Calgary investment sales remained at historically high levels in the third quarter despite a pause in activity that affected markets elsewhere in the province.
“Renewed optimism in Calgary’s commercial real estate market powered investment to new heights and will set a new annual record,” said Andrew Petrozzi, director, commercial research, Western Canada with Altus Group.
Sales data for the third quarter of 2022 point to a 77 per cent increase in investment versus a year earlier, at nearly $861 million on a volume of 174 transactions. This compares to $487.5 million invested across 116 transactions last year.
Two major office deals – The Bow and Western Canadian Place, together worth $1.7 billion – pushed the Calgary market to a record quarterly high of $2.5 billion in the first quarter, ensuring this year will set a new benchmark despite a steady decline in transaction activity since.
But even the macroeconomic headwinds facing investors aren’t dissuading interest. While investors in other major centres, including Edmonton, hit pause in the third quarter, the strong showing in Calgary heralds continued momentum heading into 2023.
“While investment activity will be curtailed through the back half of 2022 and into 2023 as investors re-examine allocations and acquisition strategies in the face of Canadian macroeconomic challenges, the momentum of Calgary’s investment market bodes well for the market’s continued performance until the stabilization of national economic indicators forecasted to take root by late 2023,” Petrozzi said.
ICI land and industrial sales claimed the lion’s share of investment during the quarter, followed by multifamily properties.
Demand for industrial space and rental apartments made these asset types among the fastest-growing in terms of investor interest during the first nine months of the year (after the chart-busting office sector). Sales of industrial properties increased 91 per cent while apartments attracted 66 per cent more dollars than a year earlier.
Key deals during the third quarter included Peak Estates, a four-year-old multifamily development in Canmore which Boardwalk REIT acquired from Starlight Investments in July for $63.5 million. The price worked out to $429,054 per unit.
On the land front, strong demand for ICI land saw the 95-acre Glenmore Yards Business Park site in the South Foothills area trade for $49.1 million in August. Prudential Steel sold the property to Anthem Properties Group, which has filed a redesignation application with the City of Calgary.
Edmonton, like Vancouver and Toronto, is in a different situation. While investors have been active in almost all segments of the market, third-quarter sales declined 12 per cent versus a year earlier to $728 million.
“While investors have generally remained engaged with almost all asset classes in Edmonton’s commercial real estate market, the shine started to come off in the eyes of some investors in the back half of 2022,” Petrozzi said.
The largest share of investment in Edmonton during the third quarter went to industrial ($241 million) and multifamily ($188 million) properties, which also ranked among the fastest-growing segments of the market in 2022 after retail assets, which saw a 120 per cent increase in transactions to nearly $113 million in the first nine months of the year.
Key deals during the quarter included the Augustana, a new 30-storey downtown apartment building completed by Pangman Development Corp. in 2021 and sold to Hazelview Investments in September for $90.1 million. The price per unit was $375,417. On the industrial front, the largest deal was Firm Capital’s purchase of Papaschase Business Park, a six-building industrial park on 12.3 acres acquired from Manulife Financial in August for $36.29 million.
Overall, investment activity in Edmonton approached $2.6 billion in the first nine months of 2022, a 43 per cent increase from a year earlier.
“While tempered demand for industrial and multi-family residential assets is expected to continue, this cooling of overall market activity is anticipated to continue through the fourth quarter of 2022 as investors reflect on all investment decisions they make while weighing the impact of the range of macroeconomic factors currently buffeting the Canadian economy,” Petrozzi said.
