Calgary Industrial Report Q4 2010
Calgary Industrial Report Q4 2010
West LRT Construction
Tel: 403 508 1215
www.dtzbarnicke.com
Calgary Industrial Report Q4 2010 Calgary Industrial: Year in Review
In the fourth quarter of 2010 the overall industrial vacancy rate in Calgary continued to decline. The most dramatic change was in the larger bay distribution market. Calgary has seen an increase Change from in activity and demand for property in this category of 50,000 Q4 2010 Q4 2009 square feet and greater. DTZ Barnicke is currently tracking only Total Industrial 16 available options in this category (see Table 1.0). By contrast, in 6,412,992 sq ft Space Available early 2009 there were as many as 30 options in this size range. The competition for tenants has been stiff with the ability for landlords Vacancy Rate 5.11% to reduce their portfolio’s exposure to vacancy by one or two large transactions. This dramatically effected rates, inducements and Absorption (2010) 2,020,888 sq ft incentives in this category. Rates from the recent transactions in Improvement in demand strength, stabilizing rental rates and the this category are $1.20-$2.00 psf less than those deals completed eroding availability of quality space was the story in the Calgary near the peak of the market. industrial market in 2010. The year marked a turning point in most The dramatic shift and change in availability and lease rates have major markets across Canada as demand experienced further not been as significant in the other size categories. Generally, the increases. While positive news, the recovery from the global numbers have remained more consistent throughout the cycle. recession for most companies has been slow and protracted. As the new year begins, the portfolios of industrial real estate Calgary’s industrial market has seen demand for space improve are looking stronger and more stable than last year. Rates are recently and seems to be gaining momentum. The vacancy rate expected to climb because of the improved economic conditions. decreased from 6.34% at the beginning of the year to 5.11% at Higher rental rates along with substantially reduced construction year end. The amount of sublease space on the market has also cost will push new industrial development projects. been reduced, currently totalling 14.2% of all available space in the The land north of the Calgary International Airport has seen a lot of city. Net absorption for the year was positive at 2,020,888 sq ft changes and preparation for the next phase of this development. while rental rates have stabilized. WAM Development Group will kick off Building 4 (totalling 436,000 sq ft) at Stonegate Landing while Oxford Properties Group has Ratio of Space by Lease Type recently announced the development of a major industrial park in the area, starting with the construction of two buildings consisting 85.8% of approximately 600,000 sq ft. Hopewell Development Corp is also going ahead with the construction of Building D, totalling 148,280 sq ft, in Phase II of Hopewell Airport Park.
Table 1.0: Large Bay Availabilities (50,000 sq ft+) 14.2%
Street Address
Sublease sq ft
Headlease sq ft
Average Gross Rental Rate (Asking) $16.00 $14.00 $12.00
$3.66 $3.66
$4.54 $9.91
$8.00
$10.35 $10.35
$3.68 $8.25
$3.90 $3.90
$2.62
$8.25
$8.25
$6.89
$6.00
$10.18 $10.18
$3.68 $3.68
$3.06 $3.06 $8.63
$8.63
$2.16 $2.16 $6.29
$6.29
$1.75 $1.75
$4.00
Northeast Northeast
SoutheastSoutheast
10-50k 10-50k sq ftft sq
0-10k 0-10k sq sq ft
50k+ 50k+ sq sq ftft
10-50k 10-50k sq ftft sq
0-10k 0-10k sq sq ft ft
50k+ sq ft
10-50k
$4.25
50k+ sq ft sq ft
$0.00
0-10k sq ft
$2.00
$4.40 $4.40
50k+ 50k+ sq sqftft
$10.00
CentralCentral
Rate • Op Costs • • OpNet Net Rate • Op CostsNortheast • Net Rate Net • Op Costs Central Costs
Calgary Industrial Report Q4 2010
15/31, 5353 50 Street SE 2728 Hopewell Place NE 415 Manitou Drive SE 5505-5543 72 Avenue SE (Building A) 401 33 Street SE 4447 46 Avenue SE 901 57 Avenue NE 1-9, 4020 9 Street SE 1727 120 Avenue NE (Building 3) 11195 42 Street SE 4623 52 Avenue SE (Building A)
Available Size (Sq ft) 192,858 128,544 121,622
Sector South East North East South East
116,230
South East
115,000 99,832 99,000 81,840
North East South East North East Central
80,000
North East
78,294
South East
76,810
South East
Calgary Industrial Report Q4 2010 Industrial Lease Rates
Land SalesActivity Activity
•
Rates stabilized this quarter with greater leasing activity.
•
•
Continued upward pressure on lease rates in the Calgary industrial market is projected as products get absorbed.
A total of 37 industrial transactions were tracked representing a dollar volume of $111,678,856 for Q4 2010.
•
An average price of $168 psf was recorded for all transactions for the year.
•
The purchasing of ING Real Estate Canada’s portfolio by KingSett Capital Inc. (which comprised of over 8 million square feet in Calgary and Edmonton) made up the majority of industrial building sales this quarter.
City wide and across the board rental rates are down an average of $0.30-$0.50 psf/year when compared to last years fourth quarter.
Land Land Activity Sales
Investment in Industrial Real Estate
Sales of Fully Serviced Industrial Land
$500,962
Total Sales
24
Total Land Area (Acres)
15
65.60 2.73
30 20 10
•
The average size of transaction in 2010 was reduced to 2.73 acres.
Vacancy and Industrial Inventory
Total Dollar Volume
5.00%
1,175
4.00% 1,165
3.00%
Vacancy Rate
6.00%
2.00%
1,155
•
The estimated construction value of all building permits in 2010 was $3,093,401,986, a 20% increase from $3,885,185,696 in 2009.
•
The estimated construction value of industrial building permits in Calgary were $104,854,799, a 52% increase from $69,136,514 in 2009.
•
The number of industrial building permits was up by about 12%, with 219 permits issued in 2010 compared to 195 in 2009.
Dollar Value of Industrial Permits
1.00% 1,145
0.00% Q3 09
Q4 09
Q1 2010
Industrial Inventory
Q2 2010
Q3 2010
Q4 2010
Vacancy Rate
The industrial vacancy rates continues to drop as buildings get absorbed and little product is added to inventory. There is anticipation of new industrial development as lease rates get pushed higher into 2011.
$140,000,000
70
$120,000,000
60
$100,000,000
50
$80,000,000
40
$60,000,000
30
$40,000,000
20
$20,000,000
10 0
$0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 07 07 07 07 08 08 08 08 09 09 09 09 10 10 10 10 $ Value of Industrial Permits
Calgary Industrial Report Q4 2010
Transaction Count
Building Permits
7.00% 1,185
0 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 07 07 07 08 08 08 08 09 09 09 09 10 10 10 10
There was a 60% increase in the number of land transactions.
Industrial Inventory (100,000 sq ft)
40
200
3.32
•
•
50
300
100
The price of land increased in 2010 to an average of $563,249/ acre.
•
60 400
49.82
•
Q2 09
70
500
0
Average Land Area (Acres)
Q1 09
80
# of Industrial Permits
Number of industrial permits
$563,249
600 Total Dollar Volume ($1,000,000)
Land Sales 2009
Transaction Count
Price (Per Acre)
Land Sales 2010
Dollar value of industrial permits
•
Calgary Industrial Report Q4 2010 Industrial Building Sales - Q4 2010 Purchaser
Size
Price
Price/sq ft
Lot Size
7140 40th Street SE
KingSett Capital Inc.
353,565 sq ft
$30,084,923
$85
13.83 acres
11 Dufferin Place SE
KingSett Capital Inc.
99,202 sq ft
$14,387,568
$71
8.01 acres
2820 7th Avenue NE
KingSett Capital Inc.
143,154 sq ft
$12,075,865
$84
7.85 acres
3905 29th Street NE
Artis REIT
95,542 sq ft
$7,600,000
$80
5.00 acres
6835 8th Street NE
Loring Tarcore Labs
38,522 sq ft
$5,100,000
$132
3.03 acres
6939 Fisher Road SE
Canada Post Corp.
33,796 sq ft
$5,100,000
$151
2.00 acres
6213 29th Street SE
DDMB Industries Ltd.
38,940 sq ft
$4,900,000
$134
3.69 acres
225 58th Avenue SE
DDMB Industries Ltd.
33,672 sq ft
$4,600,000
$137
1.87 acres
Address
DTZ Barnicke Industrial Team Brent Johannesen Senior Vice President [email protected] Direct Tel: 403 508 6470 Kyle Whitehead Industrial Research Coordinator [email protected] Direct Tel: 403 517 2660 DTZ Barnicke 1410 - 715 Fifth Avenue SW Calgary, Alberta, Canada T2P 2X6 Tel: 403 508 1215 Toll Free: 1 866 508 1215 Fax: 403 508 2675 www.dtzbarnicke.com Disclaimer This report should not be relied upon as a basis for entering into transactions without seeking specific, qualified, professional advice. Whilst facts have been rigorously checked, DTZ Barnicke can take no responsibility for any damage or loss suffered as a result of any inadvertent inaccuracy within this report. Information contained herein should not, in whole or part, be published, reproduced or referred to without prior approval. Any such reproduction should be credited to DTZ Barnicke. © DTZ Barnicke Limited, Real Estate Brokerage 2010
Calgary Industrial Report Q4 2010
West LRT Construction
Tel: 403 508 1215
www.dtzbarnicke.com
Calgary Industrial Report Q4 2010 Calgary Industrial: Year in Review
In the fourth quarter of 2010 the overall industrial vacancy rate in Calgary continued to decline. The most dramatic change was in the larger bay distribution market. Calgary has seen an increase Change from in activity and demand for property in this category of 50,000 Q4 2010 Q4 2009 square feet and greater. DTZ Barnicke is currently tracking only Total Industrial 16 available options in this category (see Table 1.0). By contrast, in 6,412,992 sq ft Space Available early 2009 there were as many as 30 options in this size range. The competition for tenants has been stiff with the ability for landlords Vacancy Rate 5.11% to reduce their portfolio’s exposure to vacancy by one or two large transactions. This dramatically effected rates, inducements and Absorption (2010) 2,020,888 sq ft incentives in this category. Rates from the recent transactions in Improvement in demand strength, stabilizing rental rates and the this category are $1.20-$2.00 psf less than those deals completed eroding availability of quality space was the story in the Calgary near the peak of the market. industrial market in 2010. The year marked a turning point in most The dramatic shift and change in availability and lease rates have major markets across Canada as demand experienced further not been as significant in the other size categories. Generally, the increases. While positive news, the recovery from the global numbers have remained more consistent throughout the cycle. recession for most companies has been slow and protracted. As the new year begins, the portfolios of industrial real estate Calgary’s industrial market has seen demand for space improve are looking stronger and more stable than last year. Rates are recently and seems to be gaining momentum. The vacancy rate expected to climb because of the improved economic conditions. decreased from 6.34% at the beginning of the year to 5.11% at Higher rental rates along with substantially reduced construction year end. The amount of sublease space on the market has also cost will push new industrial development projects. been reduced, currently totalling 14.2% of all available space in the The land north of the Calgary International Airport has seen a lot of city. Net absorption for the year was positive at 2,020,888 sq ft changes and preparation for the next phase of this development. while rental rates have stabilized. WAM Development Group will kick off Building 4 (totalling 436,000 sq ft) at Stonegate Landing while Oxford Properties Group has Ratio of Space by Lease Type recently announced the development of a major industrial park in the area, starting with the construction of two buildings consisting 85.8% of approximately 600,000 sq ft. Hopewell Development Corp is also going ahead with the construction of Building D, totalling 148,280 sq ft, in Phase II of Hopewell Airport Park.
Table 1.0: Large Bay Availabilities (50,000 sq ft+) 14.2%
Street Address
Sublease sq ft
Headlease sq ft
Average Gross Rental Rate (Asking) $16.00 $14.00 $12.00
$3.66 $3.66
$4.54 $9.91
$8.00
$10.35 $10.35
$3.68 $8.25
$3.90 $3.90
$2.62
$8.25
$8.25
$6.89
$6.00
$10.18 $10.18
$3.68 $3.68
$3.06 $3.06 $8.63
$8.63
$2.16 $2.16 $6.29
$6.29
$1.75 $1.75
$4.00
Northeast Northeast
SoutheastSoutheast
10-50k 10-50k sq ftft sq
0-10k 0-10k sq sq ft
50k+ 50k+ sq sq ftft
10-50k 10-50k sq ftft sq
0-10k 0-10k sq sq ft ft
50k+ sq ft
10-50k
$4.25
50k+ sq ft sq ft
$0.00
0-10k sq ft
$2.00
$4.40 $4.40
50k+ 50k+ sq sqftft
$10.00
CentralCentral
Rate • Op Costs • • OpNet Net Rate • Op CostsNortheast • Net Rate Net • Op Costs Central Costs
Calgary Industrial Report Q4 2010
15/31, 5353 50 Street SE 2728 Hopewell Place NE 415 Manitou Drive SE 5505-5543 72 Avenue SE (Building A) 401 33 Street SE 4447 46 Avenue SE 901 57 Avenue NE 1-9, 4020 9 Street SE 1727 120 Avenue NE (Building 3) 11195 42 Street SE 4623 52 Avenue SE (Building A)
Available Size (Sq ft) 192,858 128,544 121,622
Sector South East North East South East
116,230
South East
115,000 99,832 99,000 81,840
North East South East North East Central
80,000
North East
78,294
South East
76,810
South East
Calgary Industrial Report Q4 2010 Industrial Lease Rates
Land SalesActivity Activity
•
Rates stabilized this quarter with greater leasing activity.
•
•
Continued upward pressure on lease rates in the Calgary industrial market is projected as products get absorbed.
A total of 37 industrial transactions were tracked representing a dollar volume of $111,678,856 for Q4 2010.
•
An average price of $168 psf was recorded for all transactions for the year.
•
The purchasing of ING Real Estate Canada’s portfolio by KingSett Capital Inc. (which comprised of over 8 million square feet in Calgary and Edmonton) made up the majority of industrial building sales this quarter.
City wide and across the board rental rates are down an average of $0.30-$0.50 psf/year when compared to last years fourth quarter.
Land Land Activity Sales
Investment in Industrial Real Estate
Sales of Fully Serviced Industrial Land
$500,962
Total Sales
24
Total Land Area (Acres)
15
65.60 2.73
30 20 10
•
The average size of transaction in 2010 was reduced to 2.73 acres.
Vacancy and Industrial Inventory
Total Dollar Volume
5.00%
1,175
4.00% 1,165
3.00%
Vacancy Rate
6.00%
2.00%
1,155
•
The estimated construction value of all building permits in 2010 was $3,093,401,986, a 20% increase from $3,885,185,696 in 2009.
•
The estimated construction value of industrial building permits in Calgary were $104,854,799, a 52% increase from $69,136,514 in 2009.
•
The number of industrial building permits was up by about 12%, with 219 permits issued in 2010 compared to 195 in 2009.
Dollar Value of Industrial Permits
1.00% 1,145
0.00% Q3 09
Q4 09
Q1 2010
Industrial Inventory
Q2 2010
Q3 2010
Q4 2010
Vacancy Rate
The industrial vacancy rates continues to drop as buildings get absorbed and little product is added to inventory. There is anticipation of new industrial development as lease rates get pushed higher into 2011.
$140,000,000
70
$120,000,000
60
$100,000,000
50
$80,000,000
40
$60,000,000
30
$40,000,000
20
$20,000,000
10 0
$0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 07 07 07 07 08 08 08 08 09 09 09 09 10 10 10 10 $ Value of Industrial Permits
Calgary Industrial Report Q4 2010
Transaction Count
Building Permits
7.00% 1,185
0 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 07 07 07 08 08 08 08 09 09 09 09 10 10 10 10
There was a 60% increase in the number of land transactions.
Industrial Inventory (100,000 sq ft)
40
200
3.32
•
•
50
300
100
The price of land increased in 2010 to an average of $563,249/ acre.
•
60 400
49.82
•
Q2 09
70
500
0
Average Land Area (Acres)
Q1 09
80
# of Industrial Permits
Number of industrial permits
$563,249
600 Total Dollar Volume ($1,000,000)
Land Sales 2009
Transaction Count
Price (Per Acre)
Land Sales 2010
Dollar value of industrial permits
•
Calgary Industrial Report Q4 2010 Industrial Building Sales - Q4 2010 Purchaser
Size
Price
Price/sq ft
Lot Size
7140 40th Street SE
KingSett Capital Inc.
353,565 sq ft
$30,084,923
$85
13.83 acres
11 Dufferin Place SE
KingSett Capital Inc.
99,202 sq ft
$14,387,568
$71
8.01 acres
2820 7th Avenue NE
KingSett Capital Inc.
143,154 sq ft
$12,075,865
$84
7.85 acres
3905 29th Street NE
Artis REIT
95,542 sq ft
$7,600,000
$80
5.00 acres
6835 8th Street NE
Loring Tarcore Labs
38,522 sq ft
$5,100,000
$132
3.03 acres
6939 Fisher Road SE
Canada Post Corp.
33,796 sq ft
$5,100,000
$151
2.00 acres
6213 29th Street SE
DDMB Industries Ltd.
38,940 sq ft
$4,900,000
$134
3.69 acres
225 58th Avenue SE
DDMB Industries Ltd.
33,672 sq ft
$4,600,000
$137
1.87 acres
Address
DTZ Barnicke Industrial Team Brent Johannesen Senior Vice President [email protected] Direct Tel: 403 508 6470 Kyle Whitehead Industrial Research Coordinator [email protected] Direct Tel: 403 517 2660 DTZ Barnicke 1410 - 715 Fifth Avenue SW Calgary, Alberta, Canada T2P 2X6 Tel: 403 508 1215 Toll Free: 1 866 508 1215 Fax: 403 508 2675 www.dtzbarnicke.com Disclaimer This report should not be relied upon as a basis for entering into transactions without seeking specific, qualified, professional advice. Whilst facts have been rigorously checked, DTZ Barnicke can take no responsibility for any damage or loss suffered as a result of any inadvertent inaccuracy within this report. Information contained herein should not, in whole or part, be published, reproduced or referred to without prior approval. Any such reproduction should be credited to DTZ Barnicke. © DTZ Barnicke Limited, Real Estate Brokerage 2010
Calgary Industrial Report Q4 2010
