The City of Calgary has a deal for you: a vacant quarter-acre commercial lot on 16th Avenue NW with frontage on the TransCanada Highway and close to transit. And the price is a mere $1.25 million, or $5 million per acre.
Yet, even with values at this level, land is considered the most consistent asset in Calgary’s real estate investment market.
“The ICI [industrial commercial and investment] land market has registered growth in sales volumes and transaction velocity in each the past three years,” said Paul Richter, director of research for RealNet Canada Inc., as he released 2013 data for Calgary real estate sales of $1 million or more.
Last year, 90 ICI land sales were recorded with a total volume of $479 million, both high-marks since the market correction in 2009, he s
Richter noted that the land sales defied the overall commercial real estate market, which saw a 50 per cent decline of larger asset sales from the near record level of 2012.
Calgary ICI land sales increased even as land sales for multi-unit residential plunged. In 2013, sales of land for residential – which can be for high-rise condo towers or large subdivisions – fell nearly 60 per cent from a year earlier, to just over $400 million.
Total land sales, at $880 million, accounted for about 25 per cent of Calgary’s $3.2 billion commercial real estate market in 2013, reflecting a sharp reduction in land demand during the fourth quarter.
In the third quarter of 2013, land transactions had accounted for 53 per cent of dollar volume, marking the first time since the second quarter of 2009 that land deals accounted for more than half of spending.
Sales data shows that land deals at that time were primarily on the residential side and some of Calgary’s residential land deals had topped $30 million. Examples of the action include the June sale of the 131-acre former Shaw-Nee Slopes Golf Course, bought by Cardel Homes Inc. and Cardel Land Holdings Ltd. for $47.8 million. In August, Brookfield Residential Properties Inc., a subsidiary of Carma Ltd., paid $5.1 million per acre for a medium-density residential lot in SW Calgary.
Avison Young, which tracks land transactions of $2 million or more, notes that residential land sales in 2013 totalled 61 units at a dollar volume of $231.1 million. This was down from 91 sales worth $772 million in 2012.
The sharp drop off in residential land sales compared to 2012 could signal a slowdown in the new home market. A similar trend has been seen in Canada’s other leading housing markets, Vancouver and Toronto, where bulk residential land sales are down 30 per cent and 51 per cent, respectively, from 2012.
