Image of tall office buildings in a downtown, looking up from a position on the sidewalk below.

Investment in Calgary Commercial Real Estate Declines for the Third Consecutive Quarter

In total, 117 sales transactions over $1 million were observed in Q3, bringing the total investment volume year-to-date to $1.7 billion, a 34% decline from the same period last year. Year-to-date, the total number of deals fell by 18% and total volume was also down 34% from the same period last year.

According to Altus Group’s Investment Trends Survey, national overall cap rates in Q3 have remained relatively stable, with only a slight decline from the previous quarter, while cap rate movements in Calgary were reported to edge downwards. Altus Group’s Investment Trends Survey noted that concerns over the state of the economy has some investors divesting their assets in certain markets in order to focus on key investment strategies. Investor sentiment towards Calgary through Q3 appeared to continue on this path of divestment and caution.

 

Graph showing total $ volume of Calgary property transactions for all sectors by quarter.

(Calgary Property Transactions – All Sectors by Quarter)

Although the land market comprised of nearly 56% of all sales volume in Q3, year-to-date volume in this sector was down by 39% at $578 million compared to the same period last year which totalled a whopping $946 million. ICI Land saw 108 transactions year-to-date worth $303 million, which represented a 19% and 27% decrease since last year, respectively. Residential Land had a similar trajectory in transactions year-to-date by 28% at 55 deals and total volume down by 48% at $275 million. Developers are still seeing some opprtunity in a slower housing market as reflected in pricing with several large residential land transactions taking place this year. The largest residential land sale was the acquisition of 250 acres on the east side, by Partners Homestead, for a total consideration of $35,708,763, or $142,550 per acre.

 

Pie chart showing total dollar volume of Q3 2019 Calgary property transactions by sector

(Calgary Q2 2019 Property Transactions – Total $ Volume by Sector)

In the multi-residential sector, year-to-date volume and deals were up by 85% and 11%, respectively, compared to the same period last year, driven by a strong first quarter. However, Altus Group tracked 5 sales transactions totalling $9.9 million in Q3 2019, the lowest volume recorded by Altus Group. This represents a 71% decrease from Q3 of last year. Investment into multi-res continues to emphasize stability and security providing stable, long term cash flows in a down market and acccording to Altus Group’s Investment Trends Survey in Q3 2019, suburban multi-family cap rates in Calgary marginally trended downwards this quarter.

 

The industrial sector saw an overall decline in activity with year-to-date volume falling by 11% from $512 million to $456 million and total deals down by 20%. Calgary’s industrial sector has expanded significantly in the last decade with the rising demand from e-commerce, logistics and warehouse, cannabis, agribusiness and other uses. Investors continue to seek value-added opportunities in this weak market as several industrial parks undergo transformation and new parks develop across the region.The largest sale of the quarter was the multi-tenant Hopewell Business Park, bought by Canadian Urban Limited for $26,500,000.

 

The retail sector took a slight downturn in total volume down by 30% to $223 million year-to-date and total deal count year-to-date was down by 14%. Compared to the same quarter last year, total volume also showed a 48% decrease, while the number of deals were up by almost 18% indicating investors are continuing to seek opportunities in a market experiencing an economic slump. The largest transaction of the quarter was 2220 Centre Street NE, bought for $6,100,000 by a local buyer.

 

Calgary’s sagging office market continues to soften as it grapples with high vacancy rates, pushing investment activity even further downwards. Year-to-date, the office sector saw a 76% decrease in volume and a 40% decline in transactions. Moreover, investment activity has been plummeting since last year, down to 6 transactions worth $32 million in Q3 2019, an 87% decrease from the same quarter last year. This was the lowest total for the office sector since Q1 of 2016.

 

“Moving into the second half of 2019, we are seeing much of the same in the commercial market, with investors exercising caution, and sales remaining flat, in light of limited investment product in the market,” noted Ben Tatterton, Manager, Data Solutions at Altus Group.

 

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ABOUT DATA SOLUTIONS

Data Solutions connects the Canadian real estate industry through the delivery of data with unparalleled breadth, integrity and relevance.  We cover new homes, investment transactions and commercial market inventory in key markets, and also provide intelligence on the national housing market and consumer home buying and borrowing patterns.

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

Data Solutions is part of Altus Analytics, the software and data solutions business of Altus Group, where our focus is to empower real estate clients and partners to work collaboratively to enhance decision making, drive performance and optimize transactional efficiency. Our solutions enable firms to better organize and manage data and connect with the right information and analytics to help them gain a complete picture of real estate assets, portfolios and transactions.

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

 

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