Calgary commercial real estate transaction activity is likely to continue upward as property values adjust to the new equilibrium and the bid-ask gap narrows, says an Avison Young report released Monday.
"While both the number of transactions and total dollar volume are down, activity levels and values are reflecting quality, not quanty," says the report.
The average price per transaction has only declined 1.5% versus the 10-year average and 2.7% versus the five-year average.
Overall transaction volume for six asset classes (office, retail, industrial, ICI land, and residential land) for 2009 was $1.42 billion from 127 sales. Dollar volume dropped 58% from 2009 and 69% from 2007.
Retail properties accounted for the largest dollar volume share (36%) in 2009 while industrial led in number of sales (28%).
"Knowledgeable, well-capitalized buyers are actively looking for quality products with long-term leases and good-quality tenants," says the report. "There are a number of positive factors within the investment market today."
For the first time in more than a decade, office deals took a backseat to retail transactions. Office transactions dropped 59% to 15 from 37 while office dollar volume dipped 70% to $377.8 million from $1.2 billion in 2008. The average sale price dropped to $25.2 million, or $254 per square foot (psf) from $33.5 million in 2008 and $39.8 million in 2007.
Office vacancy finished the year at 11.6%, compared to 6% at the end of 2008.
Meanwhile, 28 retail property transactions valued at $509 in 2009 were "highly comparable" to 28 worth $540 million in 2008.
However, Calgary's industrial market experienced one of its slowest years in the past five as 35 transactions valued at $228 million were completed. Industrial dollar volume was off the record-setting pace of 2008 and 2007 while vacancy reached 10.6% at the end of 2009, up slightly from the third quarter and up significantly from 7.8% at the end of 2008.
Showing posts with label Calgary office market. Show all posts
Showing posts with label Calgary office market. Show all posts
Monday, March 29, 2010
Tuesday, December 15, 2009
Investors showing more confidence as 2009 ends
Signs continue to point to a significant rebound in Canada's commercial real estate market in 2010.
While bloggers and tweeters in the U.S. are fretting about an impending market crash, the Canadian market is quietly moving into position for a turnaround. As 2009 comes to an end, institutional investors, especially REITs, continue to shore up their balance sheets and scout properties to purchase.
In many cases these days, the decision not to buy is based on a lack of supply, especially in in downtown Vancouver, where a new office tower is not expected to be built before 2013. Avison Young brokers predict that many investors will come off the sidelines next year as the effects of the global financial meltdown ease and they gain more clarity on their own business operations.
The general feeling, notably in Toronto and other Eastern Canadian markets, is that the worst of the recession is over. Investors will show considerably more confidence in 2010, especially if employment, considered a key commercial real estate benchmark, continues to rise.
A number of large transactions, ranging in price from $25 to $212 million are already in the works. They include Dundee REIT's announced acquisition of the 655,000-square-foot Adelaide Place office complex in Toronto for $211.5 million, which is slated to close in February.
Other pending deals range from office buildings in Vancouver, Toronto and Ottawa to large retail properties in Calgary and apartment buildings in Montreal.
The next 12 months should not break many records, especially when you consider the well documented glut of office vacancy in Calgary. But 2010 is expected to put commercial real estate investors in a better mood than they were this year.
(Follow Monte Stewart on Twitter at www.twitter.com/MonteStewart.)
While bloggers and tweeters in the U.S. are fretting about an impending market crash, the Canadian market is quietly moving into position for a turnaround. As 2009 comes to an end, institutional investors, especially REITs, continue to shore up their balance sheets and scout properties to purchase.
In many cases these days, the decision not to buy is based on a lack of supply, especially in in downtown Vancouver, where a new office tower is not expected to be built before 2013. Avison Young brokers predict that many investors will come off the sidelines next year as the effects of the global financial meltdown ease and they gain more clarity on their own business operations.
The general feeling, notably in Toronto and other Eastern Canadian markets, is that the worst of the recession is over. Investors will show considerably more confidence in 2010, especially if employment, considered a key commercial real estate benchmark, continues to rise.
A number of large transactions, ranging in price from $25 to $212 million are already in the works. They include Dundee REIT's announced acquisition of the 655,000-square-foot Adelaide Place office complex in Toronto for $211.5 million, which is slated to close in February.
Other pending deals range from office buildings in Vancouver, Toronto and Ottawa to large retail properties in Calgary and apartment buildings in Montreal.
The next 12 months should not break many records, especially when you consider the well documented glut of office vacancy in Calgary. But 2010 is expected to put commercial real estate investors in a better mood than they were this year.
(Follow Monte Stewart on Twitter at www.twitter.com/MonteStewart.)
Tuesday, October 20, 2009
Thales Group lease offers hope to T.O. market
Thales Rail Signalling Solutions Inc. (TRSS), a subsidiary of Thales Group worldwide, announced Tuesday it has leased 190,000 square feet of office space in Toronto's suburbs.It's the largest new-space deal signed in Toronto this year, and commercial real estate insiders and observers are optimistic that it will bost sales and lease velocity.
See the linked Globe and Mail story below for more info.
Wednesday, October 7, 2009
Speculative construction boosts Calgary office vacancy
Speculative new construction will boost Calgary office vacancy dramatically in the next two or three years.
According to Avison Young's National Fall/Winter Newsletter released Tuesday, about 6.3 million square feet (msf) will be added to the city’s office space inventory, an increase of 11 per cent, but only two-thirds of the space has been leased, with 2.3 msf not yet spoken for.
"Over the next two or three years, speculative new construction will be one of the biggest issues facing the Calgary office leasing market," states the report.
Avison Young, Canada's largest independently-owned real estate firm, is projecting that vacancy could reach as high as 16% (18.3% including sublease space) by spring of 2012. That would be the highest Calgary vacancy mark since the controversial National Energy Plan and the collapse of world oil prices decimated the city's economy in the early 1980s.
"Global market conditions, which combined to cause the current level of vacancy, will continue to affect the market as long as the world remains in recession," says the report. "The rapid economic downturn has resulted in corporate downsizing, merger and acquisition activity, reduced growth plans, and low oil and gas prices. All of these factors have resulted in more space being returned to the market as either head lease or sublease space, growth into new space being halted, and negative absorption being recorded for the first time in six years. Many businesses are also postponing decisions on their office space needs until the last moment as they attempt to capitalize on softening lease rates."
Once occupancy does begin to occur, says the report, both the vacancy created by new construction and any resulting backfill space will add to the existing vacancy and impact the market heavily. Vacancy is expect to remain high until job creation, corporate growth and commodity prices rise.
But there is a silver lining to the situation. As vacancy climbs, asking rents will drop.
"As vacancy increases due to a slower economy and new construction being completed, Calgary landlords will face some difficult issues," says the report.
To check out details on Calgary and the other Canadian markets in the newsletter, go to www.avisonyoung.com
According to Avison Young's National Fall/Winter Newsletter released Tuesday, about 6.3 million square feet (msf) will be added to the city’s office space inventory, an increase of 11 per cent, but only two-thirds of the space has been leased, with 2.3 msf not yet spoken for.
"Over the next two or three years, speculative new construction will be one of the biggest issues facing the Calgary office leasing market," states the report.
Avison Young, Canada's largest independently-owned real estate firm, is projecting that vacancy could reach as high as 16% (18.3% including sublease space) by spring of 2012. That would be the highest Calgary vacancy mark since the controversial National Energy Plan and the collapse of world oil prices decimated the city's economy in the early 1980s.
"Global market conditions, which combined to cause the current level of vacancy, will continue to affect the market as long as the world remains in recession," says the report. "The rapid economic downturn has resulted in corporate downsizing, merger and acquisition activity, reduced growth plans, and low oil and gas prices. All of these factors have resulted in more space being returned to the market as either head lease or sublease space, growth into new space being halted, and negative absorption being recorded for the first time in six years. Many businesses are also postponing decisions on their office space needs until the last moment as they attempt to capitalize on softening lease rates."
Once occupancy does begin to occur, says the report, both the vacancy created by new construction and any resulting backfill space will add to the existing vacancy and impact the market heavily. Vacancy is expect to remain high until job creation, corporate growth and commodity prices rise.
But there is a silver lining to the situation. As vacancy climbs, asking rents will drop.
"As vacancy increases due to a slower economy and new construction being completed, Calgary landlords will face some difficult issues," says the report.
To check out details on Calgary and the other Canadian markets in the newsletter, go to www.avisonyoung.com
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