Calgary commercial real estate market update – Q4 2024

Population boom fuelled 17% investment gains in Calgary’s 2024 market

Calgary’s 2024 investment market demonstrated significant strength, achieving nearly $5.2 billion in dollar volume transacted, a notable 17% increase compared to the previous year. This upward trajectory was largely driven by Alberta’s exceptional population boom, which fuelled heightened demand across various sectors. A notable surge in transactions occurred in the second quarter, as investors hurried to close deals ahead of the June 25th capital gains tax increase, leading to a decline in the third quarter as deals were brought forward into the second quarter. However, this activity unfolded amidst a challenging backdrop of elevated interest rates, a persistent bid-ask spread, skilled labour shortages and shifting economic conditions. These factors likely contributed to Calgary’s lower ranking in the Altus Group’s Q4 2024 Canadian Investment Trends Survey (ITS). Despite these complexities, investors strategically targeted suburban multiple-unit residential properties, capitalizing on the province’s significant population influx.

Figure 1 - Property transactions - All sectors by year

Office investment activity

Calgary’s office market experienced the greatest year-over-year increase in investment volume, with $588 million transacted, a substantial 51% rise. This increase reflects the ongoing “flight-to-quality” phenomenon, where tenants and investors favour newer, high-quality office spaces, and the continued efforts to remove functionally obsolete office space from the market inventory through demolition or conversion. The office market has shown encouraging signs of recovery with five consecutive quarters of positive absorption, indicating a gradual increase in occupancy. The Downtown Calgary Development Incentive Program, which subsidizes office conversions at $75 per square foot, has actively assisted in repurposing underutilized older office spaces, contributing to a reduction in overall vacancy. According to Altus Group’s Canadian Office Market Update – Q4 2024, Calgary’s availability rate, while remaining the highest in Canada at 21.7%, represents a steady improvement from the 2021 peak of 26.1%. On the construction front, as of the fourth quarter, Calgary had no new office completions. In addition, the Westwinds Business Campus III, a 72,123-square-foot building with a 100% availability rate, was the only building under construction, suggesting a cautious approach to new office development.

Multifamily investment activity

Calgary’s multifamily sector saw a substantial upswing in 2024, recording $1.2 billion in dollar volume transacted, representing a 38% increase year-over-year. This surge was primarily driven by investors eager to capitalize on the city’s robust population growth, fuelled by both interprovincial and international immigration. While the increased investment spurred a notable rise in multi-unit construction starts, the pace of development struggled to keep up with the growing demand for rental housing. Consequently, rental market conditions remained tight throughout the year, marked by low vacancy rates and intense competition for available units. This imbalance between supply and demand continued to apply upward pressure on rental rates, further exacerbating rental inflation and significantly constraining housing affordability for an expanding segment of Calgary’s population. The ongoing tightness in the rental market signals an urgent need for accelerated housing development and innovative solutions to address the city’s evolving housing requirements.

Retail investment activity

Calgary’s retail sector demonstrated steady growth in 2024, recording $857 million in dollar volume transacted, representing a 25% year-over-year increase. A key driver of this strengthened demand was Calgary’s strong population growth, which has consistently outpaced national averages. However, the supply of retail space continued its downward trend, primarily due to low levels of new construction failing to keep pace with the growing demand. Reflecting broader national investment strategies, investors in Calgary showed a clear preference for neighbourhood retail properties anchored by grocery or general merchandise retailers. Shopping centres with a clear potential for redevelopment were also highly sought after. Despite the attractive fundamentals and strong investor interest, Calgary’s retail market remained exceptionally tight, particularly in these favoured categories. This scarcity of product acted as a constraint on investment activity within Calgary’s otherwise robust retail market.

Industrial investment activity

The industrial sector in Calgary demonstrated signs of moderation, attributable to a deliberate slowdown in construction activity, which reflected a heightened focus on aligning supply with demand. This is evidenced by Calgary’s industrial availability rate, which, according to Altus Group’s Canadian Industrial Market Update – Q4 2024, increased by 70 basis points year-over-year to 6.6%. This caution resulted in a 19% decrease in transaction volume, totalling $681 million. Despite the slowdown, investor confidence in the long-term prospects of Calgary’s industrial market remained, underpinned by the province’s strong population growth, which continued a drive demand for industrial space as companies expand their operations. On the construction front, nine buildings were completed, totalling two million square feet, with 44% of the space available for lease. Moreover, only two buildings are under construction, totalling 774,675 square feet, with all of its space available for lease. This significant decrease in under-construction inventory and pre-leasing activity further underscores the market’s focus on balancing supply and demand.

Land investment activity

In 2024, Calgary’s land sector witnessed a total investment volume of $1.5 billion, marking a 15% increase from the prior year. A detailed breakdown revealed that the residential land sector accounted for $798 million in dollar volume transacted, representing a substantial 28% year-over-year increase. The ICI land sector saw modest growth, reaching $744 million in dollar volume transacted, a 4% increase. This increased activity suggested a strong underlying belief among developers and investors in Calgary’s future residential and economic growth, likely influenced by the province’s notable population gains. The resilience of residential land demand, despite rising construction costs, highlighted this conviction. Within the ICI land sector, demand patterns varied. Industrial land remained robust, driven by regional economic expansion, while commercial land interest was more nuanced, concentrated on strategic development sites. The balanced growth observed in both residential and ICI investment pointed toward a developing diversification of Calgary’s economy. The overall strength of the land sector, in the face of increasing construction costs, provided a clear indication of sustained investor confidence in Calgary’s long-term growth potential and its capacity to attract investment across diverse land use categories.

Figure 2 - Property transactions by asset class (Q4 2023 vs. Q4 2024)

Notable Calgary property transactions

The following are the notable transactions for the Q4 2024 Calgary commercial real estate market update:

635 8th Avenue SW (635 Eighth) – Office

In October 2024, Enright Capital Ltd. acquired the 26-storey, Class B office building at 635 Eighth Avenue SW in downtown Calgary from Cadillac Fairview Corporation for nearly $16.9 million. Constructed in 1983 and offering 271,000 square feet of space, plans for the building include upgrades such as a new gym, conference centre, and tenant lounge. Earlier in May 2024, Cadillac Fairview also sold the 29-storey Encor Place office tower, located at 645 7th Avenue SW, to Soltron Group for $21.5 million. This Class B building, situated on the southeast corner of 7th Avenue and 6th Street SW, contains 359,131 square feet of office space. With sale prices ranging from approximately $60 to 62 per square foot, both transactions are viewed as value-add investment opportunities in Calgary’s gradually improving downtown market.

11479 Valley Ridge Drive NW (The Lodge at Valley Ridge) - Apartment

In December 2024, United Active Living acquired The Lodge at Valley Ridge, a new three-storey low-rise apartment complex containing 133 units, for $22.2 million. This acquisition was part of United Active Living’s portfolio expansion, which includes a total of three new senior communities comprising 544 units. The other two residences are located at 3108 Don Etheli Boulevard SW (Carewest Garrison Green) and 111 Glenmore Trail SW (Trinity Lodge)

350 7th Avenue SW (First Canadian Centre) - Office

Armco Capital expanded its Calgary office portfolio with the acquisition of First Canadian Centre, a major 41-storey class A office tower located at 350 7th Avenue SW. The transaction, valued at $46 million, adds approximately 54,000 square feet of office and retail space to Armco’s holdings. The BOMA Best Platinum-certified building benefits from a prime downtown location and connectivity to Calgary’s Plus 15 Pedestrian Walkway system, as well as modern amenities. This acquisition joins Armco’s other Calgary office properties, Bow Valley Square and Altius Centre, acquired in October 2024 and October 2023, respectively.

685 Centre Street SW (TELUS Sky) - Office

The TELUS Sky complex, Calgary's third-tallest building, located at 685 Centre Street SW, was involved in a significant transaction valued at $154.7 million. TELUS sold the residential component of the newly opened (2019) building to Allied Properties and West Bank. Meanwhile, Allied Properties and Westbank sold the commercial component to TELUS, resulting in TELUS owning 100 percent of the commercial space. The commercial portion comprises 452,352 square feet of office space, 13,059 square feet of retail space, and 156 underground commercial parking and fleet stalls. The residential component, known as The Residences at TELUS Sky, includes 326 rental units, associated common areas and facilities, and 176 underground residential parking stalls. The complex is connected to the city’s indoor Plus 15 network and is near the LRT system.

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

Conclusion

Calgary’s 2024 investment market demonstrated significant strength, achieving a notable 17% increase in investment volume, largely fuelled by Alberta’s substantial population growth, which spurred heightened demand across key sectors, particularly the multifamily sector. While the office sector showed encouraging recovery, driven by a flight to quality trend and repurposing initiatives, retail and land also experienced healthy growth, contrasting with the industrial sector’s strategic recalibration towards supply-demand balance. Looking ahead to 2025, population growth is expected to continue driving demand, especially in the undersupplied multifamily sector, necessitating accelerated housing development. Investors are likely to prioritize strategic acquisitions in resilient asset classes, closely monitoring government policies and Calgary’s ability to manage its rapid growth amidst economic uncertainties to maintain its appeal as a strong investment destination.

View the Calgary CRE market update for Q3 2024

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