Calgary’s purpose-built rental apartment market is on fire these days, with 52 projects comprising 7,288 units across the city according to data compiled by research firm Urban Analytics.
“All of the cranes that you see downtown Calgary right now are building rental product,” Kimberly Poffenroth, vice-president of business development and market analysts (Alberta) of Urban Analytics, said during a panel at the Calgary Real Estate Forum on Nov. 7.
At the end of the third quarter this year, she said Calgary’s purpose-built rental market was 92 per cent occupied.
“Calgary’s rental market has become increasingly competitive over the past few years due to a multitude of reasons,” Poffenroth explained. “Flexibility of renting has been an attractive factor especially with the current economic stresses in Calgary.
“For the young professionals, it’s a lot easier to adjust and move around if you’re just committed to a one-year lease versus a 25-year mortgage, and that has been drawing in people who want that ease of living in a rental building and who don’t have their employment situation figured out quite yet and who aren’t quite ready to purchase a home.”
Many reasons to rent an apartment
Poffenroth said people are choosing to rent in the Calgary market these days until they solidify where they’re at in their careers and their relationships.
Instead of saving for a multifamily condominium unit, in many cases they are choosing to rent, eventually saving up enough money for a down payment on either a single-family home or a townhome.
“Another reason is the ample amenities that these purpose-built rental projects are offering are making it very appealing to rent . . .,” Poffenroth noted.
“There are some very unique ideas that some of these purpose-built rentals (are offering), including subscription-based lifestyle rental options where your food may be included, where certain amenities may be included and it’s really following a lot of what was introduced in the U.S. years before us.
“So we’re kind of taking some of these American purpose-built rental ideas and putting them in Calgary and it is drawing in renters.”
Another reason for the increase in renters is the mortgage stress test. Those unable to qualify for a mortgage or who can only qualify for a lower amount are now choosing to rent until they can meet the higher thresholds.
All of those factors are driving the shift toward rental product, especially in the inner city.
Condo projects shift to apartments
“As we keep seeing rental demand take off, we have seen a number of projects which have gone from planned condominium to rental. Currently, there are 13,553 rental units in the contemplative stages in Calgary and out of those 13,000, 8,465 of them are planned in the downtown core. That’s a lot of rental units coming to downtown Calgary,” Poffenroth said.
“In addition, 4,000 out of the 13,000 are currently under construction and we will be seeing a number of these contemplated projects start construction in the upcoming year, too. So, it’s creating an increasingly competitive rental scene in Calgary.”
Samuel Dean, senior-vice president, capital markets, multifamily Alberta for JLL said this year the Calgary market is also seeing several legacy, older assets either under contract or on the market which are anticipated to trade.
“So, it is one of the bright spots in the investment market,” Dean said during the session on the multiresidential market.
Robert Moskovitz, vice-president, development and operations for Landstar Communities, said his company examines macro trends in trying to understand where the market is going to be. He noted several economic and cultural trends likely to impact the market in the next 10 to 15 years.
“There is a change in the market. Part of it is driven by the local economy,” Moskovitz said.
“People are less willing to look at the condo option because the option of rental gives them more – the mobility and the flexibility. The other aspect is . . . generational in which the new generation kind of has a different perception in terms of how they look at their future and their whole understanding culturally of the shared economy.
“So, therefore it’s easier for them to come to terms with the rental product rather than purchasing something and then tying themselves to it.”
“Flight to quality” in Calgary
Marcel Parsons, vice-president of asset management at GWL Realty Advisors, said there is a lack of supply of quality assets in the Calgary market.
“There’s a lot of vintage and we know there’s a flight to quality here in Calgary. Calgary has the lowest inventory of rental units per 100 people across the country. For the size of the city that Calgary is, they have 2.6 units per 100.
“If you look at similar cities across the country, Edmonton and Ottawa, they’re in the four units per 100. I look at Calgary as, there’s an opportunity to build quality amenitized buildings here in the marketplace,” he said.
“I’m definitely bullish on the Calgary market. We like Beltline. We like East Village. We’ve looked at some opportunities around the university. But our focus as a company is to focus on transit and employment nodes.
“So, we want to be in the urban core and we’re trying to make it so that it’s a defensive play for years to come.”