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Demand high, vacancy remains low in Calgary multifamily market

The District apartments in Calgary. The city's rental apartment market remains very tight, with demand outstripping new supply. (File photo, courtesy JLL)
The District apartments in Calgary (formerly known as Westview Heights). The city's rental apartment market remains very tight, with demand outstripping new supply. (File photo, courtesy JLL)

Tight vacancy and increasing rents have been the story for Calgary’s multiresidential rental market recently and that’s unlikely to change any time soon: the city’s population continues to grow and housing supply is at crisis levels.

At the Oct. 11 Calgary Real Estate Forum, Wendy Waters, VP, research services and strategy of GWL Realty Advisors, presented a graphic showing Calgary is short 54,700 units compared to 1990 housing levels.

Speaker James Ha, president of Boardwalk REIT (BEI-UN-T), said the company has just under 6,000 apartment units in Calgary with a vacancy rate of about 0.5 per cent.

“One of the challenges we have is taking calls from prospective residents who call looking for an apartment hoping to move into something the same week. Gone are those days,” he said.

Ha did note, however, there is always turnover with about 30 per cent of units turning over on any given year. That means there is generally at least some availability following the first of each month.

Housing construction lagging demand

He said Alberta is taking in about 50,000 new residents per quarter.  At 2.5 times household formation, that means the province needs 80,000 homes to accommodate that population growth.

“We don’t have 80,000 homes under construction,” he said. “In fact, we have a fraction of that. We have 35,000 homes in Calgary and Edmonton combined under construction . . . These are some of the best fundamentals we’ve seen in a long time.”

CEO Lisa Russell said Unitii Corp., has waiting lists across its portfolio. 

“There’s zero to two per cent vacancy depending on the location,” she said. "We’re going into the winter months and this is when we typically start to see things slow down. Our November is really, really strong and we’re not anticipating any kind of slowdown.

"What we also see is renters typically leave for a condo or a house purchase, but given the interest rates right now, people are staying put and the most affordable for folks right now is to stay in the rental market.

“We’re not going to be anticipating (any change) in the supply chain at this point over the next, call it, 12 to 24 months as far as we can see out. But again it’s a strong market. Calgary’s favourable and very affordable, too, compared to the markets that we have across the rest of Canada.”

Apartment vacancy drops, remains very low

Last year, Canada Mortgage and Housing Corporation reported the Calgary region’s rental vacancy between three and four per cent.

Wendy Waters, VP, research services and strategy of GWL Realty Advisors. (Courtesy GWLRA)
Wendy Waters, VP, research services and strategy of GWL Realty Advisors. (Courtesy GWLRA)

Waters, citing Yardi data, said Calgary’s vacancy has plummeted to the two per cent range which is comparable to Toronto and Vancouver. Population growth is driving that vacancy down, as Calgary had record population growth in 2022. 

“We’ve had a really strong performance,” Waters said of the company’s Calgary portfolio. “We’ve been able to raise the rents on those buildings.”

She said rents in Calgary are still lower than in Toronto and Vancouver. Calgarians typically have more disposable income, partly because housing costs are lower.

The strong population growth is going to keep upward pressure on rents and with mortgage rates elevated, people will stay renting longer waiting for some certainty or for rates to come down.

In a LinkedIn post about Calgary's shortage of rental apartment housing, Waters wrote: “Calgary also has the lowest ratio of rental apartments among Canada's largest metros.

"With strong inflows of people from across Canada and the world, demand for more rental housing is strong."

Julian Schonfeldt, chief investment officer, said Canadian Apartment Properties REIT’s portfolio of about 2,000 units in Calgary has a vacancy rate of about 0.5 per cent.

“That’s for us quite impressive because Calgary and Alberta generally was a bit more of a pain point for the REIT during COVID. We were at five per cent vacancy,” he said. 

Rental increases strong

“We’re having wait lists and we’re seeing, despite the rents having moved so much, just having an unprecedented demand," Schonfeldt said.

"Going forward, we’re forecasting around one per cent but I think that’s more to do with our conservatism than anything just given the amount of population growth that we’re seeing . . . the challenges with adding supply, (it) continues to be a really strong environment going forward.

"It’s been a good recovery in a market that deserved it and we’re optimistic about it.”

Schonfeldt said the rate of rental increases has been strong since June 2022. 

“Do I think that will keep going at the same pace? Probably not. At some point you’re going to hit an affordability threshold. But we continue to see incredible pressure,” he said, adding there’s still some good runway for the market.

Russell said Unitii has about 1,200 units under various forms of construction. The timeline to construct can be up to a three-year process from beginning to end. 

“Our phone is starting to ring with folks who have been sitting on land and the pro formas are skinny. So things like eliminating GST for new rentals certainly is helpful but it really also comes down to cost of capital,” she said.

“When we’re looking at the entire package we don’t foresee a relief in inventory for the next two years to come and that’s if everybody starts now. It’s a long process.”




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