Despite the massive June flood, Calgary’s commercial real estate sector posted solid third-quarter investment figures, RealNet Canada Inc. reports.
“I was really curious to see these numbers because they were right on the heels of the flood and to see what if anything we could tie back to that,” said Paul Richter, director of research with RealNet. “It is really hard to say (what caused the spike in activity).”
Land deals dominated third-quarter activity for Calgary as investment grew by 17% overall and activity levels improved by 70 per cent from the prior quarter, RealNet found. (Realnet Canada graph shown in image).
First time since Q2 2009
Land transactions also accounted for 53 per cent of all transactions in dollar figures, marking the first time since the second quarter of 2009 that land deals accounted for more than half of transaction volumes.
Sales data shows that land deals were primarily on the residential side.
“It’s a good mix of medium- and high-density projects,” said Richter. “There were a couple big deals there, $10.5 million for just over an acre and $10 million for just under an acre.”
RealNet defines medium density as multi-residential projects of four stories and under and high density as five stories or greater.
“The big surprise was the rush to residential land markets,” he said. “There was a real rush to acquiring land.”
He added that “deal velocity in the land market appears to be ramping up and may play a key roll in overall market measurements going forward.”
Office market busy
In the quarter, the office market accounted for four of the top 10 transactions for $242 million, or 25% of the market whole. It was dominated by the $180-million sale of Shell Centre to Cadillac Fairview.
“It really was the office market driving things,” Richter observed.
Big deals dominated Calgary’s CRE deal activity. The top 10 transactions in the quarter, which included sales in the hotel, office, industrial and ICI land markets, accounted for 63% of the total investment in the July-to-September period.
“There were 15 deals over $20 million in Q3,” said the RealNet research director. “One of the other surprising things is the pace of these larger value deals has really ramped up since Q2, 2011. Per quarter, we were getting between 10 and 15 deals rights up until Q3, 2012 and all of a sudden it shot up to 17, 21, 17 and 23 and then has settled back to 15. So the run-up on these $20-million assets has been significant.”
“It has been on the back of the very strong office market and the suburban markets in the office sector improving and the industrial markets have always seemed to be the strongest markets,” he added. “The institutional investors, which are typically the ones buying these assets are seeing the value in more than just the office product.”
The hotel market saw two transactions in the quarter for $196.6 million, dominated by one massive sale.
The sale of the Westin Calgary, part of a portfolio of hotels that included Westins in Edmonton, Vancouver and Toronto, sold for $183.1 million, making it the top transaction in the quarter.