Calgary Investment
MarketView
Calgary Investment FOURTH QUARTER 2006
QUICK STATS Change from 4Q05 Total Sales
$2,299.7M
Average $ PSF Total SF Sold
11.4M
Capitalization Rates * The arrows are trend indicators over the specified time period and do not represent a positive or negative value. (e.g., absorption could be negative, but still represent a positive trend over a specified period.)
SALES VOLUMES Downtown Office:
$568.2 M
Suburban Office:
$287.7 M
Industrial:
$371.9 M
Multi-Family Residential:
$478.7 M
Retail:
$593.2 M
Total:
$2,299.7 M
HOT TOPICS • Total dollar increased to $2.3 billion from $1.93 billion in 2005. • Market characterised by strong demand far out-stripping supply in all asset classes. • Downward pressure continues to be exerted on capitalisation rates. • Discrepancy between contract and market rental rates have made Calgary capitalisation rates the lowest in Canada.
www.cbre.ca
As has been the trend during the past several years, the Calgary investment sales market continued to be very strong throughout 2006. The Calgary investment market witnessed an increase in year-over-year sales activity, to $2.3 billion from $1.9 billion, despite recording a decline in the overall number of transactions to 327 transactions from 347 in the previous year. Continuing the trend seen in the Calgary investment market during the recent past, the reason most often attributed for the year-overyear decrease in the overall number of trades but an increase in the dollar-value of those transactions is the continued scarcity of supply coupled with further ‘cap-rate compression’.
population growth in 2005 to 2006, based on the Calgary Civic Census, grew by nearly 36,000 people, with almost 26,000 net in-migrants. The labour market grew by 7.9% in the past year, with employment growth forecasted to be 1.9% in the coming year.
As projected, the most important source of product in 2006 was the ongoing ‘profit-taking’ by private owners of real property, including individuals and real estate syndicators. It is anticipated that this trend will continue throughout 2007 and that the majority of product available throughout the coming year will be provided by that class of owners. As was also anticipated, another ongoing tendancy has been the willingness of institutional As has also been the development in the recent and quasi-institutional investors to increasingly past, institutional investors have continued to broaden the parameters of real estate deemed lead purchaser categories for the acquisition acceptable for acquisition to include the real of best-quality assets of all estate being made available "Investor confidence in the classes. Additionally, due by private vendors. Both of to the continued decline of Calgary and Alberta economies these trends are expected to the yields at which many resulted in the continuation of continue in 2007. investors find accretion resulting from the growing the trend toward strong demand As has historically been the strength of unit pricing case, the product classes for all product classes." of many of the leading experiencing the greatest issuers, significant activity demand will continue be: was also demonstrated by real estate operating trophy office properties in the downtown core; corporations and the REIT’s throughout the regional and grocery-anchored shopping centres; year in virtually all product classes. current-generation industrial buildings with credit tenancies; and, high-rise multi-family residential Continued investor confidence in the rental properties. Due to the anticipated lack of Calgary and Alberta economies resulted availability of such high-demand product, the in the continuation of the move toward continued discrepancy between contract rental strong demand for all product classes. rates and Calgary’s skyrocketing market rental Notwithstanding the softening of the global rates, the increasing availability of product from Oil and Gas market recorded toward the private owners and the increased range of product close of 2006, the Calgary market remained acceptable for acquisition by institutional an quasicomparatively strong throughout the year. institutional purchasers, Calgary market activity in TD Economics has forecasted that Alberta’s 2007 is expected to be comprised of: Class “B” out-performance of the Canadian economy downtown office properties; quality suburban office overall, from the perspective of real GDP buildings; and, shadow-anchored or retail centres growth, was 0.3%, however, noting that or centres having ‘junior’ anchors. nominal GDP growth is a better indicator of the true strength of the Alberta economy, with that The combination of the large discrepancy between number increasing to 1.6% over the rest of the rental rates in-place and the current market rates country. As an example, the GDP growth per together with the continued strong demand with person increased by an amount almost 60.0% limited supply is expected to result in continued higher in Alberta than in the rest of Canada. capitalisation rate compression for the best Additionally, the Province’s net asset position available properties in all asset classes. In many increased by 18.0% while over the same period classes of real estate, internal rate of return metrics the average debt load increased by 20.0% in will increasingly be the most applicable method of the rest of the country. understanding comparable trades in the Calgary market. According to the most-recent Report published by Calgary Economic Development, Calgary’s © 2007 CB Richard Ellis Alberta Limited
CB Richard Ellis | Calgary Investment MarketView | 4Q 2006
Year End 2006 Inventory SF(millions)
Number of Transactions
Downtown Office
31.2
16
Total Sales Volume (millions) $568.2
Suburban Office
14.1
39
Office Total:
45.3
Industrial
Total SF Sold (millions)
Average psf ($)
2.5
$227
$287.7
1.4
$195
55
$855.9
3.9
-
102.3
82
$371.9
3.2
$118
Retail
29.0
67
$593.2
4.3
$269
Subtotal:
176.6
204
$1,821.0
11.4
-
Multi-Family
41,400
70
$478.7
N/A
N/A
Market Total:
-
274
$2,299.7
-
-
Inventory SF (millions)
Number of Transactions
Total Sales Volume ($)
Total SF Sold (millions)
Average psf ($)
Downtown Office
31.2
24
$699.0
3.9
$179
Suburban Office
13.9
51
$312.0
2.0
$141
Office Total:
45.1
75
$1,011.0
5.9
-
Industrial
102.3
95
$236.2
3.1
$88
Retail
29.0
68
$401.1
1.8
$189
Subtotal:
176.4
238
$1,648.3
10.8
-
Multi-Family
41,400
106
$227.7
N/A
N/A
Market Total:
-
344
$1,876.0
-
-
Market
Year End 2005 Market
JOB GROWTH Employment Statistics (Seasonally Adjusted)
10%
400
8%
300
6%
200
4%
2005
2004
0
2003
100
Unemployment Rate
500
2006 675.3
12%
611.6
600
596.2
14%
589.6
700
2002 573.4
# of Jobs (000's)
# of Jobs Calgary Unemployment 2.6% National Unemployment 6.1%
According to Statistics Canada data, the employed labour force in Calgary grew by 17,900 jobs over the previous three months, through to the end of December 2006. The year to date job growth has surpassed 62,000 or just over a 10% annual growth rate for the city and represents 21% of all the job growth registered in all of Canada. An important feature of the job creation in the city is that it was dominated by full-time highly skilled, better paying positions. Calgary’s unemployment rate fell by 1% during the quarter and now stands at 2.6%, the lowest in the country. The national unemployment rate ended 2006 at 6.1%.
2% 0%
Souce: Statistics Canada
© 2007 CB Richard Ellis Alberta Limited
CB Richard Ellis | Calgary Investment MarketView | 4Q 2006
MULTI FAMILY >$1,000,000
OFFICE MARKET >$1,000,000
228 114
183
0
600
856
1,000
960
400 200
A major increase in multi-family transactions took place over 2006. With the continuing trend of strong net migration to Calgary, coupled with increasing cost of home ownership and a low rental pool, multifamily sales grew by 242.0%. Total sales volume saw a major spike in 2006 as more owners realized the trends during the course of 2005 were continuing through 2006. This resulted in an increase in sales from $198.0 million in 2005 to $478.7 million this year. This year’s there were nine major transactions over $10.0 million, four of which were greater than $40.0 million including a 197 suite at 1729 - 90th Avenue SW sold at $40.5 million, the 299 suite Beverly Centre Lake in Midnapore at $60.7 million. A combined group of 15, 35, 47 & 55 Grier Place NE; 742 & 790 Kingsmere Court SW; 525 - 22nd Avenue SW; 606 & 612 - 58th Avenue SW, containing a total of 542 suites at a sale price of $61.7 million and Bromley Square, 357 units, at $63.0 million.
INDUSTRIAL MARKET >$1,000,000
2006
2005
2004
2002
2006
2005
2004
2003
0 2003
100
132
200
800
335
300
1,000
714
400
Total Sales ($ millions)
478
1,200
2002
Total Sales ($ millions)
500
As at the end of the year, only 16 downtown office buildings had sold in Calgary for a total dollar-volume of $568.0 million, or an average of $227.00 psf and a maximum of $407.00 psf. The volume was down over 24.0% from the previous year’s totals. The transactions completed in 2006 totalled 2.4 million SF, or 7.7% of the total current inventory in the City’s downtown core. Of the total transaction volume for the year, the largest single-asset contributors were two sales completed by CB Richard Ellis' National Investment Team – Calgary (NIT – Calgary) including: Palliser Square for $155.0 million; and, Scotia Centre, a 50.0% interest which sold for $100.0 million. Also sold was a three-building Brookfield Portfolio, which also included suburban office buildings, trading for $171.0 million. Thirty nine suburban office buildings traded in 2006. The total dollar-volume was $287.0 million. The average was $195.0 psf. The transactions in 2006 included 1.4 SF of suburban office product, representing the sale of 9.9% of the total inventory utilised by CB Richard Ellis. The most significant trades of the past year were the sales of: Heritage Square for a total of $61.3 million; NIT – Calgary’s sale of the Yellow Pages Building, for $25.9 million; and, Dominion Place for $22.0 million.
RETAIL MARKET >$1,000,000
100 50
300
593
566
401
400
295
150
500
368
200
600
Total Sales ($ millions)
372
250
236
263
300
224
200 100
© 2007 CB Richard Ellis Alberta Limited
2006
2005
2004
2006
2005
2004
2003
2002
The Calgary industrial market recorded a lower number of transactions, but a higher total dollar-value of those transactions as compared to the previous year, with a total of 82 transactions accounting for over 3.9 million SF trading during the past year. The sales of industrial product completed in 2006 equated to almost $372.0 million. The average price per square foot was $118.00. The largest industrial sale transactions were the sales of: the Canadian Tire Distribution Centre, for $101.8 million; the $20.9 million sale of 5664 – 69th Avenue S.E.; and, 5300 - 86th Avenue S.E. for $15.3 million.
2003
0
0
2002
Total Sales ($ millions)
350
363
400
The retail investment sale market was very strong again in 2006, largely due to the continued strength of the retail leasing market, tenant performance and the availability of product in the class. The year was on-pace from the previous year, recording one fewer trade for a total of 67 trades. The total dollar-volume of over $593.0 million exceeded the total for the previous year. The average selling price was $274.00 psf. The transactions completed in 2006 accounted for 4.4 million SF, or 15.2% of the inventory recorded by CB Richard Ellis. The most significant retail trades of the past year were the sales of: SouthTrail Crossing, for $75.1 million; and, the $38.0 million sale by CB Richard Ellis' NIT – Calgary of TransCanada Shopping Centre.
MarketView | Calgary Investment CALGARY CITY MAP
N AT I O N A L I N V E S T M E N T T E A M - C A L G A RY
David Forbes Executive VP - Principal T 403 750 0502
Patrick McFetridge, MBA VP - Principal T 403 750 0515
Geoff Mar, LL.B Associate VP - Principal T 403 750 0512
Ken Westhaver, ACP, MCIP Director, Development Services T 403 750 0509
Ron Dedesko, CFA Director of Financial Analysis T 403 750 0522
Duncan Maclean Financial Analyst T 403 750 0800
Richie Bhamra Financial Analyst T 403 303 4569
Sheila Meyer Project Coordinator T 403 750 0544
© 2007 CB Richard Ellis Alberta Limited. The information contained herein (the “Information”) is intended for informational purposes only and should not be relied upon by recipients hereof. Although the Information is believed to be correct, its accuracy, correctness or completeness cannot be guaranteed and has not been verified by either CB Richard Ellis Limited or any of its affiliates (CB Richard Ellis Limited and its affiliates are collectively referred to herein as “CB Richard Ellis”). CB Richard Ellis neither guarantees, warrants nor assumes any responsibility or liability of any kind with respect to the accuracy, correctness, completeness, or suitability of, or decisions based upon or in connection with, the Information. The recipient of the Information should take such steps as the recipient may deem appropriate with respect to using the Information. The Information may change and any property described herein may be withdrawn from the market at any time without notice or obligation of any kind on the part of CB Richard Ellis. The Information is protected by copyright and shall be fully enforced.
For more information regarding the MarketView, please contact: Mike Gigliuk, Director of Research, Alberta CB Richard Ellis Alberta Limited 500, 530 - 8th Avenue S.W. T2P 3S8 T 403 750 0804 F 403 269 4202 [email protected]
Calgary Investment FOURTH QUARTER 2006
QUICK STATS Change from 4Q05 Total Sales
$2,299.7M
Average $ PSF Total SF Sold
11.4M
Capitalization Rates * The arrows are trend indicators over the specified time period and do not represent a positive or negative value. (e.g., absorption could be negative, but still represent a positive trend over a specified period.)
SALES VOLUMES Downtown Office:
$568.2 M
Suburban Office:
$287.7 M
Industrial:
$371.9 M
Multi-Family Residential:
$478.7 M
Retail:
$593.2 M
Total:
$2,299.7 M
HOT TOPICS • Total dollar increased to $2.3 billion from $1.93 billion in 2005. • Market characterised by strong demand far out-stripping supply in all asset classes. • Downward pressure continues to be exerted on capitalisation rates. • Discrepancy between contract and market rental rates have made Calgary capitalisation rates the lowest in Canada.
www.cbre.ca
As has been the trend during the past several years, the Calgary investment sales market continued to be very strong throughout 2006. The Calgary investment market witnessed an increase in year-over-year sales activity, to $2.3 billion from $1.9 billion, despite recording a decline in the overall number of transactions to 327 transactions from 347 in the previous year. Continuing the trend seen in the Calgary investment market during the recent past, the reason most often attributed for the year-overyear decrease in the overall number of trades but an increase in the dollar-value of those transactions is the continued scarcity of supply coupled with further ‘cap-rate compression’.
population growth in 2005 to 2006, based on the Calgary Civic Census, grew by nearly 36,000 people, with almost 26,000 net in-migrants. The labour market grew by 7.9% in the past year, with employment growth forecasted to be 1.9% in the coming year.
As projected, the most important source of product in 2006 was the ongoing ‘profit-taking’ by private owners of real property, including individuals and real estate syndicators. It is anticipated that this trend will continue throughout 2007 and that the majority of product available throughout the coming year will be provided by that class of owners. As was also anticipated, another ongoing tendancy has been the willingness of institutional As has also been the development in the recent and quasi-institutional investors to increasingly past, institutional investors have continued to broaden the parameters of real estate deemed lead purchaser categories for the acquisition acceptable for acquisition to include the real of best-quality assets of all estate being made available "Investor confidence in the classes. Additionally, due by private vendors. Both of to the continued decline of Calgary and Alberta economies these trends are expected to the yields at which many resulted in the continuation of continue in 2007. investors find accretion resulting from the growing the trend toward strong demand As has historically been the strength of unit pricing case, the product classes for all product classes." of many of the leading experiencing the greatest issuers, significant activity demand will continue be: was also demonstrated by real estate operating trophy office properties in the downtown core; corporations and the REIT’s throughout the regional and grocery-anchored shopping centres; year in virtually all product classes. current-generation industrial buildings with credit tenancies; and, high-rise multi-family residential Continued investor confidence in the rental properties. Due to the anticipated lack of Calgary and Alberta economies resulted availability of such high-demand product, the in the continuation of the move toward continued discrepancy between contract rental strong demand for all product classes. rates and Calgary’s skyrocketing market rental Notwithstanding the softening of the global rates, the increasing availability of product from Oil and Gas market recorded toward the private owners and the increased range of product close of 2006, the Calgary market remained acceptable for acquisition by institutional an quasicomparatively strong throughout the year. institutional purchasers, Calgary market activity in TD Economics has forecasted that Alberta’s 2007 is expected to be comprised of: Class “B” out-performance of the Canadian economy downtown office properties; quality suburban office overall, from the perspective of real GDP buildings; and, shadow-anchored or retail centres growth, was 0.3%, however, noting that or centres having ‘junior’ anchors. nominal GDP growth is a better indicator of the true strength of the Alberta economy, with that The combination of the large discrepancy between number increasing to 1.6% over the rest of the rental rates in-place and the current market rates country. As an example, the GDP growth per together with the continued strong demand with person increased by an amount almost 60.0% limited supply is expected to result in continued higher in Alberta than in the rest of Canada. capitalisation rate compression for the best Additionally, the Province’s net asset position available properties in all asset classes. In many increased by 18.0% while over the same period classes of real estate, internal rate of return metrics the average debt load increased by 20.0% in will increasingly be the most applicable method of the rest of the country. understanding comparable trades in the Calgary market. According to the most-recent Report published by Calgary Economic Development, Calgary’s © 2007 CB Richard Ellis Alberta Limited
CB Richard Ellis | Calgary Investment MarketView | 4Q 2006
Year End 2006 Inventory SF(millions)
Number of Transactions
Downtown Office
31.2
16
Total Sales Volume (millions) $568.2
Suburban Office
14.1
39
Office Total:
45.3
Industrial
Total SF Sold (millions)
Average psf ($)
2.5
$227
$287.7
1.4
$195
55
$855.9
3.9
-
102.3
82
$371.9
3.2
$118
Retail
29.0
67
$593.2
4.3
$269
Subtotal:
176.6
204
$1,821.0
11.4
-
Multi-Family
41,400
70
$478.7
N/A
N/A
Market Total:
-
274
$2,299.7
-
-
Inventory SF (millions)
Number of Transactions
Total Sales Volume ($)
Total SF Sold (millions)
Average psf ($)
Downtown Office
31.2
24
$699.0
3.9
$179
Suburban Office
13.9
51
$312.0
2.0
$141
Office Total:
45.1
75
$1,011.0
5.9
-
Industrial
102.3
95
$236.2
3.1
$88
Retail
29.0
68
$401.1
1.8
$189
Subtotal:
176.4
238
$1,648.3
10.8
-
Multi-Family
41,400
106
$227.7
N/A
N/A
Market Total:
-
344
$1,876.0
-
-
Market
Year End 2005 Market
JOB GROWTH Employment Statistics (Seasonally Adjusted)
10%
400
8%
300
6%
200
4%
2005
2004
0
2003
100
Unemployment Rate
500
2006 675.3
12%
611.6
600
596.2
14%
589.6
700
2002 573.4
# of Jobs (000's)
# of Jobs Calgary Unemployment 2.6% National Unemployment 6.1%
According to Statistics Canada data, the employed labour force in Calgary grew by 17,900 jobs over the previous three months, through to the end of December 2006. The year to date job growth has surpassed 62,000 or just over a 10% annual growth rate for the city and represents 21% of all the job growth registered in all of Canada. An important feature of the job creation in the city is that it was dominated by full-time highly skilled, better paying positions. Calgary’s unemployment rate fell by 1% during the quarter and now stands at 2.6%, the lowest in the country. The national unemployment rate ended 2006 at 6.1%.
2% 0%
Souce: Statistics Canada
© 2007 CB Richard Ellis Alberta Limited
CB Richard Ellis | Calgary Investment MarketView | 4Q 2006
MULTI FAMILY >$1,000,000
OFFICE MARKET >$1,000,000
228 114
183
0
600
856
1,000
960
400 200
A major increase in multi-family transactions took place over 2006. With the continuing trend of strong net migration to Calgary, coupled with increasing cost of home ownership and a low rental pool, multifamily sales grew by 242.0%. Total sales volume saw a major spike in 2006 as more owners realized the trends during the course of 2005 were continuing through 2006. This resulted in an increase in sales from $198.0 million in 2005 to $478.7 million this year. This year’s there were nine major transactions over $10.0 million, four of which were greater than $40.0 million including a 197 suite at 1729 - 90th Avenue SW sold at $40.5 million, the 299 suite Beverly Centre Lake in Midnapore at $60.7 million. A combined group of 15, 35, 47 & 55 Grier Place NE; 742 & 790 Kingsmere Court SW; 525 - 22nd Avenue SW; 606 & 612 - 58th Avenue SW, containing a total of 542 suites at a sale price of $61.7 million and Bromley Square, 357 units, at $63.0 million.
INDUSTRIAL MARKET >$1,000,000
2006
2005
2004
2002
2006
2005
2004
2003
0 2003
100
132
200
800
335
300
1,000
714
400
Total Sales ($ millions)
478
1,200
2002
Total Sales ($ millions)
500
As at the end of the year, only 16 downtown office buildings had sold in Calgary for a total dollar-volume of $568.0 million, or an average of $227.00 psf and a maximum of $407.00 psf. The volume was down over 24.0% from the previous year’s totals. The transactions completed in 2006 totalled 2.4 million SF, or 7.7% of the total current inventory in the City’s downtown core. Of the total transaction volume for the year, the largest single-asset contributors were two sales completed by CB Richard Ellis' National Investment Team – Calgary (NIT – Calgary) including: Palliser Square for $155.0 million; and, Scotia Centre, a 50.0% interest which sold for $100.0 million. Also sold was a three-building Brookfield Portfolio, which also included suburban office buildings, trading for $171.0 million. Thirty nine suburban office buildings traded in 2006. The total dollar-volume was $287.0 million. The average was $195.0 psf. The transactions in 2006 included 1.4 SF of suburban office product, representing the sale of 9.9% of the total inventory utilised by CB Richard Ellis. The most significant trades of the past year were the sales of: Heritage Square for a total of $61.3 million; NIT – Calgary’s sale of the Yellow Pages Building, for $25.9 million; and, Dominion Place for $22.0 million.
RETAIL MARKET >$1,000,000
100 50
300
593
566
401
400
295
150
500
368
200
600
Total Sales ($ millions)
372
250
236
263
300
224
200 100
© 2007 CB Richard Ellis Alberta Limited
2006
2005
2004
2006
2005
2004
2003
2002
The Calgary industrial market recorded a lower number of transactions, but a higher total dollar-value of those transactions as compared to the previous year, with a total of 82 transactions accounting for over 3.9 million SF trading during the past year. The sales of industrial product completed in 2006 equated to almost $372.0 million. The average price per square foot was $118.00. The largest industrial sale transactions were the sales of: the Canadian Tire Distribution Centre, for $101.8 million; the $20.9 million sale of 5664 – 69th Avenue S.E.; and, 5300 - 86th Avenue S.E. for $15.3 million.
2003
0
0
2002
Total Sales ($ millions)
350
363
400
The retail investment sale market was very strong again in 2006, largely due to the continued strength of the retail leasing market, tenant performance and the availability of product in the class. The year was on-pace from the previous year, recording one fewer trade for a total of 67 trades. The total dollar-volume of over $593.0 million exceeded the total for the previous year. The average selling price was $274.00 psf. The transactions completed in 2006 accounted for 4.4 million SF, or 15.2% of the inventory recorded by CB Richard Ellis. The most significant retail trades of the past year were the sales of: SouthTrail Crossing, for $75.1 million; and, the $38.0 million sale by CB Richard Ellis' NIT – Calgary of TransCanada Shopping Centre.
MarketView | Calgary Investment CALGARY CITY MAP
N AT I O N A L I N V E S T M E N T T E A M - C A L G A RY
David Forbes Executive VP - Principal T 403 750 0502
Patrick McFetridge, MBA VP - Principal T 403 750 0515
Geoff Mar, LL.B Associate VP - Principal T 403 750 0512
Ken Westhaver, ACP, MCIP Director, Development Services T 403 750 0509
Ron Dedesko, CFA Director of Financial Analysis T 403 750 0522
Duncan Maclean Financial Analyst T 403 750 0800
Richie Bhamra Financial Analyst T 403 303 4569
Sheila Meyer Project Coordinator T 403 750 0544
© 2007 CB Richard Ellis Alberta Limited. The information contained herein (the “Information”) is intended for informational purposes only and should not be relied upon by recipients hereof. Although the Information is believed to be correct, its accuracy, correctness or completeness cannot be guaranteed and has not been verified by either CB Richard Ellis Limited or any of its affiliates (CB Richard Ellis Limited and its affiliates are collectively referred to herein as “CB Richard Ellis”). CB Richard Ellis neither guarantees, warrants nor assumes any responsibility or liability of any kind with respect to the accuracy, correctness, completeness, or suitability of, or decisions based upon or in connection with, the Information. The recipient of the Information should take such steps as the recipient may deem appropriate with respect to using the Information. The Information may change and any property described herein may be withdrawn from the market at any time without notice or obligation of any kind on the part of CB Richard Ellis. The Information is protected by copyright and shall be fully enforced.
For more information regarding the MarketView, please contact: Mike Gigliuk, Director of Research, Alberta CB Richard Ellis Alberta Limited 500, 530 - 8th Avenue S.W. T2P 3S8 T 403 750 0804 F 403 269 4202 [email protected]
