Fri, June 14
Weather Icon Calgary 11°C



A Tale of Two Markets


With some unique positives, negatives and quirks, Calgary’s commercial and residential real estate situation continues to be a tale of two parallel but distinctly different markets. One is hot. The other is lukewarm, encouraging and getting hotter.

While Calgary’s residential real estate market continues hot, it is also reasonable, especially compared to other major Canadian areas. Area realtors and trends agree – and caution – that mortgage rates, benchmark prices, affordability and listings vs. sales are key factors in the dynamic that is Calgary real estate.

Home values have been rising since the start of the year. While there are mixed signals about detached homes, Calgary’s condo apartment market continues to be red hot. According to the Calgary Real Estate Board (CREB), Calgary real estate had its busiest July ever and benchmark prices increased for a seventh consecutive month. Year-over-year sales surged by 18 per cent.

“Continued migration to the province, along with our relative affordability, has supported the stronger demand for housing, despite higher lending rates,” says CREB chief economist Ann-Marie Lurie. “We continue to struggle with supply in the resale, new home and rental markets.”

“The influx of migration to the province is something we were seeing last year,” says respected Calgary realtor Christian Twomey, with RE/MAX Landan Real Estate and CREB chair. “Calgary also had record-breaking sales activity last year, which is still strong today.”

The impact of migration is significant. A City report estimates an influx of 40,600 new residents – a three per cent Calgary population increase, since last April. The migration boost is projected to continue, with a forecast of 110,000 more new Calgarians by 2027.

Twomey also cautions that prices are a key factor. “Housing affordability is a critical issue, and Calgary is not immune. While we are far more affordable than most other major urban cities, we need more supply across all product types.”

Housing experts underscore a significant factor: budgets! Spikes in mortgage rates are causing some  prospective homebuyers to wait for drops in rates, although experts suggest that they will likely remain high until next year. Calgary house prices are exploring uncharted territory.

Because 2022 was such a hot, post-COVID recovery year, Jared Chamberlain, plugged-in REALTOR® and team lead of the Chamberlain Group notes that “the Calgary market has seen its first regular cycle since 2020, meaning the market usually slows in August, picks up again in early-mid September and most likely runs all the way through to December.

“This year’s Q1 and Q2 numbers were way down, compared to 2022. But last year was such an anomaly in the sheer number of sales, it may be a stilted comparison. Calgary stats show that, unlike many other cities in Canada which are feeling the slowdown, Calgary is one of the few markets that are not feeling it in the same way.

“People from other provinces are still hunting for affordability and Calgary is, if not near the top of their list, the city they are looking at,” he says.

Twomey cautions about the misleading interpretation of national and province-wide trends. “Real estate is local! It is important to consider how things are operating by region or by community. Even here in Calgary, our market conditions are quite different from the conditions just a few hours north, like up in Edmonton.”

Calgary commercial real estate not only survived the unprecedented pandemic broadsides and disruptions, but is rebounding with various significant and subtle new normals.

The COVID scrambling and the supercharged work-by-remote trends continue to redefine Calgary workplaces. And into Q3, the strategy and the focus of Calgary’s office, industrial and retail real estate is also re-jigged. According to the most recent RE/MAX Commercial Real Estate Report, Calgary’s office market has made some headway in the first quarter of the year, with availability rates edging downward.

Two factors have contributed to the decline: the uptick in tech businesses and the repurposing of existing commercial to residential. Attracted to the value proposition of the Calgary commercial real estate market, a young workforce and incentives offered by the Alberta’s Investment and Growth Fund, tech companies have started moving into the downtown core.

Thanks in large part to government incentives to convert office space to residential, “repurposing” is a growing Calgary commercial real estate trend. The City ‘s goal is to convert up to six million sq. ft of office space to residential condo units. Ten buildings have been earmarked for repurposing, representing more than 1,200 new homes in the core. It also eliminates one million square feet of empty office space.

Retail space (downtown and in the ’burbs) is strong. Low vacancy rates reflect demand and the RE/MAX Report notes that Calgary’s shopping malls remain vibrant, such as Canadian Tire taking over many of the Bed, Bath and Beyond locations. “Particularly the downtown leasing market is having a busy year,” says the upbeat and knowledgeable Bill Falagaris, executive vice president, Office Leasing with Barclay Street Real Estate.

“The Class A sector is very strong with headlease rates increasing in buildings like Bow Valley Square, Ampersand Building (formerly Sun Life Plaza), Stephen Avenue Place and Calgary Place. The Class B market continues quiet, compared with AA and A markets. And the Class C market are suffering.”

Up, down or stable, there is a cautionary consensus that Calgary’s commercial market can’t and won’t revert back to the golden boom years.

“Although the office market is stronger than it has been in the last several years, the downtown is unlikely to ever return as we knew it before the drop in energy prices and since the pandemic,” Jeff Robson, president and broker at JR Mercantile Commercial points out. “Retail, medical and hospitality are rebounding with new entrants to the market, especially from other provinces and the U.S., and there’s a greater confidence in Alberta’s economy.”

Calgary tenants and landlords are adjusting. “All tenants are looking for good value and landlords that are engaged in managing their real estate. Office tenants are looking for buildings that are rich with amenities to entice their workers back from the home office to the corporate office.

“Industrial tenants are, in many cases, scrambling for what little space there is. Retail tenants are looking for ways to generate more revenue from smaller footprints,” he says. “Restaurants are looking for more efficient ways to get more of their food to more of their customers by incorporating and accommodating delivery drivers with parking and separate entrances. Health and wellness tenants are looking to situate in more prominent locations with an abundance of parking.”

He explains “Calgary’s downtown has been slower to come back, but especially for retail and restaurants, location is still crucial. If you are too far west in the plus 15, many of the office buildings have yet to rebound, and some may never be reoccupied.”

Bill Falagaris mentions that “remote work for employees is still a factor. While many  people are coming back to the office, many Calgary companies still have the hybrid model of a three- or four-day work week. The needs and requirements of tenants is changing in the way tenants configure their office premises. There is a tendency for tenants to plan their office premises to accommodate ‘hotelling,’ for tenants to share work stations and desks.”

The trends and forecasts for Calgary commercial real estate project a continued increase in leasing activity for the rest of 2023 and, with increased business confidence in Calgary continuing, the future is positive for 2024.