Calgary's industrial real estate market has traditionally been one of the strongest in the city, thanks to its proximity to major transportation routes and its location at the heart of Western Canada's energy industry. While the economic downturn in recent years has had an impact on the market, it remains resilient, with a range of opportunities for investors.
One of the most reliable types of real estate in Calgary is commercial and industrial property. Although things have slowed down as a result of the pandemic, the market has been expanding steadily for decades, and the promise is still very present as we approach 2022. Because of this, Calgary's business real estate professionals are both upbeat about the future and still taking things slowly and cautiously.
Here are a few business real estate forecasts for Calgary that will continue to influence our city:
1. Investors are becoming more interested in multi-family homes,
There hasn't been much of a market for business and industrial investment properties so far. Since there has been less demand lately, according to our commercial real estate experts, novice investors have begun searching for alternatives. Enter multi-unit residential buildings. These are frequently quite affordable and offer a consistent stream of rental revenue with little work. They are more appealing than ever thanks to the current real estate market, which has low demand for business properties and high demand for residential buildings. The average price per unit was $200,000 in 2017 and is expected to rise by an estimated 6% annually from 2018 to 2022.
2. A rise in construction's overall expense
Building prices will likely increase slightly as a result of rising construction costs (materials and labour). Some experts have already forecasted that prices will rise on future projects. While construction is still going on, investors are currently being given returns on their investments of roughly 7-9%, which is not at all terrible! These yields won't be as great after construction is complete, though.
3. The cost of commercial real estate will increase.
In the previous five years, prices for business real estate have already risen. And because investors anticipate these prices to rise in the future, they are very alluring to those looking to invest their money in a highly profitable but comparatively low risk venture.
4. Condominiums are displacing conventional workplace buildings.
Over half of all investment properties are anticipated to be condos by 2022 as opposed to commercial or industrial structures. This is because office and industrial buildings generally demand a higher initial investment, as well as the current increased interest among small-time investors who want a higher return.
5. Despite the slowing oil and gas sector, the construction business is still booming.
It won't be shocking if we witness a radical change in the way commercial buildings are built within the next few years given how many businesses in Calgary's oil and gas sector have already struggled to meet demand or even remain afloat. Costs for construction will rise, but there will be a chance for new kinds of contractors, possibly from other sectors like retirement homes because the market may slow down a little bit until O&G gets back into high speed.
6. Considerably fewer retail locations
There will be a lot more innovation in how people buy, which is why it is anticipated that retail spaces will become more scarce and that prices will rise. Within the following few years, this will probably cause Calgary's business real estate prices to increase.
7. More property is available for purchase
Residential areas are now being hybridised with land that was previously only allocated for business uses, such as warehouses and storage facilities. This implies that over the next few years, there will likely be a larger demand for residential structures. Because there will be less space accessible on the market, developers and investors may be forced to pay more for the land on which they will construct their buildings, even though this may not definitely result in an increase in overall prices.
8. The development of the "sharing economy"
One tendency that we believe will materialise within the next five to ten years and that we have already begun to notice. . This not only makes it simpler for novice buyers to enter our local real estate market, but it also allows businesses like Airbnb and Vrbo to pay more, offer greater returns, or even do both!
9. More stringent regulations than ever before
When it comes to Airbnb, this is particularly accurate. To reduce the availability of short-term rentals, many North American cities, including Toronto, have imposed stringent regulations on Airbnb. In order to increase the profitability of business buildings by raising rental prices and lowering vacancy rates, we anticipate Calgary to follow suit. We'll probably have much tighter rules in place by 2022 to stop the number of Airbnb owners from exceeding the number of renters.
Calgary's Commercial Real Estate Market
Calgary's commercial real estate market is diverse, with several submarkets that offer different types of properties. Office space, retail space, industrial warehouses, and multifamily properties are just a few examples. In recent years, Calgary's commercial real estate market has faced some challenges due to the economic downturn caused by the decline in oil and gas prices. However, with the recent recovery in oil prices and the city's diversified economy, the commercial real estate market is showing signs of improvement.
One of the main indicators of the health of the commercial real estate market is the vacancy rate. In Calgary, the overall vacancy rate for office space was 19.1% at the end of 2020, according to the Calgary Real Estate Board. While this may seem high, it's worth noting that this is a significant improvement from 2020, when the vacancy rate was 26.4%. This improvement is expected to continue in 2023, with the Calgary Real Estate Board forecasting a decline in the office vacancy rate to 16.4%.
One of the key factors driving demand for industrial space in Calgary is the growth of the e-commerce industry. With more consumers shopping online than ever before, there is a need for warehouses and distribution centers to store and deliver goods. This has led to increased demand for industrial space, particularly for properties that are close to major transportation routes and population centers.
Another factor that makes Calgary's industrial real estate market attractive to investors is its location at the center of Western Canada's energy industry. Calgary is home to many oil and gas companies, as well as a range of service providers that support the industry. This has led to demand for industrial space for use as storage facilities, workshops, and offices.