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MARCH 2010, Volume
25 Issue 3
What's
Happening in Alberta
Landmark towers gets
facelift and new name
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McLeod tower in Edmonton.
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The landmark former TD tower in downtown Edmonton has a facelift, a new name and, developers say, offers an ideal location for cost-conscious office tenants in the heart of the city.
The tower, built in 1961 and designed by Skidmore Owings and Merrill LP, has been renamed the McLeod tower. It is directly across from the World Trade Centre.
The tower has undergone an extensive and historically sensitive makeover, according to Robert McLeod of Re/Max Real Estate Edmonton.
The renovation includes the preservation of the marble exterior, the addition of new elevators, and restaurant space added to the concourse and main floor, as well as energy upgrades.
McLeod, who is handling leases in the building, said each floor boasts almost 7,000 square feet of open space, and floor plates can be divided and can even include multiple levels.
The lease rates reflect the currently competitive office market in Edmonton, where the downtown vacancy rate is now around 8 per cent, up from 5.8 per cent a year ago. But, with little new space being added this year, the renovated tower's location and fairly low rates may attract some interest.
The McLeod tower space, with six consecutive floors available, is being offered at $10 per square foot, triple net, well below the $28 to $30 level of Class AA space in the city. Operating costs and taxes are estimated at $8 per square foot.
Calgary tunnel
funding ditched
Federal and provincial governments that have poured money into Calgary's northwest and northeast ring roads in the last few years aren't interested in burying more cash in northeast Calgary - at least not yet.
Both governments gave the cold shoulder in January to pitches from the City of Calgary and the Calgary Airport Authority for $197 million in federal and provincial cash for a $287 million tunnel at Calgary International Airport.
The proposed tunnel would have allowed east-west traffic to flow under a new 4.2-kilometre runway planned as part of the airport's expansion project.
Alberta Transportation Minister Luke Ouellette was in no hurry to volunteer $98 million of his government's money for the project, arguing Calgary had the option of using money from provincial infrastructure funding for the project if it had deemed it a high-priority project.
Calgary International Airport is coming off a small decline in passenger traffic in 2009 due to the recession, but the airport authority sees the runway project and a tunnel under it as essential for Calgary's economic growth, said airport authority president and CEO Garth Atkinson.
Fears of bust
found premature
Perhaps 2009 won't be thought of as a building bust year in Calgary.
Alberta's largest city recently confirmed its building permit totals for the past year weren't so bad - at least not in the 10-year context.
While permit values fell nine per cent in 2009 to $3.66 billion, they were still up 11 per cent relative to the 10-year average of $3.32 billion.
"Despite all the fluctuation we experienced, there has still been a great deal of activity, new and improvement, that happened in our city, and our year-end numbers reflect that," said David Watson, Calgary's general manager of planning, development and assessment.
The year ended with December permit numbers up considerably from the same month a year ago - $153 million residentially in 2009 versus just $44 million in 2008. Non-residential construction was also up 86 per cent for the month over 2008.
Edmonton multi-family
prices rising: forecast
Investors thinking of plunging cash into Edmonton's multi-family housing market can expect to see an upward pressure on prices due to lower vacancy rates and increased rental rates in 2010, according to Colliers International.
In its recently released multi-family property update for the capital, Colliers predicts rental starts will remain relatively low, meaning very little new supply of rental units in the marketplace.
Edmonton's multi-family vacancy rate jumped to 4.5 per cent for the fourth quarter of 2009, with area rates varying from around 2 per cent near the University of Alberta to almost 10 per cent in northeast Edmonton.
Improved economic prospects for the capital, thanks to a reviving oilpatch and oilsands economy, are expected to bring more jobs back to Edmonton in 2010. As a result, Canada Mortgage and Housing Corp. is forecasting Edmonton's vacancy rate will slide back under 4 per cent later in the year.
CMHC backing for purchasers should help keep interest in the Edmonton market strong, according to Colliers, especially with condo starts projected to increase only slightly from the previous year.
"In addition to these extremely favourable conditions in the multi-family market, CMHC is offering an 85 per cent loan-to-value on product with a 6.75 to 7.25 per cent capitalization rate. They are also willing to look at capitalization rates as low as 6.5 per cent if properties are well located and show potential in terms of rental increases or a decrease in expenses," Colliers says.
Average two-bedroom apartments rent for around $1,030 per month in Edmonton.
The average cost of a multi-family apartment unit sold last year in Edmonton declined to $90,000 from $120,000 in 2008. That figure was pulled from 43 property sales for $122 million.
The average per-acre price for land for multi-family parcels was $915,000, down from $1.15 million in 2008.
Fewer than 30 acres of multi-family land traded for a total of $27 million in Edmonton in 2009, one of the slowest levels of activity in this century.
Modest recovery
in office leases
Colliers International has released an update on Calgary's downtown office market for early 2010, and it contains a small bright spot, from the perspective of landlords.
While the city's overall downtown office vacancy rate rose from 10.67 per cent on September 30, 2009, to 11.55 per cent at year end, it was due to a new office project coming on stream, rather than firms slashing space requirements further.
Colliers is expecting 2010 first-quarter deals to be characterized by higher vacancy rates and lower rent costs.
– Compiled by Dave Husdal
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