Airdrie’s business sector is experiencing some growing pains, with a general shortage of affordable commercial real estate spaces in the city, and some significant growth limitations in its industrial real estate sector capacity at the moment.
According to “Airdrie’s Growth Report: Tracking Development and Change,” Airdrie’s industrial properties are slightly more expensive to lease than similar lands in Calgary, at $161 per square foot versus $159 per square foot. However, the industrial real estate available in the city tends to be of smaller size than properties available in Calgary and Balzac, which creates a growth limitation for what types of businesses could actually establish themselves in Airdrie.
“With the Hamlet of Balzac to the south of Airdrie currently attracting several new distribution and logistics buildings,” the report reads, “Airdrie has become home to many industrial tenants that occupy the small-to-medium-sized warehousing that makes up nearly 75 per cent of Airdrie’s industrial inventory.”
The report goes on to state these user groups “have been amongst the most affected by the pre-pandemic Alberta economic downturn, resulting in less demand for new space and inconsistent leasing activity, ranging from under 10,000 to 50,000 square feet per quarter.”
On the other hand, there are also some positive signs that this might be turning around, as the Calgary region as a whole experiences a post-COVID boom.
“Alberta industrial markets continue to build momentum,” the report reads, “and municipalities within the Calgary Metropolitan Region, including Airdrie, are reaping the benefits.”
The report cites recent announcements such as the Costco distribution centre expansion, whereby the existing northeast Airdrie facility will increase by 700,000 square feet over two phases, as an example of the investment that is occurring in Airdrie.
“Future development and investment attraction are likely to be heavily concentrated in the Highland Park Industrial area, joining projects such as Highland Common, High North Business Centre, and larger tenants such as TransCanada Turbines, Belron and Costco,” it read.
On the commercial real estate side of things, there is a strong demand for retail and commercial space in Airdrie.
Retail space crunch
According to the same growth report, there has been a strong post-COVID demand for retail and commercial space in the city. During the pandemic, demand dropped off to a point where there was only 2,500 square feet per quarter being leased. Recent quarters have shown an upswing to about 4,500 to 6,000 square feet of leased space per quarter.
That strong demand for commercial retail space in Airdrie has led to increased lease prices and a bit of a space crunch, acknowledged Tara Levick, an economic development officer with the City of Airdrie.
For smaller businesses just getting started or those wishing to expand, she said cost challenges in the lease market may represent a disincentive to taking that next step to procure a storefront property.
“We definitely heard in our (2022 Airdrie Economic Development) Business Survey that costs and availability of office, commercial and industrial space and land is top priority,” Levick said. “It is definitely something that is affecting the majority of our businesses.
“What we (as a City) are doing is a deeper dive into the survey results to see if that is industry-specific, but we are definitely seeing low vacancy rates in Airdrie.”
There are some new developments coming soon which may eventually help alleviate some of that space crunch, she added.
“We are definitely seeing more (commercial) areas come on line,” she explained. “Down by Walmart in Sierra Springs, there is a new community coming online that will have a commercial retail focus. We are seeing growth opportunities in the downtown with the launch of a new downtown plan (by city council). And then in the booming areas like Kingsview Market and Gateway north of Superstore…We are seeing land that has been vacant for a while being built on – so that’s always very exciting to see.”
But Levick acknowledged there is not a lot of smaller scale, affordable commercial real estate available in Airdrie at the moment to help incubate newer start-ups.
She said the City’s long-term plan to revitalize downtown – passed by City council in September – would likely help encourage some property owners in the area to think about converting existing spaces to help foster more local retail openings in Airdrie. However, she also feels many of those who own older commercial buildings in the city were already moving in that direction on their own even before those incentives were brought in.
“What we are seeing is that this is happening organically through business owners,” she said. “We are seeing an increase in business owners that are opening more like a coworking space. They are taking on the full lease themselves, but the intent is for it to be multiple businesses operating in that location. And that is something we haven’t seen in Airdrie before very often.”
The next step for Airdrie Economic Development and the City of Airdrie, Levick said, is to intensify efforts to attract new commercial and industrial investment in the city. The municipal government has recently created a new staff position that will be solely dedicated to attracting investors under the economic development portfolio.
“We have a plan on how to attract business here, and we have done some marketing concepts on what makes us competitive and unique that they would choose us over other locations,” she said. “That is something our department is very excited to roll out, knowing we have six quarter sections up in East Points that are ready to go at any time.”
According to Levick, Airdrie has many natural advantages that will hopefully make the community a fairly easy sell to potential developers and investors.
“We are competitive with property taxes (to other nearby jurisdictions), but we are also competitive through location, right along the QEII [highway],” she explained. “We are competitive in (having) a young workforce, and we are competitive in quality of life. We see excellent numbers in people that live here who love living here.”
Sale of $37M property could be biggest residential real estate deal in Kelowna history – iNFOnews
A 90-acre parcel of land in the Rutland area of Kelowna has gone on the market for $37 million.
It’s not listed through any realtor but is posted on the For Sale by Owner Inc. website.
It’s 90.19 acres at 1151 McKenzie Rd., which is north of the Toovey Road subdivision and west of the Black Mountain Golf Course.
The land went on the market two to three weeks ago, according to the owners’ lawyer, Crystal Wariach.
“Over 90 acres of Kelowna’s finest future development land with spectacular panoramic views of the lake and city lights,” the real estate listing says.
The land is not in the agricultural land reserve and is designated for housing.
This outlines the property.
Image Credit: Submitted/ForSalebyOwner.ca
In 2019, when city council was looking at various growth scenarios, Wariach emailed councillors on behalf of the owners (cited as Balbir Wariache and Mrs. Prem Wariache).
She asked that this parcel retain is designation as future housing, which is what happened.
“Over the past two years, my clients have had professional development plans created for the property,” she wrote. “The plans provide for the build out of up to 320 lots for single-family homes on the property.”
The owners bought the property in 1999 and continue to own it, Wariach confirmed.
She wasn’t able to confirm, by publication time, whether development options had changed from the 320 lots envisioned in 2019.
The land is included in the Bell Mountain Area Structure Plan that was adopted by council in 2003.
Most of the land within that plan has been developed into single-family housing in subdivisions such as Blue Sky, Prospect Mountain and Lone Pine Estates, Wariach’s 2019 email says.
The largest sale through the MLS listing service that has been publicized to date was announced in January 2021 when the Kirschner Mountain housing development sold for $22 million.
It included 190 acres of land left from a larger parcel that was part of the Kirschner Mountain housing development.
If the McKenzie Avenue property sells for $37 million it will eclipse that sale in terms of residential property sold through the MLS system in the city.
Since the Kirschner Mountain sale, there have been bigger real estate deals in Kelowna.
Last December, the Mission Group paid $24 million for the former B.C. Tree Fruits plant near the North End of downtown.
Earlier this year, Victor Projects spent $33 million to buy the former Costco site near the Highway 33 and Highway 97 intersection.
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An ETF to Consider While Investors Pick Up Distressed China Real Estate
Investors are giving the China real estate market a second look as the country continues to work through the real estate doldrums brought on by last year’s Evergrande Crisis. As such, this opens up opportunities for exchange traded funds (ETFs) that get exposure to Chinese real estate.
It’s often said in the investment world to follow the “smart money.” That could mean tailing the bets of institutional money managers such as Brookfield Asset Management, which is looking at opportunities in distressed Chinese real estate.
Per a South China Morning Post article, “Brookfield Asset Management is on the lookout to acquire premium commercial property from distressed Chinese developers, aiming to increase its footprint in the world’s second-largest economy where fresh capital is needed to bail out the troubled real estate sector.” Based on the report, the Canadian firm is targeting properties in specific cities with the probability of generating returns in the long run.
“We are seeing opportunities and are pursuing lucrative deals,” said Yang Yiwen, senior vice-president of real estate portfolio management for Brookfield in China. “There will be drawn-out negotiations because of pricing gaps to close.”
As mentioned, the value stems from last year’s Evergrande Crisis, which saw a number of large real estate developers come close to defaulting on their loans. This prompted them to sell real estate such as commercial buildings at low prices in China’s prime locales, giving real estate investors plenty of opportunities to snatch up property at a bargain.
An ETF to Play the Real Estate Bounce
ETF investors looking to play a rebound in China’s real estate market can obtain exposure using the Global X MSCI China Real Estate ETF (CHIR). CHIR seeks to provide investment results that generally correspond to the price and yield performance, before fees and expenses, of the MSCI China Real Estate 10/50 Index.
The underlying index tracks the performance of companies in the MSCI China Index (the “parent index”) classified in the real estate sector, as defined by the index provider. Summarily, ETF investors get the following:
- Targeted exposure: CHIR is a targeted play on the real estate sector in China — the world’s second-largest economy by GDP.
- ETF efficiency: In a single trade, CHIR delivers access to dozens of real estate companies within the MSCI China Index, providing investors with an efficient vehicle to express a sector view on China.
- All share exposure: The index incorporates all eligible securities as per MSCI’s Global Investable Market Index Methodology, including China A, B, and H shares, red chips, P chips, and foreign listings, among others.
A look back, and ahead, at Canada’s commercial real estate landscape
This year’s Global Property Market conference opened with presentations which looked both forward and back . . . reviewing the major trends of 2022 and offering an investment outlook for 2023.
Following are snapshots of what MSCI head of real estate economics Jim Costello and LaSalle Investment Management global strategist Jacques Gordon had to say during their talks at the Nov. 29 event at the Metro Toronto Convention Centre.
MSCI is a New York City-headquartered provider of decision support tools and services for the global investment community and Costello has 30 years of experience analyzing the relationships between real estate and economics.
LaSalle is a global real estate money manager with more than $81 billion in assets under management.
Gordon has been responsible for the macro strategy and micro research used to guide all investment decisions in 30 countries, but will soon take a new role as executive in residence at the Massachusetts Institute of Technology Center for Real Estate.
Jim Costello, MSCI
Costello said the real estate industry has enjoyed a period of tremendous returns globally and in Canada, but that dropped significantly in Q3 and major challenges remain ahead.
The global volume of real estate deals valued at more than $10 million is down from last year, when there was an enormous flow of capital into the sector. It is still, however, at an elevated level compared to historic deal flows.
“It was just a lot of folks hungry for yield in a period when interest rates were exceptionally low,” Costello said. “But as rates reset, there are going to be challenges for some of those investments.”
Many of the deals being done were larger as smaller assets that were traditionally purchased by investors with limited pools of capital behind them stopped moving earlier.
Liquidity fell in 97 of 155 global markets in the third quarter and Costello doesn’t see it picking up again for a while.
New York City was the most liquid market in the world from 2017 to 2020, but the Australian city of Sydney now holds that title.
Larger gaps have been created between buyer and seller price expectations. Costello said price corrections are needed to drive U.S office liquidity.
He believes sellers need to cut their price expectations by 15 per cent to get deals done and that number could increase.
Deal activity was down in Q3 in every asset class and the most popular markets have also changed.
Instead of traditional front-runners New York City and London, Los Angeles and Dallas have become the top global markets owing to their large number of logistics facilities and apartment buildings — two asset classes investors continue to chase.
Alternative real estate sectors — including self-storage, data centres, medical office, research and development, manufactured housing, student housing and seniors housing — have been gaining ground on more traditional asset classes.
Jacques Gordon, LaSalle Investment Management
Gordon said there were four inflection points affecting global economies and real estate in the transition from 2022 to 2023 and beyond. Things are moving:
• from interest rates being lower for longer to higher rates with a heavier drag on cash flows;
• from a COVID rebound to a global stall;
• from upward price pressure to downward price pressure; and
• from fossil fuel-driven economies to renewable energy-driven economies.
“Most of us are in private equity real estate,” Gordon said in talking about interest rates. “Whether we’re debt or equity players, we’re putting money to work for multiple years at a time.
“When you do that, you realize that we’re going to have to endure this period of, probably, 12 to 18 months of higher inflation and higher interest rates, but this too shall pass.”
Gordon said the COVID-19 pandemic “blasted a hole in the global economy” in 2020, but last year there was a “supercharged rebound with governments just blasting out surplus money.”
However, gross domestic product (GDP) numbers in countries around the world have been well below expectations in 2022.
Oxford Economics’ GDP forecasts for next year aren’t good, with several countries (including Canada) expected to have negative growth.
Real estate experienced major upward price pressure through 2021 and the first part of 2022, but now investors are having to deal with downward price pressure and declining transaction volumes in the sector.
Gordon said the depth of buyer pools has retreated across property types and, although deals can still get done, there are fewer bids for properties and sellers often don’t want to accept them.
Office vacancy rates are on the rise. JLL figures show a global vacancy rate of 14.5 per cent, with Europe at 7.2 per cent, Asia Pacific at 14.1 per cent and the U.S. at 19.1 per cent in the third quarter.
Coal, oil and gas comprise 77 per cent of the global primary energy mix, but Gordon said the future of energy looks nothing like its past.
He believes it’s going to take a lot of hard work to reduce the reliance on fossil fuels and shift toward more environmentally friendly energy.
“We in this room can commit to a net-zero-carbon world, but we need the rest of the world to come with us,” Gordon said. “Otherwise, we won’t get there.”
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