Calgary’s multi-family rental market is firing on all cylinders coming into 2023, which is shaping up to be a banner year due to an influx of new workers and students. Despite a record level of development, the rental vacancy continues to fall in the face of high demand, according to a third-quarter 2022 report from NAI Advent, Calgary.
As of the third quarter, construction has begun on nearly 2,800 new rental apartment units in Calgary in 2022. That's the highest number on record, though 2021 was another banner year with 2,572 rental apartment starts, reports Canada Mortgage and Housing Corporation (CMHC).
“Vacancy has reached its all-time low in Calgary sitting at 1 per cent to 2 per cent in some areas. This is great for landlords but has made the rental market more competitive for renters, especially those looking for affordable rent,” NAI Advent noted.
Landlord investors, particularly from Vancouver, where per-door prices for existing apartment buildings are much higher, are looking towards both Calgary and Edmonton, agents say.
Older apartment buildings in Calgary built prior to 1970, which like Vancouver, make up the majority of the market, sell in Calgary for an average of $150,000 per door, or less than half the price as in Vancouver.
The average per-door price in Calgary for all multi-family rental sales in the third-quarter 2022 was $170,000. In Metro Vancouver it was $403,915, reports Marcus & Millichap.
The typical capitalization rate for a Vancouver apartment rental building is 2.8 per cent; in Calgary it is around 5 per cent, data shows.
And, as sales of apartment buildings in Q3 2022 fell to a seven-year low in Metro Vancouver, they were hitting fresh highs in Calgary, where rental construction is booming.
B.C.-based Bosa Developments, one of the builders active in Calgary’s East Village, is completing the 42-storey, 337-unit Arris residential tower that will open at the end of 2023.
A joint project with RioCan Real Estate Investment Trust, the entire luxury tower has been converted from condos to rentals.
The move appears to be paying off. Within days, 25 per cent of the Arris tower was rented out, Bosa claims.
“With a few banners on the building and a few social media posts, our phone started ringing and we leased 45 out of 190 homes before official marketing started,” said Robert Marchand, vice -president of marketing at Bosa Development.
That success persuaded Bosa to launch a second East Village rental tower, which started construction this summer.
Kendall Brown, market and rental analyst at Urban Analytics, said the Arris' larger-than-normal units and upscale amenities likely attracted Calgary renters.
“A lot of younger professionals are choosing buildings based on the amenity offering,” Brown said. “Arris differs from the competition by offering larger floorplans than what are typically found in downtown Calgary, plus it offers comprehensive, upscale amenities that are becoming a trend among rental building.”
Rents at the Arris start at $1,674 for a one-bedroom, compared to an average Calgary rent of $1,491 per month.
On the demand side, seven interest rate hikes in 2022 have driven more people to rent rather than own.
Alberta is also seeing a significant uptick in people moving to the province, with more than 50,000 coming to the province to live in the first half of 2022 alone, according to Statistics Canada data compiled by NAI Advent.
According to the latest numbers from Rentals.ca, the average Canadian rental apartment was $1,810 a month in Q3 2022, up about 12 per cent from the previous year.
In Calgary, the average one-bedroom rental as of the Q3 2022 increased from 20 per cent to 25 per cent from a year earlier, NAI Advent reports.
“Average rents are hitting $2.57 per square foot, the highest recorded rent per square foot in the last five years,” according to NAI Advents Calgary Q3 2022 multi-family report.
A City of Calgary program also provides grants for converting empty office space into residential buildings, but it is proving expensive.
Three buildings were recently named as receiving incentives for conversion to residential, including 909 Fifth Avenue SW, recently purchased by Peoplefirst Developments with an eye to redevelopment. The others include Palliser One at 125 Ninth Avenue SE and 205 Ninth Avenue SE. Each will require $10 million in city incentives.
In announcing the first office conversion, Calgary Mayor Jyoti Gondek, referenced the extent of the city’s office glut, in estimating about six million square feet of office space should be converted to other uses or removed.