Empty offices fuel Calgary's real estate investment losses
Empty office spaces are taking over Calgary or at least they are fueling the real estate investment losses! An article in the Calgary Herald shares the results for the ICREIM-IPD Canada Annual Property Index covered $90.9 billion of directly held commercial real estate. Article: "An indication of the local commercial real estate market's dramatic decline in recent years is seen in results from previous years, which were in positive territory -- 26.5 per cent in 2005; 29.9 per cent in 2006; 20.2 per cent in 2008. Calgary's loss has been primarily felt in the office sector, with a 11.2 per cent decline followed by losses in the industrial (6.5 per cent), residential/ rental (1.2 per cent) and retail (0.1 per cent) sectors. "There's no question what's driving (the overall decline) is the downtown office market," said Richard Pootmans, business development manager for real estate at Calgary Economic Development. "The current realities are best seen in the context of the multi-decade investment horizon of the large investment funds that have by and large financed our latest generation of new office buildings in the core. These investments have been made with a long-term appreciation of our energy industry future. From a positive perspective, current landlord pain is opportunity's gain." According to an office market report by CB Richard Ellis Ltd., Calgary's downtown vacancy rate jumped to 15.5 per cent at the end of the fourth quarter last year in an overall inventory of 35.7 million square feet. The vacancy was just over four per cent in the fourth quarter of 2008. The CBRE report said it believes corporate downsizing has for the most part ended. "Capital markets are back and barring any large mergers, we may see nominal demand for office space in 2010," said CBRE. "With a staggering 2.5 million square feet of space to be added to the inventory in the next 24 months, vacancy should still creep up over 21 per cent." Calgary's downtown office vacancy rate hit a high of 21.8 per cent in the fourth quarter of 1992. The report by the Institute of Canadian Real Estate Investment Managers and the Investment Property Databank says the total return on real estate investment throughout the country was a negative 0.3 per cent, down from 3.7 per cent in 2008, and the first time since 1993 that the total return entered negative territory. Of the major sectors, retail was the top performing sector with a total return of 3.5 per cent, followed by residential at 1.9 per cent. Office and industrial both posted negative returns of 2.6 per cent and 4.4 per cent respectively. The report measures the returns from one open market valuation to the next. Returns for the largest commercial property markets in Canada were as follows: Montreal, 1.3 per cent; Ottawa, 3.0 per cent; Vancouver, -- 0.2 per cent; Toronto, 0.2 per cent; and Edmonton, 1.1 per cent." Source: Calgary Herald