If the last few years have taught us anything, it’s that Calgary is uniquely positioned to not only survive the global economic recession, but to thrive throughout 2023 and beyond. Voted as the “Third Best Livable City in the World” by the Economic Intelligence Unit in 2022, Calgary is an opportunity-rich city for individuals, as well as small and large businesses looking for a home.
While certain challenges are evident, Calgarians can feel confident that long-term efforts to diversify the local economy, in combination with commodity price growth in energy and agriculture, will strengthen the city against future volatility.
There are three main commercial real estate indicators that will reveal Calgary’s economic dominance when compared to other major metropolitan areas:
- International Investment – Calgary boasts more large corporate head offices per capita than any other Canadian city. Additionally, seven of the top 10 world banks and investment banks have offices in Calgary. Translation? Calgary is the premier city in which to conduct international business within the country. We should continue to see international corporations relocate or establish headquarters throughout the city, thanks in part to our extensive global business network, and the space to build, develop or inhabit existing office space. One such example is Amazon Web Services (AWS), which will open its second cloud computing hub in Calgary in 2023. The company chose Calgary because of its national and international infrastructure, low cost of doing business and high quality of life for employees. These benefits don’t just apply to AWS, but all companies looking for a brighter business future. We expect to see this trend continue over the next year.
- Office Vacancy Rates – It’s no secret that the pandemic forced employees to work from home, and many will continue to work remotely. But thanks to Calgary’s competitive office rates and shorter commute times to downtown, more employers are calling professionals back to the office. September 2022 revealed the highest number of employees returning to the office, and to more favorable conditions. The pandemic allowed building owners the opportunity to upgrade and build out new property amenities in an effort to retain and recruit new tenants. And it worked. Many companies were able to transition to A or AA class space at a competitive rate over the past year. Despite the city’s high office vacancy rate, Calgary’s office occupancy rates have reached 65% – that is far better than other metropolitan areas, like Toronto at 25% and Vancouver hovering around 50%. We anticipate that over the next year companies will continue taking advantage of lower rental rates and upgraded buildings, creating more opportunities for adaptive reuse in B and C class office space. A great example of that transformation already taking place is the Ampersand in downtown Calgary which is a downtown office tower that Aspen Properties transformed to reflect the needs of the modern workplace. The result is healthy lease-up as the market has positively responded to what Aspen has done to the building and what they now offer their tenants.
- Industrial Development Opportunities – Since the beginning of 2022, Calgary’s industrial market has seen its hottest streak since 2008. Even with vacancy hovering under 3%, Calgary still provides far more opportunity for investment than its two sister cities, Toronto and Vancouver, whose vacancy rates sit at less than 1%. Priced per square foot, Calgary’s industrial rental rates have held steady at approximately $10 throughout 2022, which is far more affordable than Vancouver’s ($18 - $19) and Toronto’s ($15 - $16).
One of the near-term challenges facing Calgary is whether the city has the infrastructure to keep up with the current needs. A severe lack of serviceable land restricts growth within Calgary’s city limits, but the eastern boundary has seen private developers bring new industrial parks online with great success. One example is Carmek Industrial Park which is outside the city and offers fully serviced land. The Park is near sold out with many buildings now constructed and other sites under development in the Park. In addition, Balzac has witnessed continued growth and more development is underway than in Calgary for industrial product. Many Parks exist in Balzac with millions of feet of buildings already constructed and several million more planned and under construction. Nose Creek Business Park, High Plains Industrial Park and Interlink Logistics Park by Hopewell are just to name a few of the major developments that now exist in Balzac which is part of Rocky View County. The County has been very pro-business and has provided the support needed to allow this explosive growth.
Other challenges that will limit new construction are high construction costs and long lead times for materials. These are persistent problems throughout North America and will continue to be major factors influencing new development in the next year.
That said, the city of Calgary offers investors and businesses alike easy access to the north, south, east, and west, without the geographical constraints of the ocean or mountains, and it has an abundance of land suitable for development. The greater Calgary area is the ideal location for retail companies operating in e-commerce, which surged during the pandemic, when buyer’s habits changed.
I am genuinely optimistic that Calgary can weather the forecasted economic storm. John F. Kennedy once said, “a rising tide lifts all boats,” and that is true of Calgary’s current economic climate: everyone benefits from a pro-business environment, low taxes, and a dynamic culture that supports growth. While the future is uncertain, Alberta has always been resilient. With increasing diversification along with the world’s need for reliable energy and agriculture, the city and province are well positioned to weather the storm that is coming.