Calgary’s commercial real estate market rebounded strongly in the first quarter of the year, but economic headwinds, only some of which stem from the pandemic, persisted in Edmonton, where investment nearly halved compared to Q1-2020, says a new report from Altus Group.
Buoyed by marked increases of first dose vaccinations throughout the province, which spurred optimistic discussions about reopening the economy, there were 162 transactions in Calgary’s commercial real estate market in Q1-2021, totalling $910 million and increasing by 22% year-over-year. The industrial and land sectors—the former saw 48 transactions worth $195 million, although that was mostly flat compared to the year prior but 49% higher than Q4-2020—in particular, were robust through the first quarter of the year, despite being mostly driven by local capital, and Altus believes that will culminate in a strong H1-2021. But the picture is blighted by major institutional stakeholders’ reluctance to invest in the city.
Additionally, Calgary’s land sector performed brilliantly in Q1, as ICI residential land transactions comprised 46% of all investment. The retail sector also bounced back during the first quarter with 28 transactions worth $141 million—almost three times higher than investment in the first quarter of 2020—however, there were a paltry six transactions worth $29 million in the office sector, where workers were largely absent, for an 80% year-over-year decline.
“Even as investors have learned to navigate and reassess risk in this new investment environment, large institutional investors have remained tepid towards Calgary under current conditions,” said the report. “This does not appear to be the case in Toronto and Vancouver, where commercial real estate demand has rebounded strongly.”
In the Albertan capital, there were nascent signs of recovery in Q1-2021, but Edmonton’s sputtering economy was the reason there were only 126 transactions, totalling $584 million, in the city’s commercial real estate market, marking a 45% decrease from the first quarter of last year. While Altus noted that the spike in vaccinations has led to more a promising outlook in which the economy reopens—although it’s unsure what that will look like—there’s a noticeable paucity of institutional capital invested in the city, and without it Edmonton’s commercial real estate market will keep limping.
Most of the activity during Q1 was in the industrial, multifamily and land sectors. Industrial and apartment comprised 47% of total activity, and the ICI and residential land asset classes amounted to 36%. There were 40 transactions in the industrial sector worth $157 million, increasing by 15% year-over-year, while the apartment sector, at 15 transactions totalling $116 million, declined by 78% compared to Q1-2020.
The office and retail sectors were ravaged by the pandemic-related shutdowns, with the former recording 11 transactions in Q1 worth $48 million and declining by 61% from the previous quarter but surging by 180% year-over-year, and the latter seeing transactions decline by 63% year-over-year to 16, which totalled $42 million.
“Even as investors have learned to navigate and reassess risk in this new environment, large institutional investors have remained tepid towards regions across Alberta under current conditions.”