Small businesses squeezed by Calgary's hot CRE market

Small businesses operating in Calgary's inner-city are often casualties in a city where there are big profits to be made in real estate.
Recently, an established and popular pub just east of downtown ended up in an caught in the crosshairs of a robust economy.
The Hose & Hound pub, in a city-owned former fire hall, has been an Inglewood favourite for 17 years. The owner moved in to the digs when the neighbourhood was far less gentrified, and the real estate values far less lucrative.
Despite trying to buy it from the city for many years, the first opportunity for its owner came in recent weeks when the city put the heritage property up for sale to use funds raised to maintain the rest of its heritage inventory.
Tenants struggle with higher rents
Only given the increased value, the tenant couldn't afford it. It's not an unusual tale.
There are a lot of larger businesses who see downtown, where the vacancy rate is less than five percent, as a coveted location.
“They are very anxious for space and seem to be able to pay the price,” Maggie Schofield, executive director with the Calgary Downtown Association said. “They want to be in the downtown core.”
From a small business perceptive, the challenge is either paying high purchase prices or hefty rent, which makes it impossible for many to anchor in the city centre, she said. Some of those small businesses that pay the price do very well.
Restaurants and retail faring well in economy
“Restaurants are doing very well,” she said. “There are 140,000 people coming down every day. For retail business it's good place.”
“It's tough on the smaller businesses … Unfortunately, some smaller people will get pushed around.
But not all of them. There are also many coffee shops, both chains and independent, which cash in on Calgary's coffee culture.
That said, downtown still has a mix of energy giant office buildings, retail businesses as well as small-operation hot dog vendors.
“We have seen a mix that ends up being appropriate for people downtown,” Schofield said. “The economy is very good in Calgary, that's the bottom line. People want to be in Calgary.”
“Overall, spending is still up in Calgary, there's low unemployment rate and high demand for real estate.”
City starting to mature
The cost of doing small business, however, is often too high in Calgary's vibrant real estate market. It means some will reposition, some will go under and ultimately supply will meet demand.
“I don't want to say there are always winners and losers but there is a natural progression,” Schofield said. “We are becoming a mature city. Downtown has reinvented itself probably three or four times in the last 20 to 30 years.”
Hose & Hound owner, Chuck Rose, recognizes part of his current plight comes down to being in a healthy real estate market.
His home nearby he bought 15 years ago in the range of about $200,000 could likely fetch $700,00 today, he said.
Assessment values skyrocket
The fire hall he moved in to in 1996 was assessed a few years later at about $500,000. Today it is assessed at $1.5 million – Rose's bid of $2 million short of what the winning bid came in at.
“We've been trying to buy the place for the last 15 years, ” he said. “If I'd pushed a little harder I wouldn't be kicking myself now.”
He hopes the new owner will keep him as a tenant. Rose realizes big bucks to be had in the real estate market can make it tough on the little guy, turning some restaurants into food trucks, but he pointed out if it's the right size, the right price and right plan – like a tiny, busy burger drive-in down the street – it can work.
“I don't think anyone can argue with the economics – it's supply and demand,” he said of the fire hall sale.
“The whole city has gone crazy, it's not just the inner city.”


Ann launched RENX in 2001 as a part-time venture and has grown the publication to become a primary source of online news for the Canadian real estate industry. Prior to…

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Ann launched RENX in 2001 as a part-time venture and has grown the publication to become a primary source of online news for the Canadian real estate industry. Prior to…

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