And why wouldn't it? Situated at the intersection of the Trans-Canada Highway and Western North America's primary north-south trade corridor (Alberta Highway 2/U.S. Interstate 15), Calgary's status as a transportation and logistics centre continues to grow.
According to Calgary Economic Development, 40 per cent of the freight that is handled through Vancouver ports is ultimately distributed through Calgary via rail, truck or air.
Calgary, after all, is within a 24-hour drive of 50 million people, most of them in the Western and Midwestern U.S.
The city is also served by Canada's two major railways - CP Rail is headquartered in the city, and CN is spending about $100 million on its new Calgary Logistics Park, which will feature roughly two million square feet of warehouse space on 680 acres.
It also has an ambitious airport authority that's chasing business, from firms who land and unload cargo 24 hours a day (you can't do that in Toronto), to parcel distributors such as UPS, which recently opened a new $30 million facility.
Investors
What does all this mean for commercial real estate investors? Experts say a growth market that should pick up steam in 2011.
The recession certainly hit Calgary. Jobs were lost. Housing prices tanked. Office towers emptied, and some major construction projects were halted. If you were an industrial landlord, you sharpened your pencil to keep good tenants and scrambled hard to find new ones while the absorption rate for new space went negative.
But 2010 clearly signalled a turnaround, and those numbers are reflected in an increased general demand for industrial properties, not only in the priciest northeast sector of the city around the bustling airport, but throughout Calgary.
While Canada's largest commercial real estate firms disagree somewhat on the state of the Calgary market, all see it improving if you own industrial properties.
Here's what DTZ Barnicke concluded as it looked at 2010 in Calgary and where 2011 is going: "Calgary's industrial market has seen demand for space improve recently and seems to be gaining momentum. The vacancy rate decreased from 6.34 per cent at the beginning of [2010] to 5.11 per cent at year-end. The amount of sublease space on the market has also been reduced, currently totalling 14.2 per cent of all available space in the city. Net absorption for the year was positive at 2,020,888 square feet, while rental rates have stabilized."
DTZ Barnicke noted Calgary has seen an increase in activity and demand for property for shops of 50,000 square feet and greater. As of year-end, it was tracking only 16 available options in the category. By contrast, in early 2009 there were as many as 30 options in the size range.
The competition for tenants has been stiff. This dramatically affected rates, inducements and incentives in this category, with rates from recent transactions in the big-bay category running $1.20 to $2 per square foot less than those deals completed near the peak of the market.
In 2011, industrial real estate is looking stronger and more stable than in 2010. Rates are expected to climb because of the improved economic conditions. Higher rental rates along with substantially reduced construction costs will push new industrial development projects, DTZ Barnicke predicts.
Many of those will happen near the airport. One of the largest industrial subdivisions under development is StoneGate Landing, from WAM Development. It consists of 1,100 acres of land suitable for industrial, retail, hotel and office developments. Over time, it is expected to be home to roughly 10 million square feet of industrial space. Its location next to the airport and surrounding major roads (the QE2 and the Stoney Trail Ring Road) make it particularly attractive. It's also close to the CN logistics park that will complete in 2013.
StoneGate Landing's next building offers more than 430,000 square feet of warehouse space in 20,000-square-foot bays just west of Deerfoot Trail.
Oxford Properties Group recently announced the development of a major industrial park in the area, starting with the construction of two buildings consisting of approximately 600,000 square feet. Hopewell Development Corp. is also going ahead with the construction of 148,280 square feet in its Phase II of Hopewell Airport Park.
Avison Young also sees growth ahead for Calgary in 2011.
"Positive momentum continues to grow within the Calgary industrial market. Signals, such as larger longer-term deals, a reduction in unoccupied, recently completed space and an overall increase in demand have been witnessed," Avison Young stated in a recent survey.
The commercial real estate giant went on to say: "While overall demand remains lower than peak levels of the last cycle, activity levels rose steadily during 2010 and in Q1, 2011. Rental rates are stabilizing and have increased modestly in certain product types around the city. This trend has convinced several developers to bring new product to the market."
Colliers International is also feeling good about Calgary.
"Looking forward to the leasing market in 2011, the overall trend of decreasing vacancy from 2010 is expected to continue. The high amount of absorption is a strong indicator of healthy demand in the market, which will continue to consume vacant product," Colliers predicted.
Just how new Calgary development shakes out may depend on the city's infrastructure challenges and successes, not just in the airport area, but elsewhere.
While commuters, nearby businesses and trucking firms will feel the closure of the section of Barlow Trail in the short term, its long-term consequences remain a question mark. The city has agreed - subject to successful negotiations with the airport authority - to construct a tunnel under the new runway to better connect the airport with points east and south via an extended Airport Trail.
But the $295 million project had no final deal as of the end of March, and was being criticized by everyone from civic critics to sitting Calgary MPs.
A key transportation link that will pull traffic away from congested Deerfoot Trail, the city's north-south freeway (and occasional parking lot), remains in progress.
Roughly 25 kilometres of southeast Calgary Ring Road will open in the fall of 2013, when the true impact of the improvements will be seen.
from Western Investor, May 2011
