily transactions in Calgary’s recent history. The property, developed by Remington Development Corporation and completed between 2022 and 2023, consisted of three 13-storey concrete towers featuring a total of 333 rental units. Located in the sought-after Quarry Park community, deVille was situated in a vibrant live-work-play environment with prime access to The Market at Quarry Park, the Remington YMCA, scenic trails, and major roads such as Deerfoot and Glenmore Trails.

163 Quarry Park Boulevard SE (The Market at Quarry Park) - Retail

Salthill Capital has successfully acquired The Market at Quarry Park, a grocery-anchored retail centre from LaSalle Investment Management for $52 million. This 91,348 square foot neighbourhood shopping centre, which was built in 2009, was fully occupied at the time of the transaction and anchored by Calgary Co-op. The property benefited from strong tenant traffic, 640 parking spaces, prime frontage on key arterial roads, and exceptional accessibility to major transportation corridors like Deerfoot, Barlow, and Glenmore Trails. Brokered by JLL, this acquisition strengthened Salthill Capital’s retail portfolio and underscored investor confidence in well-located, community-focused assets with stable tenancy.

700 Centre Street SE (Hyatt Regency Calgary) - Hotel

The Hyatt Regency Calgary, a 355-room full-service hotel, was sold in mid-March 2025 to a Niagara Falls-based private group, Fallsview Group, for $125.5 million, which corresponded to a price of $351,521 per room. This transaction represented the second-largest hotel sale on record in Calgary and marked Fallsview Group’s first hotel purchase in Alberta. Situated in the heart of downtown, adjacent to the Calgary TELUS Convention Centre, the hotel offered extensive amenities for both corporate and leisure travellers. The sale reflected robust investor interest for hospitality assets and a strong recovery within Calgary’s hospitality sector.

Figure 3 - Overall Capitalization Rate trends - 4 benchmark asset classes

Looking ahead

The first quarter of 2025 underscored Calgary’s position as a dynamic and resilient hub for investment. The total investment volume of $1.2 billion, representing a 14% year-over-year increase, showed the market’s fundamental strength despite macroeconomic uncertainties. While investor sentiment was cautious due to trade tensions and a modest interest rate reduction by the BoC, a strategic flight to quality, and affordability directed capital toward Calgary. This trend, combined with robust population growth, provided a crucial counterbalance to external pressures. The hotel and office sectors, in particular, saw significant investment volume surges driven by a single high-value acquisition and Class A office demand, respectively. Meanwhile, the multifamily, retail, and industrial sectors showed signs of moderation and rebalancing as either supply caught up with demand or cautious investors adopted a wait-and-see approach.

Looking ahead, Calgary is poised for continued transformation. The city’s strong demographic fundamentals, with a projected population growth of 3.5% in 2025 and 2.2% in 2026, will likely continue to be a primary driver of demand across most asset classes. While the direction of the BoC’s policy rate remained uncertain, with many analysts expecting it to hold steady, the market will likely benefit from a clearer economic and political landscape as the year progresses. The industrial sector, which saw a slowdown in transactions, is expected to see a rebound in demand tied to the performance of the broader Canadian economy and stable Canada-US trade policies. The office sector is also well-positioned for gradual improvement, as the downtown revitalization efforts and the successful adaptive reuse of obsolete inventory continued to drive down availability rates. Furthermore, the large-scale mixed-use community developments and the continued focus on transforming outdated retail and office spaces may shape the future landscape of the city, offering new opportunities for both investors and tenants.

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