Spring housing market predictions and what SVB’s collapse means for rates: This week’s top real estate stories
Here are The Globe and Mail’s top housing and real estate stories this week, with the lowest mortgage rates available in Canada today, commentary from our mortgage expert and one home worth a look.
What housing crash? What Canadian markets look like for the spring
Prospective home buyers held their breath in anticipation last year as real estate prices declined across the country, hoping to enter the market as prices would plunge. But the housing crash didn’t happen. A year after the Bank of Canada started raising interest rates, houses remain unaffordable, mortgages cost more, and homeowners are holding on to their properties, making real estate listings scarce. Erica Alini and Rachelle Younglai look at what to expect from the market this spring.
The collapse of Silicon Valley Bank could reverse interest rate hike trends
The U.S. Federal Reserve was widely expected to raise interest rates at its next meeting on March 22, but the sudden failure of Silicon Valley Bank (SVB) – the largest collapse of a U.S. bank since the 2008 crisis – has investors slashing their bets, Mark Rendell reports.
The bank’s failure is sharpening the tensions between fighting inflation and managing risks of financial instability, leading markets to believe the Fed will hold off on further interest rate increases to stabilize the economy.
Why the SVB collapse is the best news for mortgage renewals and homebuyers
The failure of SVB could ripple through the economy, but for now, fear is manifesting itself through a rush of money into government bonds. The rush to the market is raising prices and bringing down interest rates on bonds.
The cost of fixed-rate mortgages is heavily influenced by interest rates in the bond market, which makes this the best news in a while for anyone renewing their mortgage or buying a house, writes Rob Carrick. Plus, the fear of economic instability triggered by the bank’s failure could push central banks to lower interest rates sooner than anticipated.
Mortgage specials start arriving, just in time for spring
This week’s market news could lead mortgage rates to go on sale, writes Robert McLister.
Canadian home sales are up slightly as prices continue to fall in February
Home prices in Canada fell in February for the 12th month, but sales volume is rising slightly in a potential sign that buyers are adjusting to higher interest rates, reports Rachelle Younglai.
The Home Price Index, which adjusts for pricing volatility, reached $704,300 last month, a 1.1-per-cent fall from January and a 16-per-cent loss from last February, when values hit their record high, according to the monthly report from the Canadian Real Estate Association (CREA.)
Decoder: The hit to Canadian house prices is deeper than it seems
While February’s housing report contained signs that the market may be stabilizing, it also cemented this as the steepest house price correction at the national level in decades, reports Jason Kirby.
According to CREA data, the typical home price in Canada has fallen by $132,000 since February 2022, and the drop is actually worse once inflation is factored in. In real, or inflation-adjusted terms, national house prices have fallen nearly $168,000, a more-than-19-per-cent decline.
Home of the week: A Calgary home for the tech lover
The Crescent area of Calgary, just a 15-minute walk to downtown, offers stunning vistas and a mix of more traditional and newly built homes. The lot size is 28.9-by-120 feet, and the entire house is oriented toward the view: a modernist building with 13-feet high windows – made in Belgium – and outdoor spaces with built-in fireplaces.
On the very back of the house is a screened-in back deck and an office workspace. Sitting in the office, you can turn around and look straight through to the front terrace and beyond. “The idea was, wherever you are, you have a view to the downtown,” the owner said.
What do you think is the asking price for this house?
a. The asking price is $3,550,000.
Calgary, Feb. 10, 2023 (GLOBE NEWSWIRE) — Sproule, a leading global energy consulting and advisory firm, is pleased to announce an agreement to acquire SGS S.A.’s (“SGS”) Subsurface Consultancy (“SSC”) based in the Netherlands. Geneva-based SGS is a testing, inspection and certification company recognized as the global benchmark for sustainability, quality, and integrity. SSC conducts reserves certification, seismic interpretation, integrated subsurface studies, and provides expert witness services for clients related to various energy projects globally, but primarily in Europe and the Middle East.
“This acquisition strengthens Sproule’s existing Reservoir Services, Geothermal, and Energy Advisory teams, particularly in the European market. It offers continuity for clients and employees, while providing additional scale to our growing platform at a disruptive time in global energy markets,” says Christoffer Mylde, SVP Corporate Development, Sproule.
This acquisition combines SSC’s deep bench and extensive track record in reservoir studies, expert witness testimony, and advisory services with Sproule’s growing global platform. The combined expertise, industry contacts, and technical acumen will offer an even more compelling value proposition to clients. SSC will be integrated with Sproule’s existing team in the Netherlands. The transaction is set to close on March 1, 2023.
“This acquisition further cements our business within the European market. It positions us to compete more effectively and deliver better solutions for our global client base, by further deepening our technical and commercial expertise. We look forward to welcoming the SSC team to Sproule, where we will provide critical continuity and offer new services to existing SSC clients,” says Jim Chisholm, CEO, Sproule.
Sproule is a global energy consulting and advisory firm that helps companies, investors, and governments understand value and risk in an increasingly complex energy market. Clients value our solutions and the resulting stakeholder confidence in decisions. Sproule offers trusted advice on evolving energy markets, including decarbonization strategies, net zero pathways, independent assurance for resource reports, optimized turn-key asset management solutions, and strategic advice on M&A transactions across the energy value chain.
We are SGS – the world’s leading testing, inspection, and certification company. We are recognized as the global benchmark for sustainability, quality, and integrity. Our 97,000 employees operate a network of 2,650 offices and laboratories, working together to enable a better, safer, and more interconnected world.
Nicole Ronsky, Marketing Manager
Rising rents mean Canadians are devoting a higher portion of their income to rent, leaving them cash strapped and stressed about how much they might have to pay if they’re forced to move in the months ahead.
Inflation, rising interest and mortgage rates, growing utility costs and swelling demand are among the factors combining to lead to increasingly high rental costs across Canada, experts say, a marked change from the start of the pandemic when rents fell for a time.
Until recently, Devyaani D (the name she goes by), 28, a media and communications professional who works at an IT consultancy firm in Toronto, shared a two-bedroom condo with a friend, and paid $2,250 inclusive of utilities, in North York.
Then her landlord said she needed the rental unit for personal use. Though her landlord tried to be subtle, the message was clear – ‘Leave ASAP!’
This meant Devyaani had to start house hunting for the third time since her arrival in Canada in 2019. She decided it was time for a place of her own.
“I couldn’t find anything that was within my budget. I decided to go overboard and shed a good chunk of my salary on rent as I had no choice. It was either that or me moving outside the city,” she says.
She narrowed down her search to a few studio apartments that ranged from $1,400 to $1,600. “The $1,400 rental properties went off the market soon after they were listed. I had no choice but to go for the $1,600 studio.” Those condos are now renting for $1,800, she says.
“I fear what’s going to happen next year. Another email hinting that I leave? Maybe,” she added.
Even though her lease isn’t up for another six months, she regularly checks rental listings just in case. “I wish the rental market was more accommodating towards newcomers and single occupants. It’s hard to budget wisely [with] this inflation and forever rising rental market,” she says.
Devyaani’s tale likely resonates with the millions of Canadian renters – especially those who are stuck somewhere between unaffordable rents and even less affordable home-ownership.
The average condo rents in Toronto were up by double digits annually in the second quarter, according to the 2022 Rental Market Report by the Toronto Regional Real Estate Board (TRREB). The average one-bedroom rent increased by 20.2 per cent year-over-year to $2,269. Over the same period, the average two-bedroom rent was up by 15.3 percent to $2,979. And there’s no respite in sight.
Rent spikes can be seen across Canada. According to data from Rentals.ca, the average rent for all property types across the country was $2,043 a month as of September, up 15.4 per cent annually. The market low in April 2021 was $1,676.
In Calgary, average condo and apartment rents are up 24 per cent year over year to $1,770 in September, says data from Rental.ca. Vancouver is up 29.3 per cent to $3,225. Even Halifax has seen an increase of 13.8 per cent to $2,052.
“Vancouver renters were already shelling out compared to other parts of Canada. Honestly, I was expecting the rents to go down a bit post-pandemic,” says Apoorv Kudtarkar, a Vancouver-based recruiter who is feeling the pinch of high rents and housing prices. “The opposite has happened.”
He says that in 2018 he and his partner paid $2,300 for a two-bedroom apartment in Burnaby. They decided to move closer to downtown and had to shell out $2,400 a month plus utilities for a one-bedroom apartment.
“We are expecting our parents to arrive [from India] next year and stay with us, we are searching for a bigger place but to no avail. We aren’t even in a situation to purchase a house anytime soon,” he says.
Rental market conditions are expected to tighten further in the coming months, says TRREB president Kevin Crigger.
“Higher borrowing costs may have temporarily precluded home buying for some households, but the Greater Toronto Area (GTA) population continues to grow alongside a booming regional economy. This means that an increasing number of people requiring a place to live will turn to the rental market,” he says.
But are rising interest rates and inflation the only reason for the rent hikes? Brampton-based businessman and realtor Raman Angroya, who has two rental properties in Brampton, says high-interest rates constitute only one factor behind the unaffordable rent hikes. Mr. Angroya, who came to Canada as an immigrant in 2011, says the scarcity of rental supply and the influx of newcomers, both immigrants and international students, are leading to an exponential increase in demand.
With the rise in interest rates, Mr. Angroya’s monthly mortgage payments for both his properties have gone up by an additional $1,200 each.
“A basement [apartment] in Brampton rents for $1,300 which used to be $1,000 just a year ago. I won’t mince my words here and say landlords aren’t greedy. They probably are and, let’s be honest, who wouldn’t be given the mind-boggling demand?”
The rental crisis is not only affecting major centres like Toronto or Vancouver. The domino effects can also be seen in other cities like Calgary and Edmonton.
Julius Ogunnariwo, 80, a property manager and a realtor based out of Calgary is taken aback by how the rent prices have gone up in the city. “We have seen an influx of people coming to Calgary from Eastern Canada and Vancouver,” he says.
An average two-bedroom basement apartment used to rent for $1,000 prior to the pandemic but can easily cost $1,300 now. An upper two-bedroom can cost about $1,600, up from $1,300 before, he says.
Apart from the interest rates, “a lot of people bought houses at an expensive price so naturally, they are going to charge higher rent,” says Mr. Ogunnariwo, who owns nine properties in Calgary.
Kayla Andrade, chief executive officer and founder at Ontario Landlords Watch, says potential renters are also going above and beyond to ensure they can rent the place they desire.
“I have been a landlord for 20 years and in recent years I have seen drastic changes in how competitive tenants in Toronto have become because of lack of supply. They are willing to offer money upfront, show their extraordinary credit records and do everything possible to get that accommodation,” she says.
Rental apartment construction dropped sharply in Toronto in the first half of the year, according to a new government report that suggests it has become “less and less tenable” for developers to shoulder rising building costs.
Housing starts for apartment rentals fell 24 per cent to 1,436 units in the first half of this year compared with the same period last year, Canada Mortgage and Housing Corp. said in a new report released Tuesday. Four of the other five major cities CMHC surveyed showed an increase in apartment rental starts, with Calgary more than doubling over the same period.
Across the country, there has been a push to build more rental housing, also known as purpose-built rental, to help house the growing number of residents who have long been priced out of the real estate market.
But in Toronto, developers have less incentive to put up purpose-built rental buildings because demand is so high from investors seeking to buy preconstruction condos.
As well, many would-be home buyers cannot afford a house, given that the typical selling price is more than $1-million in the Toronto region. Condos are relatively cheaper.
The sharp rise in construction costs has also been a factor for developers. CMHC said costs are up 22 per cent, year over year. Those expenses, along with the jump in interest rates and higher land costs, “appear to make” purpose-built rental construction in Toronto “less and less tenable,” the report said.
Matt Lundy: Why aren’t more homes for sale? They’re being rented
Because of strong demand for preconstruction condos, it is easier for developers to quickly recoup their costs on them. Once a condo building has been completed, buyers close on their units and the developer gets paid.
“You sell and you’re done,” said Dana Senagama, CMHC’s senior specialist for the Toronto region.
With a purpose-built apartment building, however, developers face a longer period to recoup their costs. Leasing a building can take over one year, and still that does not cover all the development expenses. “You kind of have to wait a long time to recover that cost,” said Ms. Senagama. “So, it is just not attractive.”
The CMHC report looked at the proportion of new high-rise units that are rental apartments versus condos, and said Toronto was the only major urban centre where condo building outstripped rental apartment construction in the first half of the year compared with the average of the prior five years. Purpose-built rental starts accounted for 10.7 per cent of the high-rise housing starts in Toronto in the first half. In the previous five years, the average was 17.4 per cent for the first half of the year.
Montreal also showed a decline in purpose-built rental construction over the past year. But overall, rental starts accounted for 67.6 per cent of the high-rise housing starts in Montreal in the first half of this year. That is higher compared with the previous five years, when the average was 61.2 per cent. Similarly, in Vancouver, Ottawa, Calgary and Edmonton, developers are shifting toward purpose-built rentals.
For Toronto, this year’s rental starts marked the lowest level since 2017. The CMHC report said this decline suggests “some builders may be pausing to reassess the feasibility of development.”
The slowdown is occurring as monthly rental rates are soaring. The average condo rental hit $3.57 per square foot in the second quarter of this year, according to condo research group Urbanation Inc. The average monthly rent for a one-bedroom condo was $2,182 across the Toronto region.
Demand for rental units has increased owing to a number of factors. Would-be buyers are either continuing to rent or looking for a place to rent because they no longer qualify for a home loan now the cost of borrowing has spiked. As well, international students and Toronto workers have been returning to the city as most government COVID-19 restrictions have been lifted.
Calgary’s apartment real estate market appears to be having a renaissance, after more than two years of the ongoing COVID-19 pandemic and nearly seven years of depressed economic conditions following the 2015 oil supply glut.
“It’s been really interesting to watch the data over the last two years,” Robert Price, founder and CEO of Bode, told Global News.
Data from Bode shows apartment sales over the past three months are up 85 per cent, towering over the five per cent for detached properties, when compared to the most recent four-year average.
Calgary’s benchmark home price up 11% since last August: real estate board
Price said the early pandemic trends showed a flight to less compact, more spaced-out properties.
“And what we’ve seen in the last four months is actually a dramatic change the other way: re-urbanization.”
Recent Calgary Real Estate Board (CREB) data bears out the increased demand trends for apartments.
CREB’s Q2 2022 report showed apartment sales were up 46.7 per cent year-over-year, while detached houses were down 14.2 per cent year-over-year. But the benchmark price for detached homes citywide was up 16.6 per cent over the previous year’s same quarter, outpacing the 9.4 per cent benchmark price increase for apartments.
“I think that we have more people coming into town now – we have more people looking for a more reasonable price point for their accommodations,” said Bev Clark of KNAG Real Estate and Property Management. “And obviously condos are more reasonably priced than single-family homes.”
People moving further outside Calgary city limits for a slice of homebuyers’ paradise
Clark said the run on single-family homes in 2020 helped lead to an increased supply of condo apartments.
“And now the amount of condominium listings is decreasing, which means that we’re going to go from low prices to maybe slightly more than low prices, but we’re not going to spike anytime soon in the condo market because there’s so much new product coming on,” she said.
Price said increased interest rates are driving people to lower-priced apartment buildings. And the return to offices is causing buyers to reconsider how far away they live from work.
“If you were working at home for two years and never had to come in, and now you’ve got a 40-minute drive and you expect to be in the office three or four or five times a week, that’s a dramatic difference to your lifestyle,” he said.
On Friday, the Canadian Real Estate Association released its latest quarterly forecast, showing home sales continuing to cool as interest rates rise. It expects sales in Alberta to plateau in 2023 after an 8.9 per cent increase this year.
Clark noted that recent performance of the stock market might have investors look to real estate for value and stability.
“But we’re also seeing many landlords who are seeing an opportunity to recoup at least part of their losses. So we’re seeing that too,” the realtor said.
“It’s a great time to buy. It’s a great time to sell, if it’s the right time for you.”
© 2022 Global News, a division of Corus Entertainment Inc.
More Calgary property investors are turning to short-term rentals even as demand increases for long-term tenancies
A growing number of property investors in Calgary are turning to short-term rentals despite increased demand for long-term tenancies.
The number of short-term rental listings for entire units available on Airbnb and Vrbo was 8-per-cent higher between January and July of this year than in 2019, according to AirDNA, a U.S.-based analytics provider for the short-term rental industry.
With a monthly average of 2,472 listings, entire units represented about 80 per cent of all listings during that time period, up from 60 per cent prior to the COVID-19 pandemic, according to the firm’s data.
At the same time, the added pressure of higher interest rates and inflation on potential buyers has created a tight rental market in Calgary, said Ray Wong, vice-president of data operations at Altus Group.
Interest rates “are pushing away those people that want to purchase and no longer can, causing more tightness and pushing rents higher in the traditional rental market,” Mr. Wong said.
In the first quarter of 2022, Altus Group recorded a rental vacancy rate of 2.31 per cent in Calgary, down from 5.1 per cent in 2021 and 6.6 per cent in 2020, while rental rates have steadily increased.
In July, the average rent of a one-bedroom unit in Calgary was 27-per-cent higher than a year earlier, the second largest increase recorded in Rentals.ca’s national rent ranking.
As Calgary’s economy recovers, this situation is expected to continue. “Calgary is benefiting from the resurgence in oil prices,” Mr. Wong said. “That’s causing a push for some of the rentals in the downtown area.”
Yet, investors appear to be gravitating toward short-term rentals rather than taking on long-term tenants. Mr. Wong notes that short-term rentals offer the prospect of higher revenue than long-term rentals because of the higher turnover.
Duncan Haldane, co-owner of Your Key, a short-term rental management company based in Calgary, said short-term rentals offer property owners a higher rate of return, among other benefits, than long-term rentals.
“It is a way to create more value from their property,” he said. “When you look at a short-term rental, the economics are better than if you compare it to a long-term rental.”
The AirDNA data show that entire units listed on Airbnb and Vrbo brought in an average of $2,000 a month during the first seven months of the year, despite being occupied half of the time they were available – a 40-per-cent increase from 2019.
The average rent for units in the rental listing website RentFaster was about $1,700 over the same period.
In July, Airbnb listed Calgary as one of the most popular markets for long-term stays in Canada, alongside Toronto, Vancouver, Montreal and Victoria.
While July is the busiest month in Calgary’s short-term rental market, AirDNA data shows that long-term stays are changing seasonality trends. During the first seven months of this year, the monthly number of nights booked in entire units has been roughly 10 per cent higher than in 2019.
Short-term rental services have also faced criticism for disrupting local housing markets by reducing supply and driving up rents.
Researchers at McGill University published a study in 2019 that found Airbnb had removed 31,000 homes from the Canadian rental market. Airbnb has denied its service has a negative effect on the traditional rental market and said it works with local governments to follow regulations designed to control short-term rentals.
While municipal governments in Vancouver, Victoria, Ottawa and Toronto require all properties listed be the owner’s principal residence, effectively banning entire units from becoming available in the short-term rental market and affecting renters, Calgary is comparatively permissive.
In 2020, the City of Calgary implemented a business licence requirement for short term-rentals to ensure property owners follow regulations such as limits on the number of guests and recordkeeping.
Lindsay Tedds, an associate professor of economics at the University of Calgary’s School of Public Policy, said policies and regulations adopted by local governments should also consider the role platforms play in driving both the demand and supply of short-term accommodations.
Dr. Tedds said cities should adopt a “co-regulation” model, working together with short-term rental companies to ensure property owners are following local rules – rather than what she describes as a “hammer of Thor” approach that could stifle the market.
“The big issue is [that] the platform is not just an agnostic player,” Dr. Tedds said.
“It wants more and more ‘listers’, and more and more short-term renters. And so it’s always making sure that from their perspective there are sufficient rentals of sufficient type in certain areas, and then they want to drive certain renters to them.”
Still, Dr. Tedds rejects the idea that short-term accommodations in Calgary are undermining the traditional market, as according to her team’s research, between 2017 and 2021 the average number of short-term rentals available in Calgary has remained flat at about 2,500 units a month, including both entire units and shared accommodations.
“We’re not seeing this being a hollowing-out of the rental market,” she explains. “The tightness of the rental market cannot be subscribed to Airbnb, it’s a function of poor housing policy for 20, 30 years.”
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In what appears to be a sign of confidence that Alberta’s economy is making a comeback, investors spent a record amount on commercial real estate in the province’s largest city during the first four months of this year.
Calgary’s commercial real estate sales in Q1 2022 topped $1.6-billion, according to The Network research firm. While this can largely be attributed to the $1.2-billion sale of downtown’s iconic Bow skyscraper, the chart-busting quarter was preceded by “a dramatic increase in sales through the third and fourth quarters of 2021,” states The Network’s report, released in April.
Adding to higher sales is a “significant increase in leasing activity for commercial property in Calgary,” says Justin Mayerchak, executive vice-president and partner at Colliers’s Calgary office.
Calgary is in the midst of an industrial real estate boom.
— Adam Grisak, director of valuation and advisory services at Colliers Canada
After enduring seven years of economic lethargy linked to the struggling energy sector, only to be further pummelled the last two-years by the pandemic, “Calgary has finally seen two consecutive quarters of positive absorption of office space,” says Mr. Mayerchak.
The vacancy rate is still the highest of Canada’s 10 major cities, at 28 per cent. But in this city, which has more office space per capita than any other in the country, vacancy has “compressed considerably” – to around 10 per cent – in higher-classed buildings. Occupancy for downtown AA space recently crossed the 13-million-square-foot mark for the first time in recent record.
“A 10-year high in oil pricing is sparking optimism in the energy sector and, by extension, Calgary’s downtown office market,” states Colliers’s Q2-2022 Downtown Office Market Report. “For the first time in several years, Colliers has seen companies in the energy sector looking to increase their overall office footprint, stepping away from the downsizing witnessed over the past few years.”
Meanwhile, Calgary’s industrial property market is “absolutely on fire,” says Mr. Mayerchak. Vacancy rates fell 50 per cent in the past year and now hover around 3.5 per cent – the lowest since 2014. Major players such as Amazon, Lowe’s, Home Depot, Canadian Tire and Walmart have made billions worth of investments in the province as they expand their industrial spaces.
According to Adam Grisak, director of valuation and advisory services at Colliers, “Calgary is in the midst of an industrial real estate boom.”
In a recent article published on Real Estate News Exchange, Mr. Grisack wrote: “Increasing job numbers have sparked renewed optimism in the city, making Calgary an attractive destination for businesses.”
After posting the second-strongest annual economic gain among the 10 provinces in 2021, the Conference Board of Canada projects that Alberta will lead the country in economic growth in both 2022 and 2023.
This optimism has driven more people to the province. According to Statistics Canada, Alberta welcomed 16,690 newcomers in the third quarter of 2021, the most in nearly seven years.
One of Calgary’s largest owners of multifamily buildings is reaping strong returns. Mainstreet Equity Corp., with 3,229 units in dozens of holdings, achieved 12-per-cent growth in Q1 2022, its fourth consecutive quarter of double-digit revenue increase.
The company expects more growth ahead. “Canadian oil production was the highest on record in 2021, and energy companies reaped their largest-ever revenues over the year – $158-billion,” states Bob Dhillon, president and chief executive officer of Mainstreet, in the company’s Q1 2022 report. “We believe this will help propel an influx of migration, extending the positive trend we have seen in recent months.”
Even with the global movement away from oil and gas, Mr. Dhillon remains optimistic about Calgary’s future. That’s because “Calgary’s economic foundation is becoming increasingly diversified,” he asserts, and this is another draw for workers.
During Calgary Economic Development’s annual Report to the Community event, which took place virtually on April 28, the city’s mayor, Jyoti Gondek, spoke of Calgary emerging as a global hub for innovation in energy transition.
“Shifting our narrative and securing Calgary’s position as a leader in the energy transformation may be the most important thing we do for our city’s economic future,” said Ms. Gondek.
Calgary was recently recognized as a cleantech “ecosystem to watch,” ranking in the top 30 out of nearly 300 cities by the international innovation research firm Startup Genome, the mayor noted.
Greg Kwong, executive vice-president and regional managing director at CBRE’s Calgary office, recalls that only a handful of years ago, “people were saying, ‘I don’t know if I could ever go back there,’ ” referring to Calgary. After all, in 2017, the Conference Board ranked Alberta’s economy third last in Canada.
“Now, you talk to any major economist from any financial institution and all their numbers point to Alberta having Canada’s strongest growth for the next 12 to 18 months,” he says.
“But I’d go further,” he adds. “I’d make that five to 10 years.”
Along with its soaring economy, the city’s low cost of living will continue to draw new business, says Mr. Kwong.
Calgary’s average home price, currently a record high of $605,000, according to the Calgary Real Estate Board, is still less than half of Vancouver’s at $1,374,500, or Toronto’s at $1,254,400.
It’s the same for commercial real estate: According to CBRE, office lease rates in Calgary cost $16.55 per square foot compared to $39 in Vancouver and $28.15 in Toronto. Industrial space is also nearly half the price compared to those two cities.
Mr. Kwong says Vancouver’s university graduates tell him they can’t afford to live in that city. “So, they’re moving here. In fact, [of] the last six people I’ve hired – three are from Vancouver.”
Canada’s average annual salary – $66,800 according to most recent StatCan figures – is not enough to save for a starter home in Vancouver, Mr. Kwong says.
“We’ve got smart, ambitious young people who are moving here. Those people don’t just sit in their heads. They’ll start businesses. They’ll work for people. They’re going to create.”
And when major businesses set up new locations, adds Mr Kwong, “they’re looking at two factors. One: Can they open up shop and hire 5,000 people? Two: What are the overhead costs? Then they look at everything else: logistics, support services, quality of life. But if they can’t find the staff and operating costs are too high, you get precluded from a lot of site searches.”
Mr. Kwong says that record spending on commercial real estate this year attests to investors’ “confidence in the long-term economy.”
These investors, Mr. Kwong concedes, are also following two adages, “that have always proven successful in real estate. Location, location, location; you’ve heard that many times.
“The other is, of course, buy low, sell high.”