Investors position plans for Prairie potential

Commercial real estate investments are flowing into major cities – some taking advantage of lower property prices in wake of oil price “crisis”

By
Western Investor
January 28, 2019





stephen avenue place
Slate Asset Management has big plans for Stephen Avenue Place in Calgary, which it now owns after buying a block-long street frontage in downtown Calgary. The 40-storey office tower will be remade, including a new retail component. | Submitted

Slate Asset Management has bought a block-long string of buildings on Stephen Avenue in downtown Calgary, and has wrapped up the purchase of approximately 2.5 million square feet of commercial space over the past two years. As 2018 ended, Slate had closed on Stephen Avenue Place, Joffre Place, Life Plaza, the Venator Building and the Kraft building. In all, the Toronto-based company now has a lock on more than 5 per cent of Calgary’s downtown office inventory.

And they are looking for more, joining investors who are defying skeptics by placing big bets on Canada’s premier oil city.

Earlier last year Spear Street Capital paid $98 million for Calgary’s IBM Corporate Park, and a third-acre parcel on 14 Street NE was sold for $102 million in a retail design-build agreement. In the third quarter of last year, Calgary office property sales had soared to $254 million, a 179 per cent increase from the same period a year earlier, according to Altus Group data.

Through the first nine months of last year – and before Slate’s latest acquisitions in November and December – commercial real estate transactions in Calgary had increased 26 per cent from the same period in 2017. 

This all happened as oil pipelines remained in limbo and the Calgary office sector was reporting Canada-high vacancy rates at north of 26 per cent. The province of Alberta is scrambling to launch oil trains and trucks to carry oil to U.S. and Vancouver ports as it deals with what Premier Rachel Notley has termed a “crisis” in the lack of pipeline capacity.

“The rise in overall commercial investment is a positive note, particularly in the land and industrial markets [of Calgary],” noted Ben Tatterton, manager, data solutions at Altus Group.

The multi-family sector posted 13 apartment building transactions worth a total $34 million in the third quarter, taking year-to-date investment volumes to $112.8 million. The largest transaction was a 51-unit apartment acquired by Mainstreet Equity Corp.

A total of 19 transactions were recorded in the residential land market in the third quarter, totalling $160 million, bringing year-to-date 2018 investment to $495.8 million, a 68 per cent increase over the same three quarters in 2017.

There were also 47 sales of non-residential land parcels, totalling $129 million in the third quarter. This pushed year-to-date 2018 investment volumes to $432 million, an increase of 39 per cent from the same period a year earlier. Commercial land sales accounted for 26 per cent, with industrial contributing 21 per cent of the total and most of the rest being agricultural land, according to Altus. 

Calgary is not the only Prairie city seeing an influx of investors.

Saskatoon 

In Saskatoon, a 13-storey, 180,000-square-foot office tower is nearing completion for a fall opening at River Landing, and its space is already 50 per cent leased. Nearby, the new Nutrien Tower will not complete until next year, but 60 per cent of its 270,000 square feet is pre-leased. 

The vacancy rate in downtown Saskatoon has fallen to 16.8 per cent, according to the latest survey from ICR Commercial Real Estate, thanks to the positive absorption of nearly 25,000 square feet.

 “It’s a healthier picture today than it was in 2013 and 2014 when vacancy went from 2 per cent to the mid-teens,” said Alvaro Campos, business manager at ICR Commercial Real Estate

A number of tenants who have already signed up for the new towers are coming from Saskatoon Square, which was built in the 1980s.

Winnipeg

Downtown Winnipeg is changing fast in the lead-up to the opening of the first new office tower in nearly 30 years.

The first building in the $400 million True North Square (TNS) project will officially throw open its doors this summer, and law firms, accounting firms and financial services companies are scrambling to secure the city’s first triple-A office space.

The 17-storey, 300,000-square-foot building has already welcomed law firm Thompson Dorfman Sweatman to its top three floors. Other confirmed tenants include accounting firm MNP and Scotiabank. 

Payroll management provider Ceridian will also make the jump to True North Square, leaving its location just a few blocks away on Garry Street.

When it’s completed in three years, TNS will have offices for more than 1,500 employees.

The impact is being felt at the three towers at Portage and Main, particularly 201 Portage, and experts agree there’s no question the office vacancy rate will spike. Landlords at the three older towers are offering sizable incentives to retain and attract tenants.

“There will be a waterfall effect,” said Kyra Winfield, a senior associate at Avison Young in Winnipeg. “People are moving in [to True North Square] but new people aren’t necessarily coming into the [Winnipeg] market.” • 


Copyright © Western Investor

Email to a Friend

Close
Most Popular
Get the WesternInvestor.com Newsletter