Commercial real estate investment represents unique set of challenges and rewards

Investing in commercial real estate could be considered the major league of real estate investment.
The skills required are greater, but so too are the potential rewards.

Greg Kwong, regional managing director for commercial real estate company CBRE in Alberta, says there is really no strict definition of commercial real estate – it can be a major office tower in downtown Calgary, a fourplex apartment building or anything in between.

Calgary's retail market is expected to remain vibrant over the next 12 months due to an improving economy and rising consumer confidence.

A report by Colliers International in Calgary says the shopping centre vacancy rate in the city is expected to drop slightly from 3.21 per cent to three per cent while streetfront vacancy rates are expected to stabilize and hover around the current rate of 5.75 per cent.

"We are still the number one province on a per capita retail (spending) basis by a significant amount above the national average," said Robert Walker, senior vice-president/partner with Colliers International in Calgary. "That still shows me that despite the vast number of layoffs downtown, the people who are employed are still spending money.

"Our average weekly income is still the highest in the country by a longshot. So they're still spending money."

New retail development to take shape near airport

A major regional shopping centre is being planned just north of Calgary's airport, in a burgeoning district.

ONE Properties has plans to develop StoneGate Common as the retail portion of the overall StoneGate Landing project and turn it into a "signature" retail development that will serve northeast Calgary and the greater Calgary region from its location at 128th Avenue N.E. and Barlow Crescent.

StoneGate Landing, directly north of the airport, will include a 10-million-square-foot industrial park, a 2.5-million-square-foot suburban office development, hotels and auto dealerships on about 800 acres.

The suburban commercial real estate market has mostly avoided the high vacancy rates seen downtown, but levels are creeping upwards in suburban malls

The economic downturn of the past two years has had a widespread impact on Calgary's retail sector with businesses in the core particularly hard hit.

Two years of a recession in 2015 and 2016 have taken their toll as thousands of people in the city's central business district were victims of layoffs in the oil patch, which takes up the vast majority of space in the downtown office market.

With thousands of potential customers gone, retail stores and restaurants have felt the pinch.

Is there a glimmer of hope in Calgary's struggling downtown office market?

A new report by Avison Young suggests the market may be turning the corner following a brutal two years of ploughing through a recession.

The vacancy rate in the core was 23.9 per cent in the first quarter of the year, up from 17.6 per cent a year ago, but basically unchanged from year-end 2016.

"The first-quarter 2017 vacancy level actually represented positive news as the market took its first steps in halting its overall downward trend," said the commercial real estate company.

Todd Throndson, principal and managing director of Avison Young's Calgary office, says the downtown office market appears to have hit a pause in its rising vacancy.

Destination malls like Chinook Centre provide more than just shopping

CF Chinook Centre in Calgary has made it on a list of the most productive shopping malls in Canada.

According to the recent Retail Council of Canada's Canadian Shopping Centre Study, Chinook Centre was ranked seventh overall with sales per square foot of $1,057 for the 12 months ending Aug. 31, 2016.

Paige O'Neill, general manager of Chinook Centre, says the local shopping centre has some key elements that contribute to its success.

No new downtown office towers for at least five years, say experts

Despite the number of construction projects currently on the go, it is unlikely Calgary's downtown office market will see any new towers for quite some time.

Todd Throndson, managing director and principal for Avison Young in Calgary, says the millions of square feet of recently created new space, three new towers coming on line and a soaring vacancy rate will sideline any plans for more towers.

He says it will take several years – at least five – before the existing vacancy will be absorbed and a landlord will be prepared to take on the risk of constructing a new tower. Today, Calgary's vacancy rate is about 25 per cent.

Calgary's industrial market shows signs of turning the corner

While Calgary's downtown office sector and its plunging vacancy rates overshadowed all commercial real estate activity in 2016, the city's industrial market has better weathered the storm and is poised to grow in 2017, say experts.

According to Barclay Street Real Estate, vacancy for the industrial real estate sector finished 2016 at 7.76 per cent. It had peaked at 7.8 per cent in the third quarter of the year. In 2015, it was 6.57 per cent.

"Absorption was a negative 127,373 square feet for Q3. This was the only quarter of negative absorption we have had since the '90s," said Jon Mook, executive vice-president of Barclay Street Real Estate's industrial division.

Real estate officials expect conditions to support turnaround in downtrodden commercial market

Calgary's commercial real estate market is showing signs it is finally moving on from tough economic conditions that sent vacancy rates soaring and rents plummeting over the past two years, say officials.

''There is a sense in the market that the worst is behind us and that conditions will gradually improve," said Joe Binfet, managing director/broker of Colliers International in Calgary.

Calgary retailers making the most of high vacancy rate

Calgary commercial experts say local retailers are becoming increasingly savvy in their fight for market share, challenging the traditional brick-and-mortar concept of doing business in favour of a pop-up model.

''I do think the trend is becoming more popular because of online shopping," said Barclay Street Real Estate retail associate Amy McGregor, who is working with Calgary Economic Development to research pop-up shops and facilitate a process for new business owners by connecting with landlords.

"Online retailers kind of want to dip their toe in the retail market and it's a low investment way to do that. There's more opportunity and more likelihood that landlords will give them the opportunity for the shorter-term leases."