Commercial and Industrial Real Estate in Calgary is one of the most stable forms of real estate. The market has been growing steadily for decades, and while things have slowed down due to the pandemic, the promise looms large going into 2022. For this reason, commercial real estate experts in Calgary are optimistic about the future, but are also still cautiously playing it by ear.
Here are some of Calgary’s commercial real estate predictions for 2022 that will continue to shape our city:
1.) Multi-unit residential buildings becoming more popular among investors,
The market for commercial and industrial investment properties hasn’t been too great so far. In fact, our commercial real estate experts have seen a decrease in demand over the last few months, which is why small-time investors have started looking for alternative solutions – enter multi-unit residential buildings. These tend to be rather affordable yet provide a steady stream of rental income without too much effort. Due to the current real estate market (i.e. low demand for commercial properties + high demand for residential buildings), they’ve become more appealing than ever, with an average price of $200,000 per unit in 2017 and estimated growth of 6% per year in 2018-2022.
2.) An increase in overall construction costs
Construction costs (materials and labour) can be expected to go up, which will create a small rise in building prices – some experts have already predicted that future projects will see price increases as well. Currently, investors are being offered returns of around 7-9% on their investments while construction is still underway which isn’t bad at all! Once construction has finished, however, these yields will not be as high.
3.) Commercial real estate prices will continue to rise
We’ve already seen commercial real estate prices increase in the last 5 years. And investors are expecting these prices to continue climbing going forward into the future, which makes them very attractive for those looking to invest their money into something that is relatively low risk with a great return rate.
4) Condominiums overtaking traditional office space
By 2022, it’s expected that more than half of all investment properties will be condominiums rather than offices or industrial buildings. This is due to a couple of factors – first, there currently seems to be increased interest among small-time investors who want a greater return, and, second, office and industrial buildings typically require a larger initial investment.
5) The oil and gas industry slowing down but construction still booming
We’ve already seen a lot of companies in Calgary’s oil and gas sector struggling to keep up with demand or even stay afloat, which is why it won’t be surprising if we see a complete shift in the way commercial buildings are constructed within the next few years. Construction costs will go up, but it will also create an opportunity for new types of contractors – likely from other industries such as retirement homes because the market may slow down a bit until O&G steps back into full gear.
6) Fewer retail spaces available
There will be a lot more innovation in terms of how people shop – which is why retail spaces are expected to become scarcer and prices will go up. This will likely push Calgary’s commercial real estate prices up within the next few years.
7) More land for sale
Land that was formerly only designated for commercial purposes such as warehouses and storage facilities is now being hybridized with residential areas. This means we’ll probably see a greater need for residential buildings within the next few years. Although this might not necessarily mean an overall price increase, it does mean that there will be less space available on the market, and so developers and investors alike may have no choice but to pay more for land on which they build their buildings.
8) The rise of the “sharing economy”
This is one trend we think will come to fruition within 5-10 years and which we’ve already started seeing. Not only does this make it easier for small-time investors to invest in our local real estate market but it also means that companies like Airbnb and Vrbo can pay more or you can get a greater return – or both!
9) Regulations becoming stricter than ever before
This is especially true when it comes to Airbnb. Many cities across North America, including Toronto, have placed strict regulations on Airbnb so as to decrease the number of short-term rentals available. We expect Calgary to follow suit in order to increase profitability for commercial buildings by upping rental prices and decreasing vacancy rates. By 2022, we’ll likely have much stricter regulations in place to prevent the number of Airbnb owners from outnumbering renters.
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The material presented in this blog is provided for general information and educational purposes only. It is not a substitute for professional advice. All information is subject to change regularly and without notice. CMS Real Estate Ltd. assumes no responsibility for any errors in the information provided, nor assumes any liability for damages incurred as a consequence, directly or indirectly, of the use and application of any of the contents of the blog/website page.