Property Biz Canada

Calgary, Edmonton driven by private investors: Altus


For decades, the Battle of Alberta has been fought within the sports realm.

Image of Scotia Place in downtown Edmonton.

Scotia Place in downtown Edmonton. (Don Wilcox RENX)

Whether it was the Edmonton Oilers versus the Calgary Flames in the National Hockey League or the Edmonton Eskimos and the Calgary Stampeders in the Canadian Football League, the rivalry has always been intense.

There’s also a rivalry that has developed in recent years in the commercial real estate world – a friendly one which sees the cities compete for investors in all aspects of the market.

However, Ben Tatterton, Data Solutions manager for the research firm Altus Group, said the two cities are this year following a similar path of growth in investments.

“It should be noted that the main source of this interest is from private investors, who are capitalizing on a marketplace that has less competition from institutional investors,” Tatterton explained.

“There is a lot of interest from private investors that are maybe capitalizing on some deals that they might have been priced out of the market previously for. We’re seeing a lot of transaction volume in Calgary. . . . 

“I think in general the sense of the economy is that there is sustained interest.”

Calgary sets record for CRE transactions

Altus’s recent Q2 2018 market report revealed Calgary registered the highest deal count on record in the second quarter with 153 sales over $1 million for a total of $1 billion. When compared to the first quarter of 2018, the second quarter saw growth across all sectors, except for residential land. The apartment market was the only sector to not record increases over the second quarter of 2017, it said.

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The report said the top three performers were the office, industrial, and ICI Land sectors which, together, captured 66 per cent of all the investment dollars in the quarter. In total, 71 per cent of all transactions in the quarter were completed by Canadian private investors.

Here are some highlights of the Calgary report:

* Office recorded 15 transactions worth $306 million. The top office transaction was Hines’ purchase of First Tower for $107 million. Slate Asset Management also purchased Scotia Centre for $95.1 million;

* Retail recorded $149 million in investment, up 43 per cent from the first quarter and up 85 per cent from a year ago. There were 25 transactions which is the highest ever, surpassing 23 in the fourth quarter of 2014;

* The industrial sector had 36 transactions for $194 million, representing a 58 per cent increase from the first quarter and a 48 per cent increase from the same quarter last year. The 36 recorded transactions represent the second highest number seen for industrial in the Calgary market;

* $166 million was invested in ICI land in 45 transactions – a 15 per cent quarterly increase and a 79 per cent annual increase;

* The residential land sector had 15 transactions worth $122 million – declining by 43 per cent from the previous quarter but up 28 per cent year-over-year.

Tatterton said the activity indicates long-term confidence in the Calgary market.

Edmonton investment up 101% year-over-year

In Edmonton, there were 223 transactions of over $500,000 in the second quarter for an investment value of $1.2 billion. That was a 42 per cent increase from the previous quarter and a 101 per cent increase from a year ago.

Altus said the apartment and industrial sectors led the way in Q2, together contributing $694 million in transaction value representing 60 per cent of the overall market. Retail rounded out the top three, recording $236 million, or 21 per cent of the total investment in the quarter.

Edmonton highlights of the Altus report include:

* A large apartment portfolio transaction, which was agreed upon in November 2017, closed in the second quarter. The acquisition of five properties comprising 775 seniors home units by Chartwell Retirement Residences (CSH-UN-T) at a price of $298 million accounted for three-quarters of the $393 million in investment activity for the sector; 

* Office had 13 transactions worth $36 million – a 43 per cent increase from the previous quarter and a 13 per cent increase from a year ago. That included a $22-million deal for the Enbridge Tower which was sold by Bentall Kennedy to a local hotel operator and developer (Lighthouse Hospitality Management Inc.);

* Retail had 43 transactions worth $236 million which was the second biggest quarter on record since Altus Group began tracking the Edmonton market area in 2013. That was up 14 per cent on a quarterly basis and a 43 per cent hike from last year;

* The industrial sector also had its biggest quarter on record since Altus Group began tracking the Edmonton market area with 64 transactions and a value of $301 million. That was up 53 per cent from the previous quarter and a 51 increase from a year ago. The largest transaction was the Sunwapta Business Centre, a three building, 415,557-square-foot complex sold for $62.9 million to Fiera Properties;

* The residential land sector was the only one with a year-over-year decline. There were 15 residential land sales for $31 million, down 58 per cent from the previous quarter and off by 14 per cent from last year.

“While a significant portion of the Q2 commercial investment total was attributed to a deal that occurred in late 2017, the high number of transactions noted this quarter is indicative of strong private investor interest and activity in Edmonton,” said Tatterton.

“There’s a feeling that there’s deals to be had in Edmonton and a lot of the private investor segment of the market is moving on them.”

Long-term confidence in both Alberta cities

Tatterton said investors are expressing long-term confidence in the Edmonton market just like in Calgary.

“Deal counts are on the rise whereas total investment dollars between them has been a little bit moreso on the fluctuating side ever since 2014. You kind of have an up quarter, then a down quarter and so forth,” said Tatterton.

“But transaction numbers have been growing so I think that just shows there’s a little less competition from maybe big institutional investors and that shows there’s opportunities for others to move in and buy.

“It certainly indicates that the interest is still there.”

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Mario Toneguzzi

About the Author ()

Mario Toneguzzi, based in Calgary has 37 years of experience as a daily newspaper writer, columnist and editor. He worked for 35 years at the Calgary Herald covering sports, crime, politics, health, city and breaking news, and business. For 12 years as a business writer, his main beats were commercial and residential real estate, retail, small business and general economic news. He nows works on his own as a freelance writer and consultant in communications and media relations/training.

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