Calgary is a major economic hub in western Canada. In recent years, Calgary’s real estate market has been impacted by the decrease in demand for office space in the downtown core. However, the city’s economy has been showing signs of recovery, and the demand for commercial and industrial real estate and commercial property sales are expected to increase in the coming years.
Overall, after one of the best years for the commercial and industrial real estate market in Calgary, the city is likely to remain dynamic and diverse in 2023, with a range of opportunities available for investors, businesses, and individuals looking for space.
Meanwhile, the industrial market in Calgary has shown strong momentum. In the final quarter, 1.0 million sq. ft. of new speculative industrial products were delivered, with 52.0% already pre-leased. Let’s take a look at what 2023 has in store for Calgary’s commercial and industrial real estate.
Rising Costs
It’s no secret that higher interest rates and inflation have increased the cost of virtually all goods and services, including construction, material, and food. Like many cities in North America, Calgary has experienced a significant increase in construction costs in recent years. The cost of materials, labour, and other factors have all contributed to these rising costs, making it more expensive to build new projects or renovate existing ones.
Naturally, rising costs have a significant impact on the affordability of rent and commercial real estate. While this is a concern, we continue to see positive momentum in Calgary’s industrial and commercial real estate sector as the economy recovers.
Calgary Continues to Diversify
Calgary has long been known as an energy hub, with the oil and gas industry playing a significant role in the city’s economy. However, in recent years, the city has been actively working to diversify its economy and attract investment in new industries. Some of the key sectors that Calgary is targeting include:
- Technology
- Logistics
- Distribution warehouses
- Film and television
- Tourism
- Financial services
With this diversification, Calgary’s industrial sector experienced its most remarkable year in recent history, and the positive trend is projected to extend throughout the first half of 2023. Calgary industrial real estate market remains favourable due to pent-up demand and the announcement of new distribution warehouses. The city’s central location and cost advantage in comparison to other markets contribute to its ongoing appeal.
Office Spaces Being Converted Into Condominiums
Calgary received some positive news regarding its high office vacancy rates as the downtown area experienced a slight drop to 32.6%, marking the second consecutive quarter of positive net absorption of office space. This drop in vacancy rate can be attributed to the office conversion program, a move that the City of Calgary has taken to remove empty downtown office spaces from the market.
Maxim Olshevsky, the managing director of Peoplefirst Developments, highlighted the program as a prime illustration of innovative thinking that renders conversion projects feasible.
Olshevsky remarked, “A transformation is taking place in a majority of Western cities and their downtowns, respectively. (The) City of Calgary is at the forefront of this transformation, and people are starting to notice.”
A Rebound in Retail Spaces for Restaurants
The COVID-19 pandemic had a significant impact on the restaurant industry in Calgary and around the world. Many retailers were forced to close their doors temporarily, and some were forced to shut down permanently due to the economic disruption caused by the pandemic.
However, as the impact of the pandemic begins to recede, we are seeing a strong demand for the restaurant sector in 2023. While delivery and takeout services have become more popular during the pandemic, many people continue to enjoy the experience of dining in a restaurant.
Blog posts from CMS Real Estate are for general information only. The content should not be considered real estate management or investment advice. If you are in need of professional commercial and industrial real estate advice, please contact our team.