2Q11 CALGARY INDUSTRIAL REPORT
CALGARY INDUSTRIAL REPORT 2Q11 ECONOMY
BEAT ON THE STREET
While economists talk about domestic household and government belt tightening, and while overarching international issues are slowing Canada’s economic recovery, Calgary’s industrial real estate market is experiencing a continuing, robust recovery. Higher natural resource export volumes combined with high conventional and heavy oil prices continue to drive the Alberta economy. While a slower US economy and additional external economic factors may cast a shadow over the economic outlook, the energy sector is directly and positively impacting industrial absorption in Calgary now. Major distribution, logistic and retail players are drawn to the region as a result of the dynamic growth and increasing employment driven by the energy sector. As a growing city, Calgary is under serviced in retail distribution.
“The momentum of Calgary's industrial market continues to build through 2011. Greater interest and activity has been experienced in almost all segments as confidence in our market grows.” - Brent Johannesen, Vice President, Industrial Sales & Leasing
ECONOMIC INDICATORS
OVERVIEW
GDP Growth
2010 3.3%
2011F 4.3%
2012F 3.8%
Second quarter land sales, leasing activity, new development and big box retail and distribution transactions all indicate a vibrant marketplace. Leasing activity of more than 1.5 million square feet (sf) has led to positive absorption of just over 450,000 sf in the quarter and a decline in the vacancy rate to 4.1% from 4.5% one quarter ago. This represents the seventh straight quarter of declining vacancy. Leasing activity has been steady in all geographic submarkets. Large bay supply is becoming increasingly tight and activity has been steadily reducing small and mid-bay inventory. Strong demand for land continued in the second quarter, and existing supply in the city has been reduced. Considerable opportunity exists for development, particularly on the QEII corridor north of the city limits and east of 84th street, where stronger supply is addressing growing demand for land. Lease rates are slowly and steadily increasing as expected, given the supply and demand relationship, and equally expected is the decrease in variance between asking and achieved rates. It is precisely these conditions that have led to the new construction announcements and the land servicing activity by some of the major industrial developers and asset managers, both in the Northeast and outlying areas such as WAM, Oxford, Hopewell and Bentall Kennedy.
CPI Growth
1.0%
1.8%
1.8%
Unemployment
6.5%
5.9%
5.5%
-0.4%
2.6%
2.6%
12,158
12,950
N/A
Employment Growth Wells Drilled
Source: Royal Bank of Canada, PSAC
MARKET FORECAST ABSORPTION will continue to rise as the economy continues to recover. VACANCY RATES will decline gradually until new developments come online. LEASE RATES are expected to increase gradually through the year.
CONSTRUCTION COMPLETIONS
OUTLOOK
CALGARY INDUSTRIAL REPORT 2Q11
4 3 msf/yr
The momentum of Calgary's industrial market will continue to build. Greater interest and activity has been experienced in almost all segments as confidence in this market grows. Transaction completions in leasing, sales and land sales will continue through the third quarter and result in ever-tightening inventories across all geographies, classes, and building sizes. Industrial tenants with current or upcoming requirements are advised to seek brokerage guidance in order to create even minimal leverage as options decrease and as markets continue to swing in favor of landlords with respect to rates. The variance between asking and actual achieved rates will continue to decrease until supply is able to relieve some of the upward pressure on rental rates.
2 1 0
1
CALGARY INDUSTRIAL REPORT 2Q11
MARKET/SUBMARKET STATISTICS Market/Submarket Northeast Southeast Central TOTAL
Inventory 32,801,409
Overall Vacancy Rate 5.4%
Q2 Leasing Activity 558,764
Under Construction 1,121,000
Q2 Construction Completions 0
Q2 Overall Absorption 82,635
Direct Weighted Average Asking Net Rental Rate* $8.60
49,711,075
4.2%
756,347
29,000
0
275,440
$7.22
25,294,218
2.2%
191,824
0
0
99,741
$8.23
107,806,702
4.1%
1,506,935
1,150,000
0
457,816
$7.82
*Rental rates reflect average asking net rent $psf/year
MARKET HIGHLIGHTS SIGNIFICANT 2Q11 NEW LEASE TRANSACTIONS BUILDING
SUBMARKET
TENANT
SQ FT
BLDG CLASS
5543 72nd Avenue SE
Southeast
Rona Retail Canada Inc
143,000
Warehouse/Distribution
705 East Lake Road NE
Northeast
Mirolin Industries Inc.
141,500
Warehouse/Distribution
Northeast
Field Aviation
77,000
Warehouse/Distribution
th
4300 26 Street NE
SIGNIFICANT 2Q11 SALE TRANSACTIONS BUILDING
SUBMARKET
BUYER
Ramsay Crossing
Southeast
The City of Calgary
SQ FT
PURCHASE PRICE
196,243
$26,000,000
1939 Centre Avenue SE
Southeast
1826 25th Avenue NE
Northeast
Mancal Industrial Developments Inc
88,608
$5,700,000
Camargue Properties Inc.
45,984
$4,439,000
SQ FT
COMPLETION DATE
SQ FT
COMPLETION DATE
SIGNIFICANT 2Q11 CONSTRUCTION COMPLETIONS BUILDING
SUBMARKET
DEVELOPER / OWNER
N/A
SIGNIFICANT PROJECTS UNDER CONSTRUCTION BUILDING
SUBMARKET
DEVELOPER
11900 18 Street NE
Northeast
WAM Development Group
435,000
Q4/11
1620 Airport Trail NE- Building „F‟
Northeast
Oxford Properties Group
395,000
Q2/12
1620 Airport Trail NE- Building „B1‟
Northeast
Oxford Properties Group
141,000
Q2/12
10710 25th Street NE
Northeast
Hopewell Development Corporation
150,000
Q4/11
th
For industry-leading intelligence to support your real estate and business decisions, go to Cushman & Wakefield‟s Knowledge Center at www.cushmanwakefield.com/knowledge Cushman & Wakefield Ltd. Suncor Energy Centre 111-5th Avenue SW, Suite 1730 Calgary, AB T2P 3Y6 (403) 261-1111
This report contains information available to the public and has been relied upon by Cushman & Wakefield Ltd. on the basis that it is accurate and complete. Cushman & Wakefield Ltd. accepts no responsibility if this should prove not to be the case. No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed by our principals. ©2011 Cushman & Wakefield Ltd. All rights reserved.
BEAT ON THE STREET
While economists talk about domestic household and government belt tightening, and while overarching international issues are slowing Canada’s economic recovery, Calgary’s industrial real estate market is experiencing a continuing, robust recovery. Higher natural resource export volumes combined with high conventional and heavy oil prices continue to drive the Alberta economy. While a slower US economy and additional external economic factors may cast a shadow over the economic outlook, the energy sector is directly and positively impacting industrial absorption in Calgary now. Major distribution, logistic and retail players are drawn to the region as a result of the dynamic growth and increasing employment driven by the energy sector. As a growing city, Calgary is under serviced in retail distribution.
“The momentum of Calgary's industrial market continues to build through 2011. Greater interest and activity has been experienced in almost all segments as confidence in our market grows.” - Brent Johannesen, Vice President, Industrial Sales & Leasing
ECONOMIC INDICATORS
OVERVIEW
GDP Growth
2010 3.3%
2011F 4.3%
2012F 3.8%
Second quarter land sales, leasing activity, new development and big box retail and distribution transactions all indicate a vibrant marketplace. Leasing activity of more than 1.5 million square feet (sf) has led to positive absorption of just over 450,000 sf in the quarter and a decline in the vacancy rate to 4.1% from 4.5% one quarter ago. This represents the seventh straight quarter of declining vacancy. Leasing activity has been steady in all geographic submarkets. Large bay supply is becoming increasingly tight and activity has been steadily reducing small and mid-bay inventory. Strong demand for land continued in the second quarter, and existing supply in the city has been reduced. Considerable opportunity exists for development, particularly on the QEII corridor north of the city limits and east of 84th street, where stronger supply is addressing growing demand for land. Lease rates are slowly and steadily increasing as expected, given the supply and demand relationship, and equally expected is the decrease in variance between asking and achieved rates. It is precisely these conditions that have led to the new construction announcements and the land servicing activity by some of the major industrial developers and asset managers, both in the Northeast and outlying areas such as WAM, Oxford, Hopewell and Bentall Kennedy.
CPI Growth
1.0%
1.8%
1.8%
Unemployment
6.5%
5.9%
5.5%
-0.4%
2.6%
2.6%
12,158
12,950
N/A
Employment Growth Wells Drilled
Source: Royal Bank of Canada, PSAC
MARKET FORECAST ABSORPTION will continue to rise as the economy continues to recover. VACANCY RATES will decline gradually until new developments come online. LEASE RATES are expected to increase gradually through the year.
CONSTRUCTION COMPLETIONS
OUTLOOK
CALGARY INDUSTRIAL REPORT 2Q11
4 3 msf/yr
The momentum of Calgary's industrial market will continue to build. Greater interest and activity has been experienced in almost all segments as confidence in this market grows. Transaction completions in leasing, sales and land sales will continue through the third quarter and result in ever-tightening inventories across all geographies, classes, and building sizes. Industrial tenants with current or upcoming requirements are advised to seek brokerage guidance in order to create even minimal leverage as options decrease and as markets continue to swing in favor of landlords with respect to rates. The variance between asking and actual achieved rates will continue to decrease until supply is able to relieve some of the upward pressure on rental rates.
2 1 0
1
CALGARY INDUSTRIAL REPORT 2Q11
MARKET/SUBMARKET STATISTICS Market/Submarket Northeast Southeast Central TOTAL
Inventory 32,801,409
Overall Vacancy Rate 5.4%
Q2 Leasing Activity 558,764
Under Construction 1,121,000
Q2 Construction Completions 0
Q2 Overall Absorption 82,635
Direct Weighted Average Asking Net Rental Rate* $8.60
49,711,075
4.2%
756,347
29,000
0
275,440
$7.22
25,294,218
2.2%
191,824
0
0
99,741
$8.23
107,806,702
4.1%
1,506,935
1,150,000
0
457,816
$7.82
*Rental rates reflect average asking net rent $psf/year
MARKET HIGHLIGHTS SIGNIFICANT 2Q11 NEW LEASE TRANSACTIONS BUILDING
SUBMARKET
TENANT
SQ FT
BLDG CLASS
5543 72nd Avenue SE
Southeast
Rona Retail Canada Inc
143,000
Warehouse/Distribution
705 East Lake Road NE
Northeast
Mirolin Industries Inc.
141,500
Warehouse/Distribution
Northeast
Field Aviation
77,000
Warehouse/Distribution
th
4300 26 Street NE
SIGNIFICANT 2Q11 SALE TRANSACTIONS BUILDING
SUBMARKET
BUYER
Ramsay Crossing
Southeast
The City of Calgary
SQ FT
PURCHASE PRICE
196,243
$26,000,000
1939 Centre Avenue SE
Southeast
1826 25th Avenue NE
Northeast
Mancal Industrial Developments Inc
88,608
$5,700,000
Camargue Properties Inc.
45,984
$4,439,000
SQ FT
COMPLETION DATE
SQ FT
COMPLETION DATE
SIGNIFICANT 2Q11 CONSTRUCTION COMPLETIONS BUILDING
SUBMARKET
DEVELOPER / OWNER
N/A
SIGNIFICANT PROJECTS UNDER CONSTRUCTION BUILDING
SUBMARKET
DEVELOPER
11900 18 Street NE
Northeast
WAM Development Group
435,000
Q4/11
1620 Airport Trail NE- Building „F‟
Northeast
Oxford Properties Group
395,000
Q2/12
1620 Airport Trail NE- Building „B1‟
Northeast
Oxford Properties Group
141,000
Q2/12
10710 25th Street NE
Northeast
Hopewell Development Corporation
150,000
Q4/11
th
For industry-leading intelligence to support your real estate and business decisions, go to Cushman & Wakefield‟s Knowledge Center at www.cushmanwakefield.com/knowledge Cushman & Wakefield Ltd. Suncor Energy Centre 111-5th Avenue SW, Suite 1730 Calgary, AB T2P 3Y6 (403) 261-1111
This report contains information available to the public and has been relied upon by Cushman & Wakefield Ltd. on the basis that it is accurate and complete. Cushman & Wakefield Ltd. accepts no responsibility if this should prove not to be the case. No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed by our principals. ©2011 Cushman & Wakefield Ltd. All rights reserved.
