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Downtown Calgary's commercial real estate conundrum – Real Estate News EXchange

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IMAGE: Trent Edwards, chief operating officer, Alberta, for Brookfield Residential. (Courtesy Brookfield Residential)

Trent Edwards, chief operating officer, Alberta, for Brookfield Residential. (Courtesy Brookfield Residential)

Downtown is central to Calgary’s economic future, but the city is facing a long road to recovery. The office vacancy rate remains in the low 30 per cent range and 13 million square feet of space – including entire towers – is sitting empty.

A double whammy of depressed oil prices, which began in late 2014, and the ongoing COVID-19 pandemic has slammed the commercial real estate market in the city’s core. Property values for downtown office buildings have plunged by $16 billion since 2015 – a dramatic 63 per cent decline in value.

The recent Calgary Real Estate Forum highlighted the plight of the challenged downtown office market and the city’s plans to invest $1 billion over the next 10 years in bringing the city’s core back to life during a couple of panels and presentations. However, it won’t be an easy journey.

The city so far has approved $45 million in financial incentives for downtown office conversions to residential properties.

Also allocated are an additional $5 million for some downtown improvements, $55 million for capital improvements, $5 million to activate downtown and public spaces and $10 million to support a dedicated team at the city to drive these and other potential initiatives.

Revitalizing downtown Calgary

Trent Edwards, chief operating officer, Alberta, for Brookfield Residential, said it’s going to take 10 to 15 years to get to where the city needs to go in this journey.

He said there needs to be about $450 million in incentives to effectively remove a vast amount of empty space. This would help with rebuilding a tax base, creating vibrancy by removing that black (or empty) space and filling it with residential or other forms of uses.

“We’re not just looking to try and fill all of this vacant space with residential space. There’s going to be lots of other forms, whether it’s student housing, or universities, or vertical farms,” Edwards said.

He noted that demolition might also be an option for some properties to create more parks or other amenity spaces. “We do need to get focused.”

The key, said Edwards, is creating a vibrant downtown to attract and retain talent to that core area.

“You look at some of these other cities – Austin, Nashville, Pittsburgh, Denver, even Detroit now. There’s a similar recipe that all of these cities have followed and again the pointy end of the stick is attracting and retaining talent because that will attract and retain capital.”

He said the formula is consistent – low taxes, ease to do business and a vibrant downtown.

“If we can focus on putting the amenity downtown, if we can focus on creating an exciting place where people want to come and attract that young talent, I think everything else does follow itself,” he said. “We have vacancy. We have affordability. But, unfortunately that doesn’t attract talent.”

Amazon’s tough, but valuable criticism

That was obvious in recent years when Amazon was looking to establish a second headquarters in Canada. Calgary strongly participated in the bidding game, but Edwards said the city received some harsh, but valuable feedback from the e-commerce retail giant.

“Their main comment was ‘You guys weren’t selected to be on a short list because your downtown sucks. It’s just not cool’ and that was one that hit me right between the eyes,” Edwards said.

“If we can create that exciting place to be, not only does it attract and retain talent but everybody else benefits because of course we’ll build that tax base back up, we’ll create jobs because we have the vacant space for people to be moving into and we have a good tax base relative to the rest of Canada.”

IMAGE: Thom Mahler, manager, urban initiatives and program lead, downtown strategy for the City of Calgary. (Courtesy City of Calgary)

Thom Mahler, manager, urban initiatives and program lead, downtown strategy for the City of Calgary. (Courtesy City of Calgary)

Thom Mahler, manager, urban initiatives and program lead, downtown strategy for the City of Calgary, said the challenge for the core is exacerbated by the COVID-19 pandemic, the growing work-from-home trend, the growth in e-commerce, susceptibility to extreme storms such as flooding, a decline in tourism and business travel and the need to diversify the economy.

“In order to bring property value back up in our downtown core and to reinstitute the vibrancy that we were used to in Calgary, we need to attract more talent and how do you attract talent? Well, you have to have a great place,” said Mahler.

“There’s a synergy between designing our downtown and programming our downtown in a way that not only is fulfilling for all of our population, but also that has a specific line of sight toward the talent we’re trying to attract.”

Recreating vibrant neighbourhoods

That task is creating vibrant urban neighbourhoods, amenities where and when people want them, access to training, education and research, high transit connectivity, mobility options, connections to surrounding neighbourhoods, safety, cultural and entertainment attractions, and connections to the airport and the mountains.

“We need a new vibe in our downtown core. We need to review our regulations to make sure that we have things in place whether that’s approvals, whether it’s policy, to make sure that there’s not barriers but more importantly that it enables the types of development we’re trying to encourage,” said Mahler.

The $45 million downtown Calgary development incentive program was launched in August and there have been 13 applications to convert up to 600,000 square feet of office to residential development.

The grant itself is $75 per square foot and a maximum of $10 million per building. It’s possible to go above $10 million, but that would require going to city council to get additional investment.

Mahler said the city wants to transform Stephen Avenue to make it an “iconic’ main street for the downtown. The plan is to also transform 8th Street with a heavy emphasis on green space and spaces where businesses can spill out onto sidewalks. It also includes the extension of the west promenade along the Bow River further west.

Investments are also planned for the Olympic Plaza and the city is considering a new downtown public market to attract people.

Mahler said the top priority is finding the funding so the city can realize the overall revitalization plan. The $200 million is a start.

All governments need to be involved

IMAGE: Greg Guatto, president and CEO of Aspen Properties. (Courtesy Aspen Properties)

Greg Guatto, president and CEO of Aspen Properties. (Courtesy Aspen Properties)

Greg Guatto, president and CEO of Aspen Properties, said a major investment from all three levels of government in the neighbourhood of $1 billion is necessary.

“The $45 million (incentive) has been a great start and I think we need $450 million over time to do that. Without this incentive, I can tell you that these office buildings would not get converted to residential. It’s just so important,” said Guatto.

“The other thing I think our city should consider strongly are incentives to attract businesses here to town.

“I look at it like owning a property. You’ve got to provide incentives or you’re not going to have a tenant in your portfolio and there is a payback for that, even if they leave at the end of their lease.”

He said significant private capital will follow if these plans are undertaken. A key is having the talent to attract businesses.

Guatto also noted the difficulty of converting some office spaces into residential. He said it’s unlikely there will be many conversion-to-condominium projects, but there is potential for more purpose-built rental.

“It’s going to take a dramatic rise in demand for residential which will lift rental rates and the downtown needs to be a cool place to live with amenities,” he said.  “You’ve got to give people a reason to live downtown besides just cheap rent.”

Guatto said post-secondary institutions need to have a bigger presence in Calgary’s downtown, connecting with business and becoming a pipeline for talent.

“And by the way, if you want to convert an office building into something, student housing works pretty well,” he said.

Growing out of the energy economy

Guatto said Calgary is not just about energy.

There is the digitization of essentially every business driving growth in the tech sector including energy companies. It’s been happening in other major Canadian centres such as Vancouver, Toronto and Montreal.

Calgary is just late to the party, he said, because so many of those jobs were driven by traditional oil and gas and the education system was set up to feed that. However, things have changed.

“I can tell you anecdotally in our portfolio in this calendar year . . . we’ve done 325,000 square feet of new leasing and it’s mostly tech companies,” said Guatto. “Lots of really cool tech companies and that’s where the growth is coming from. It’s these tech companies.

“They start small and they’re the ones that are growing.”

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Montreal real estate prices soar 21% amid lower listings, sales in November – Global News

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The Quebec Professional Association of Real Estate Brokers says November home sales and new listings fell in Montreal as prices soared by more than 20 per cent compared with a year ago.

The association says sales for the month totalled 4,402, a 17 per cent drop from 5,296 in November 2020.

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New listings amounted to 5,056, down 14 per cent from 5,848 last November.

The median price of a single-family home soared by 21 per cent compared with a year ago to reach $525,000, while condos went up by 18 per cent to hit $374,000 and plexes with two to five units had a 15 per cent spike pushing them to $725,000.

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Apart from condominiums, which saw a slight decline, the association says the median prices were also up from October 2021.

Charles Brant, the association’s director of market analysis, says he noticed a lack of supply and persistently high demand last month that placed pressure on prices and encouraged potential sellers to get into the market.

“The announcement of an earlier-than-expected rise in interest rates no doubt motivated potential sellers to advance their project in order to benefit from the sustained activity and the opportunity to sell at the best price,” he said in a statement.

© 2021 The Canadian Press

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Montreal real estate prices soar 21% amid lower listings in Nov.: brokers group – moosejawtoday.com

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MONTREAL — The Quebec Professional Association of Real Estate Brokers says November home sales and new listings fell in Montreal as prices soared by more than 20 per cent compared with a year ago.

The association says sales for the month totalled 4,402, a 17 per cent drop from 5,296 in November 2020.

New listings amounted to 5,056, down 14 per cent from 5,848 last November.

The median price of a single-family soared by 21 per cent compared with a year ago to reach $525,000, while condos went up by 18 per cent to hit $374,000 and plexes with two to five units had a 15 per cent spike pushing them to $725,000. 

Apart from condominiums, which saw a slight decline, the association says the median prices were also up from October 2021.

Charles Brant, the association’s director of market analysis, says he noticed a lack of supply and persistently high demand last month that placed pressure on prices and encouraged potential sellers to get into the market. 

“The announcement of an earlier-than-expected rise in interest rates no doubt motivated potential sellers to advance their project in order to benefit from the sustained activity and the opportunity to sell at the best price,” he said in a statement.

This report by The Canadian Press was first published Dec. 7, 2021.

The Canadian Press

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Ottawa home prices rose 19% year-over-year in November: real estate board – Globalnews.ca

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Ottawa housing prices continue to climb as 2021 draws to a close. It’s a trend real estate experts expect to continue in 2022.

The Ottawa Real Estate Board said that November’s average sale price for a condo was $432,099, while the typical residential-class home sold for $716,922. Both represented increases of 19 per cent over average sale prices in November 2020.

Though those figures represent significant jumps year-over-year, OREB President Debra Wright says that the month-to-month prices from October to November were relatively steady in the residential market and up seven percent for condos.


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“This is a far better situation than the monthly price escalations we had seen in the first quarter of 2021,” Wright said in a statement. “However, there is no question that supply constraints will continue to place upward pressure on prices until that is remedied.”

RE/MAX said in its 2022 Canadian housing market outlook last week that Ottawa average home price is expected to rise a further five per cent next year. That’s below estimates for other large markets in Ontario, such as Mississauga (14 per cent), Toronto (10 per cent) and Brampton (eight per cent).

In Ottawa as well as those other cities, RE/MAX said home prices could feel pressure as increased immigration levels further constrain supply levels.

Read more:

Canadian homebuyers facing weeks of move-in delays tied to supply chain snags

The OREB projects housing inventory in Ottawa is currently at a one-month supply, with the 1,430 units added to the market last month representing a 27 per cent drop from October and a 13 per cent decline from levels in November 2020.

While sales sit at “30 or so units over the five-year listing average, this is simply not sustainable and is taking us further away from the balanced market that will bring much-needed relief to potential buyers,” Wright said.

OREB members meanwhile sold 1,459 properties in November, a drop from the 1,605 seen in the same month last year. Sales figures were unseasonably high during this period in 2020, however, as more homes were sold in the fall because pandemic-driven lockdowns and general economic anxiety pushed demand from the usually busy spring and summer to later in the year.

November 2021’s sales volumes were still above the five-year average of 1,348 total units sold in November.

Realtors with the OREB have also gotten more involved with rentals in the past year, helping nearly 4,500 tenants find new units so far in 2021 compared with 3,120 such deals this time last year.


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Cost of housing biggest crisis outside the pandemic: Singh – Nov 28, 2021

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

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