Mark Edwards, development manager at Panattoni. (Courtesy Panattoni)

Edmonton-based commercial real estate developer Panattoni hasn’t built new assets in the Calgary market for a few years, but that is about to change with its acquisition of a major parcel of southeast development land.

The company has purchased 122 acres in the southeast part of the city, in partnership with Manulife Investment Management, with the potential to build up to 2.3 million square feet of industrial real estate over several buildings.

Financial details of the transaction were not released.

“This is new land for us in Calgary. We have built before in Calgary but not for quite some time,” said Mark Edwards, the development manager for Panattoni,

The property is at 68th Street and 100th Avenue S.E. The City of Calgary had marketed the land as Point Trotter.

Edwards said the property will be renamed as 68th Street Logistics Park.

“There’s been a couple of major developments in that area,” Edwards explained in an interview with RENX. “The city constructed the intersection at 68th Street and Glenmore (Trail) which has created a very, very strong access to the arterial transportation network in Calgary.

“You’re basically two right-hand turns off 68th Street and you’re on Stoney Trail. A left-hand turn onto Glenmore. So as far as access goes it’s really a centre-ice location now. There’s quite a logistics hub that has developed in that area.”

Major industrial developments in SE Calgary

The district is already home to facilities for Amazon, Home Depot and Sofina Foods.

“We have over 4.5 million square feet of new logistics buildings in that area. We see that as a significant opportunity in the market of Southeast Calgary, where there isn’t a lot of land available,” Edwards said.

Panattoni and its partners are currently deciding what types of facilities would be best to construct on the property, Edwards said. It’s also unclear at this point whether the first building or buildings to be constructed would be build-to-suit or on spec.

Panattoni has traditionally not been shy about building on spec, having recently constructed and then fully leased a 548,124-square-foot facility in Edmonton to MTE Logistic. That was also a partnership with Manulife Investment Management.

Although no firm timeline is available for when construction might start at 68th Street, Edwards said there is some desire to begin soon.

“This is a big piece of land here that we want to bring to the market, get vertical while the market continues to roar. The market will tell us if we keep going down there.”

Demand remains robust for modern logistics and light industrial space.

The Calgary industrial CRE sector

Calgary’s industrial real estate market has seen significant growth in recent years – as have other major Canadian markets – and it is also benefiting from highly constrained market conditions in Vancouver.

“Calgary is seeing a lot of interest from Vancouver . . . the spillover from Vancouver where Vancouver has basically zero vacancy in industrial. So users are starting to look at other markets and Calgary and Edmonton have seen spillover from that,” he added. “It continues to be strong.

“The vacancy rate most recently reported is sub-three per cent. So that’s certainly a healthy market.”

When asked if there is more to come for Panattoni in land acquisitions in Calgary, he replied: “You never know. The Calgary market is performing really well right now. We like it.”

According to the Q2 industrial report by commercial real estate firm JLL, total vacancy in the Calgary market was 1.7 per cent with just under 7.3 million square feet under construction. Year-to-date absorption is close to 1.8 million square feet.

Limited options for large tenants

The report said Calgary industrial tenants seeking facilities over 80,000 square feet are now faced with limited new facility options.

“Momentum remains strong, many tenants are now looking further out in time for occupancy options, while developers are subsequently ramping up speculative construction.

“Relief in the form of notable additions to new vacant inventory are not expected until Q2/Q3 2023, although tenant interest is now being cast to those spaces that will be first to be occupiable,” said JLL.

“Calgary continues to present a viable market for national industrial occupiers and developers alike.

“Calgary’s industrial real estate market appears poised for pricing increases across the board, with land pricing well below Vancouver and Toronto (averaging $750,000 per acre versus $3,000,000 per acre or more in those markets) and a desirable geographic location paired with strong population demographics and attractive housing prices.

“With occupant demand expected to remain stable for the next 12 months, there is likely no other forecast but for price increases to net rent, raw land, and existing buildings.”