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Calgary's 600,000-sq.-ft. Nexen Building sits vacant | RENX – Real Estate News EXchange

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The former Nexen Building in downtown Calgary. The 37-storey, 600,000-square-foot tower is completely vacant, a result of the region’s continuing economic downturn. (Mario Toneguzzi RENX)

It’s situation that has likely never been experienced in Calgary’s downtown office market. When energy company Nexen moved its operations to the Bow Tower last fall, the energy company left the site of its former headquarters completely empty – the 801 Seventh Building.

More commonly known as the Nexen Building, it stands 37 storeys tall and contains about 600,000 square feet. Every square foot is now available for lease.

Michael Gigliuk, vice-president, associate, with Devencore, confirmed that never in Calgary history has a building of this magnitude in the city’s core been entirely vacant.

During the early 1980s, the city struggled through an economic downturn that left several smaller buildings empty, but nothing on this scale.

Gigliuki is a veteran of the downtown office market in Calgary who is well-known for his research and knowledge of the industry.

He told RENX six downtown Calgary office buildings were vacant during that 1983 slump: Selkirk House, 220,000 square feet; the Western Union building, 74,000 square feet; the Alpine building, 52,000 square feet; Atrium 1 and 2, 109,000 square feet each; Petro Fina building, 150,000 square feet; and the Hanover building, 240,000 square feet.

Nexen Building opened in 1982

The total for those six vacant buildings was 952,000 square feet. Much of it was a result of energy giant Petro Canada vacating four of the buildings, ironically about 600,000 square feet: Atrium 1 and 2; Petro Fina; and Hanover.

“Just to give you some perspective, at that time the total inventory in 1984 in downtown Calgary was 25.4 million square feet and today it’s 44 million square feet,” said Gigliuk.

“The vacancy at that time was 19.4 per cent. Actually 1983 is when the vacancy peaked back then, at 22.3 per cent.”

Oil and gas company Nexen is a subsidiary of Hong Kong-based CNOOC Limited.

Nexen moved its headquarters near the end of 2019 from the corner of 7th Avenue and 8th Street S.W. to the 58-storey Bow skyscraper, taking up 290,000 square feet of sublease space from Cenovus Energy. The Bow is located at 500 Centre Street S.

The Nexen Building was designed by J.H. Cook Architects and built by CANA Construction for Novalta Properties. The tower, which is just shy of 500 feet in height, opened in 1982 as the headquarters of Nova Corporation.

Ownership of the Nexen Building is now comprised of five Calgary families and an Ontario-based pension fund group. Leasing inquiries are being handled by Century West Management Inc.

A spokesperson for Century told RENX no one from the ownership nor management group would be available for comment.

“Early signs of positivity”

Calgary’s downtown office market has been struggling since the collapse of oil prices in late 2014, which sent the economy into recession in 2015 and 2016.

Thousands of jobs were lost in the heart of the oil patch which led to energy companies, and those related to the industry, vacating huge amounts of space in the heart of the city.

Today, about five years later, the downtown vacancy rate remains at an extremely elevated level in the range of 25 per cent.

“Calgary’s downtown office vacancy rate remains very high, persistently over 20 per cent, as it has been since 2016. Recently there have been some early signs of positivity on the horizon as vacancy rates have been trending slowly downward over the past three quarters,” said Adam Legge, president of the Business Council of Alberta.

“We’re expecting to see some economic growth in 2020, but it will likely be very low, slow growth that is unlikely to absorb a considerable amount of that inventory.

“This ongoing market situation is leading to innovation and new ideas in Calgary real estate. Several commercial buildings have been repurposed as apartments, and many building owners have put forward new offerings and new rental models, like co-working.

“Calgary’s downtown is a unique system, even among cities of similar size. It is highly concentrated in a single and defined geographic area and it’s also uncommonly connected because of the +15 (pedestrian) network.

“This means that the overall health of that system is important and pockets of very high vacancy can be concerning.”

Other large blocks of space available

While having the entire Nexen Building vacant might be unique, having large blocks of vacant space is not new. Todd Throndson, managing director and principal of Avison Young, said other blocks of space in the 600,000-square-foot range have been available.

“There have been other large blocks of space that have been available to tenancies in the market,” he said. “Unfortunately we have a vacancy of over 20 per cent.

“So whether or not there’s a building that has 600,000 square feet or not, I don’t think it really impacts the marketplace in any way, shape or form.

“What it does do, is it does allow an opportunity for a larger-size tenancy to either consider it as an option for themselves or use it as leverage against the landlords because they’re going to have to be very aggressive to try and get a tenancy.”

Throndson said the location of the former Nexen Building will also be a factor for potential tenants.

“It’s in the West End. It’s not right down in the core. It’s not going to appeal to some of the tenancies that are in the core right now that would never consider a West-End location,” he observed.

“So they’re going to have to compete on a financial basis.

“But, it does allow an opportunity for any significant and large tenancy in the suburban marketplace to consider downtown.”

Downtown Calgary “fairly active”

Aly Lalani, executive vice-president/partner with Colliers International, said it is definitely rare to have a building of this magnitude be completely vacant.

“It’s a unique situation. I don’t know it speaks to the market at all. I’d say it would be unfair to characterize this as a sign of the market,” he said.

“We’re seeing quite a bit of activity in the market, a lot of activity from tenants outside of the downtown core whether that’s tenants located in the suburban Beltline market or tenants who are outside of Calgary who are considering Calgary.

“The downtown core has been fairly active. Last year we added the 600,000-square-foot building of Nexen to inventory. We added TELUS Sky to inventory and some bigger sublease blocks of space that came available.”

Lalani contended that, although the market ended the year with negative 177,000 square feet of absorption, it’s not indicative of the activity that took place.

“It’s active downtown and that trend will continue for 2020. The good news is that we have no new office supply coming to the market other than potential sublease blocks, which is a wild card that we can’t really plan for.”

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Google real estate executive says 5% more workers coming in to office each week

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Alphabet Inc’s Google has seen an increasing number of employees coming in to its offices each week, particularly younger workers, the company’s real estate chief said during an interview at the Reuters Next conference on Friday.

On Thursday, Google indefinitely pushed back the mandated return date for employees due to concerns about the Omicron variant. The company had previously said its 150,000 global employees could be required to come in to the office as soon as Jan. 10.

Nevertheless, David Radcliffe, Google’s vice president for real estate and workplace services, said many Googlers are returning of their own volition. About 40% of its U.S. employees on average came in to the office daily in recent weeks, up from 20-25% three months ago, he said. Globally, 5% more employees are returning to offices week after week, he added.

“People are actually showing voluntarily that they want to be back in the office,” Radcliffe said. “We’re moving in the right direction.”

Younger employees and those who joined Google more recently have been coming in at higher rates, seeking opportunities to learn from colleagues, Radcliffe added.

Google expects workers in the office at least three days a week once it mandates a new return date.

Based on feedback from those already back, it is redesigning floor plans to increase private, quiet spaces for distraction-free individual work and adding conferencing and other collaboration areas in open spaces both indoors and outdoors.

Real estate and human resources experts have considered Google a trailblazer for the past 20 years in sustainable office design and variety of workplace perks, including free meals, massages and gyms.

To extend those sustainability and wellness benefits to remote work, Google has encouraged employees to buy carbon offsets and non-toxic furniture for their home offices. It also has provided free cooking classes and discounts to fitness studios near workers’ homes.

“It was amazing how many employees had really never cooked themselves,” Radcliffe said.

 

(Reporting by Paresh Dave in Oakland, Calif., and Julia Love in San Francisco; Editing by Sonya Hepinstall and Matthew Lewis)

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Calgary real estate is on a late-year roll – Western Investor

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With $468 million in sales – not counting the $1.2-billion Bow office tower purchase that has yet to close – in the third quarter (Q3) 2021, Calgary is on track to top $2 billion in commercial and industrial real estate sales this year, according to Altus Group.

Meanwhile housing sales in November reached 2,110 transactions, just shy of the record for the month set in 2005, as the sales-to-new-listing ratio hit a blistering 100 per cent.

Altus reports that the Calgary’s commercial real estate market recorded 115 transactions for a total investment volume of $468 million in the third quarter, bringing the total investment volume for the year close to $2 billion. The total sales volume was up 37 per cent from the first three quarters of 2020.

Industrial sales led the commercial and industrial assets investment parade in the third quarter, with 27 transactions valued at $188 million. This sector was dominated by two substantial distribution logistics centre deals. These were the $69.7 million purchase of a Canadian Tire 496,000-square-foot distribution centre by Skyline Commercial Real Estate Investment Trust (REIT); and the $32.18 million sale of the Valad Construction headquarters industrial and office complex to Nexus REIT.

The ICI (industrial-commercial-institutional) land sector was the second most active in terms of dollar volume with 38 transactions amounting to $83 million, up 62 per cent from Q3 of 2020.

The multi-family rental apartment sector saw 15 transactions totalling $82 million, a 70 per cent increase from the same point last year, and only a marginal decrease from the previous quarter.

The retail sector tallied $44 million in transactions amounting to a 110 per cent increase from Q3 2020.

The biggest retail sale was the $8.35 million purchase of the Hansen Ranch Plaza, a near-12,000-square-foot retail centre in northwest Calgary, bought by local investors.

“Calgary’s beleaguered office market has remained flat, with five transactions amounting to $15 million, a negligible change from the same quarter last year,” noted Ben Tatterton, manager of data solutions at Altus, who prepared the Calgary report with national research manager Krut DSesai.

The landmark sale of the Bow office tower will be registered in a future quarter, Altus noted.

The two-million-square-foot Bow tower was purchased in August from Toronto-based H&R REIT by Oak Street Real Estate Capital, of Chicago, for $1.216 million, in a deal expected to close by the end of this year.

The Calgary Real Estate Board (CREB) reported a rush of home buyers in November.

“Lending rates are expected to increase next year, which has created a sense of urgency among purchasers who want to get into the housing market before rates rise,” said CREB chief economist Ann-Marie Lurie. She added that supply levels have tightened, causing prices to rise.

The benchmark composite home price in November was $461,000, up nearly 9 per cent from November of 2020, according to Lurie.

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Saskatchewan real estate market conditions making it hard for buyers: realtors – Globalnews.ca

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Saskatoon real estate agent Warren Ens says the current real estate market conditions in Saskatchewan aren’t for the faint of heart.

“The really good houses, you pretty much have to go the exact same day as (they’re) listed, and even then you probably are going to get into a bidding war,” he said Friday.

Read more:

Saskatoon real estate market slows but still healthy, says realtors association

He adds that bidding wars over Saskatoon homes are happening at a rate he has never seen in his 11 years working in Saskatchewan.

“(Last) Friday I got into two bidding wars with two different clients,” he laughed. “That’s not something you see too much of.”

A new report from RE/MAX shows this is the case across the country, making it harder for first-time homebuyers to get into the market.

Read more:

Canada’s housing market hotter than ever — and investors are playing a big role

RE/MAX Canada Regional Executive Vice President Elton Ash says this competition could continue.

“In March, we’re anticipating the Bank of Canada to start edging the overnight rate up with inflation concerns and that sort of thing,” he said Thursday. “That’s going to push buyers suddenly, because they’ve been looking and they’re going to want to lock in at a lower rate.”


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Rural Boom: Why millennials are flocking to small town Canada – Nov 20, 2021

He said buyers from all across Canada are now seeing the value of an affordable new house in the Prairies.

“People are looking at that and saying, ‘Hey, yeah I might today be working in Toronto but I can work remotely and I can move back home to Saskatchewan where prices are much more affordable; family life will be better and I can work remote,’” Ash explained.

Read more:

Toronto-area home sales top November record, prices reach all time high

Ens says he’s seen this play out in his day-to-day job, with plenty of newcomers in the last year.

“We’ve seen people from Toronto, Chilliwack, B.C., places like that that are coming here,” he said.

From his perspective, the report is accurate in its prediction that houses will likely only continue to slowly increase in price, but he says a seller’s market won’t always make things easier.

Read more:

‘Not as crazy as it seems’: How COVID-19 gave rise to home-buying sight unseen

“When you have bidding wars and you have multiple offers it sounds great for a seller,” he explained. “But it’s also very tricky because you could actually lose all the offers because you do something wrong.”

The bottom line, he says, is that Canada is a seller’s market — and Saskatchewan is selling fast.

© 2021 Global News, a division of Corus Entertainment Inc.

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