Calgary Real Estate Forum reveals Positive Landlord Perspectives

Oct 20, 2010 by

Had opportunity to attend the Calgary Real Estate Forum today and was pleasantly surprised at the abundance of positive attitudes that were prevalent at all the sessions.  Of particular interest was the ongoing debate that the Calgary Industrial market should see the start of some speculative construction in the next 12 months to meet declining supply.  This is due in part by the various positive measures that developers use in our market to determine the viability of new projects.   These being a declining industrial vacancy rate of 4.38% as of 3rd quarter 2010, stronger tenant demand based on positive absorption of 2.8 million square feet  year to date and lower construction costs which are said to have fallen between 20 and 30% since the high in 2008.  Statistics courtesy of Colliers International.  

Two of the developers in particular were very bullish on the Calgary market.  WAM Development Group although not specifically saying they are kicking off another round of buildings in their Stonegate Landing project in the NE alluded strongly that it is likely. 

Hopewell Development Corporationalso suggested that market conditions are beginning to align and if capital in the form of lending or joint ventures with pension fund advisors or other low cost capital partners is forthcoming they too could be developing additional buildings on lands they currently hold. 

Both groups quoted “economic rents” in the high $6.00 to low $7.00 ranges.  This is where the rubber hits the road though.  We have seen some recent lease transactions in the Calgary Industrial market for 50,000 square foot tenants in the $5.50 range for newer version distribution grade buildings.  Exactly the type of buildings that WAM and Hopewell build.  As such it is this writers opinion that we still need to see some settling in the rental rates in order to see the “development stars align”.   The rental rate debate will continue but none the less it was excellent to hear the positive outlook for the Calgary Industrial market.