While demand slowed in Q4 2023, there are numerous signs that demand has increased through Q2 2024. Demand has slowed due to many factors that would include the continuation of high interest rates, a slow down in the trend of consumer spending, and consumers choosing to spend more of their disposable income on experiences such as vacations instead of purchasing “hard goods”.
Calgary Market Summary • May-August 2024
"After two years of record commercial real estate investment in Edmonton, investors slowed their collective pace to let some froth come off the market. All indicators – population growth, low rental vacancy and expected BOC interest rate reductions -point toward a positive balance of 2024." -- David Wallach, CCIM, Owner/Broker of Barclay Street Real Estate.
Since the late 2010s and especially since mid-2020, ownership of commercial condo units has increased significantly in the Calgary market.Several formats – office, industrial and retail/ medical are available and can be found in a variety of options from units in small, multi-tenant buildings to business parks – all of which provide distinct advantages such as fixed and clear costs, complete control over design within the premises, and notably, tax benefits not available to leasing tenants.
"Confidence in Calgary’s future and plentiful opportunities to participate in future growth, coupled with the Bank of Canada interest rate reductions, created near-record demand for commercial assets at mid-year." -- David Wallach, CCIM, Owner/Broker of Barclay Street Real Estate.
Calgary’s overall retail availability rate increased further during the second quarter of 2024, reaching 4.6%. As stated in our previous edition of this report, the level of available space on the market at June 30th has Calgary approaching what we consider to be a balanced market in which the variety of options for would-be tenants and existing tenants alike and allows for rental rates to stabilize among the various sizes, formats and locations of options on the market. Despite a slight-yet-ongoing increase in available space being marketed, the situation remains remarkably stable given the substantial increase in Calgary’s retail inventory since early 2015; currently 44.8 million square feet (msf) versus 37.2 million msf at mid-year 2015 when multiple store chains began shutting their doors via major closures and consolidations.
Sale/leaseback transactions are an option for obtaining maximum equity and accessible working capital from owned real estate. This type of transaction allows the owner of a property to sell it and then lease it back from the buyer at a rental rate and lease term that is acceptable to the new owner, typically on terms consistent with the given market’s rates. The primary purposes of this strategy are to raise money or to free up the owner’s equity for other uses, while retaining use of the facility.
Calgary Market Summary • January-April 2024
Overall availability – and particularly the vacant component – of Calgary’s suburban office market decreased everso- slightly through the first quarter of 2024 due to approximately 45,000 square feet of positive absorption. We saw tenants making a substantial shift in mindset as the quarter progressed – opting for both good-sized spaces in the 5,000 sf – 10,000 sf range but also in their approach to choosing locations based on Landlord reputation and investment in their properties.
The Greater Calgary & Area (GCA) industrial market showed continued signs of easing overall vacancy in the first quarter of 2024. The GCA availability rate moved up slightly from the end of last year, reaching 5.5% and vacancy – space without a headlease in place – rose to 4%. Q1 ’24 marked the third consecutive quarter of increasing vacancy and availability and while both metrics remained well below the low-7% recorded just before the COVID-19 pandemic, we view both as likely to continue ticking upwards in the near future and bringing the greater Calgary area industrial market into a balanced market.
The tri-county area commercial market began the year trending positive with strong market fundamentals for all property types. Looking back at the quarter, and similarly to 2019 and 2020, the largest commercial sales in the market involved multi-family properties.
The tri-county area commercial market posted strong market fundamentals during the fourth quarter of 2020 for all property types. Looking back at the year and similar to 2018 and 2019, the largest commercial sales in the market involved multifamily properties. Although office tenants are evaluating what their mid- to long-term office footprint will look like in the future, overall office rents increased throughout the year. With the growth of consumer online shopping, industrial/flex tenants are continuing to increase their warehouse/distribution space. The retail market will continue to be supported by residential development. As we move into 2021, the continued expansion of the area driven by the steady population growth will see an influx of commercial real estate activity. Read on for more of the latest in the region’s commercial real estate market.
The effects of the coronavirus on the tri-county area commercial market remain unclear. Although data from the third quarter is providing greater clarity about local conditions and the short-term real estate outlook, there remains uncertainty surrounding market dynamics and long-term effects. Office Tenants are evaluating what their mid- to long-term office footprint looks like in a post-COVID world. With the growth of consumer online shopping, Industrial/ Flex Tenants are increasing warehouse/distribution space. The retail market will continue to be supported by residential development in our tri-county area.
The effects of the coronavirus outbreak on the tri-county area commercial market remain unclear. Although data from the second quarter is providing greater clarity about local conditions and the short-term real estate outlook, there remains uncertainty surrounding market dynamics and long-term effects.
The effects of the coronavirus outbreak on the tri-county area commercial market remain unclear. Prior to the coronavirus outbreak, the tri-county area had strong economic momentum, and the current report largely reflects the environment before the pandemic. It is too early to provide a quantitative assessment or forecast of the ultimate market impact of COVID-19. As with previous reports, our analysis focuses on the market activity reflected in current quarterly statistics. The overnight halt to the tourism industry will likely have repercussions for the local economy. In a year of evident political and economic uncertainty, we expect to see additional tempering in metrics — including asking rent growth and construction starts — as companies look for additional signals of where their businesses are headed this year.
Oklahoma City’s office market has experienced a dynamic first half in 2023, offering a blend of opportunities and challenges across its submarkets. The total market vacancy rate, which measures the unoccupied space in the market, has decreased from 25.2% at the year-end of 2022 to 24.7%. On the surface this would appear to be a positive sign, however, the overall absorption for the office market was a -11,146 SF. There is generally an inverse relationship between absorption and the vacancy rate, but this relationship can be affected by the removal of office buildings from the data set that were recategorized.
Second quarter 2023 closed with a direct vacancy rate of 21.42%, an overall vacancy rate of 23.81%, and an average asking direct rental rate reported at $18.66 psf. In June, the Michigan unemployment rate was recorded at 3.6%, a decrease of 0.7 percentage points compared to this time last year, while the U.S. unemployment rate was recorded at 3.6%. Although inflation persists, interest rate hikes have remained consistent over the past year, and as employers target cost cutting measures, the labor market continues to maintain strength with fewer Americans applying for jobless benefits. 253,000 job openings occurred in April, 339,000 openings in May and a slight decrease in June to 209,000 openings, closing the quarter with 9.8 million total job openings in the U.S. In April, U.S. consumer confidence declined for the 3rd time in four months and again in May as individuals continue to become more discouraged by inflation, and by yet another increase of the key interest rate by the Federal Reserve totaling a quarter point to the highest it’s been in 16 years; however, they have indicated there may be a pause in further increases after 10 rate hikes which have had a costly impact on both businesses and consumers. Consumer price growth slowed in May rising only 0.1% from April, while mortgage rates approached a 7-month high, the quarter closes on an uneasy note as to how the remaining half of the year will unfold.
Second quarter 2023 closed with a direct vacancy rate of 3.69%, an overall vacancy rate of 3.95%, and an average asking direct rental rate reported at $7.36 psf. In June, the Michigan unemployment rate was recorded at 3.6%, a decrease of 0.7 percentage points compared to this time last year, while the U.S. unemployment rate was recorded at 3.6%. Although inflation persists, interest rate hikes have remained consistent over the past year, and as employers target cost cutting measures, the labor market continues to maintain strength with fewer Americans applying for jobless benefits. 253,000 job openings occurred in April, 339,000 openings in May and a slight decrease in June to 209,000 openings, closing the quarter with 9.8 million total job openings in the U.S. In April, U.S. consumer confidence declined for the 3rd time in four months and again in May as individuals continue to become more discouraged by inflation, and by yet another increase of the key interest rate by the Federal Reserve totaling a quarter point to the highest it’s been in 16 years; however, they have indicated there may be a pause in further increases after 10 rate hikes which have had a costly impact on both businesses and consumers. Consumer price growth slowed in May rising only 0.1% from April, while mortgage rates approached a 7-month high, the quarter closes on an uneasy note as to how the remaining half of the year will unfold.
The Chicago suburban office market showed signs of strength through the second half of 2022 as rental rates increased, absorption levels turned positive, and vacancy rates stabilized at approximately 27%. Although the vacancy rate is at a record high, the data remains distorted by zombie offices (typically outdated corporate campuses); one of which was sold in October for more than $230 million. The 1.4 million-squarefoot- campus in Northbrook, formerly the long-time home of Allstate, is being redeveloped into an industrial mega site. Developers must determine the highest and best use for these vacant office campuses, whether into more digestible-sized office product or into an entirely new asset class. These decisions will help mitigate oversupply issues while contributing to the long-term stability of Chicago’s suburban market.
In Q4/22, Chicago’s downtown office market vacancy rates and rental rates remained relatively unchanged compared to Q3/22. Absorption levels deteriorated, however, totaling 800,000 square feet of negative net absorption through the quarter. As a result, absorption levels through 2022 were negative 1.2 million square feet—an improvement relative to the negative 3 million square feet seen in 2021.
The COVID-19 pandemic interrupted several years of sustained growth in the Portland market. Demand for office space in the Portland metro area remains low, as businesses continue to evaluate their space needs in the post-pandemic era. The central business district (CBD) was hit hardest by the pandemic. Many smaller businesses have sought to move out of downtown into areas such as Beaverton and Gresham, however, several major office leases have still been signed in the CBD in 2021.Portland’s office investment market has also remained slow through 2021 as a result of the pandemic. Annual sales volume exceeded $1 billion between 2015 and 2019, but that came to an end in 2020.
The COVID-19 pandemic brought immense challenges to the retail sector, which had already been struggling for years due to the growth of e-commerce. 16 months of intermittent lock downs and social distancing caused many retailers and restaurants to close. With the state officially reopened as of June 30th, Portland’s retail market could bounce back in response.
The Denver retail market has been a cyclical winner. Trade area demographics are supporting retail sales, with the metro's superior growth in population, employment, and income increasing buying power.
The Denver office market is in the midst of a moderate rebound. Rent growth slowed sharply throughout 2015 and 2016 as the market felt the full brunt of the collapse in oil prices, and rents at 4 & 5 Star properties briefly turned negative.
Several indicators emerged or firmed over the past year that point to rebounding demand in Denver's apartment market.