Investors remain confident in Calgary market

Calgary commercial real estate investment activity will pick up this fall, says the managing director of Avison Young's Calgary office.
"Whenever you go through a period of slow activity, pent-up demand happens," Todd Throndson told the Calgary Herald. "People want to do things. There's a lot of money that's on the sidelines that is going to need to get active.
"Now it may wait as long as it possibly can before it gets active to see how far down pricing can go. But it's going to have to get active. Especially with the institutions. They are going to have to place that money into something."
Throndson made the comment following the release of Avison Young's latest Calgary investment report, which shows that overall transaction volume for office, retail, industrial, multi-family, industrial land and residential land was $842 million for the first seven months of this year with 68 sales.
The total is down$1.35 billion, or 62 per cent, from the same period in 2008. But Throndson told the Herald that investment activity will improve going into the fall as prices deflate a little and buyers indicated their willingness to pay slightly more.
"People are starting to move forward with what they think is the new reality in the world," he said. "I do think there's going to be more activity over the last four months of this year," he said.
Although the numbers are down year-to-date until the end of July, there are some positive aspects which indicate a healthy investment market, said Avison Young, including a high average price and few distress sales.
Peter Cuthbert, vice-president of real estate for Standard Life Investments Inc., told the Herald that more than five million square feet of downtown Calgary office space now under construction, including the Bow tower and Eighth Avenue Place, will create an over-supply situation. But, Cuthbert added, investors remain confident in the Calgary market.
"The interesting thing about Calgary is the stock of downtown core office is fairly tightly controlled by institutional players," he said. "So in a market like this, they're unlikely to sell out of it. The market's turned down. No one's quite sure what's going on and nobody's actually selling buildings in that segment, so how do you put a price on it?"
Standard Life, which has about 20 per cent, or one million square feet, of its portfolio staked in the Calgary and Edmonton markets, is actively pursuing acquisitions in Western Canada. He predicted the slowdown prevalent in the first half of this year will be temporary.
"We are pursuing opportunities," he said.