November Commercial Real Estate Market Summary

 In News


As the Liberals begin their second term on Parliament Hill, Justin Trudeau and his Liberal team will have a lot of work to do to regain the trust of Albertans as the party lost all their seats not only in Alberta but in Saskatchewan as well. With pressure mounting on the minority government to bridge the gap between the east and west, Calgary Mayor Naheed Nenshi is willing to help to narrow the divide so that the Liberals are better able to attend to the key issues at hand in Alberta, such as delivering on their pipeline promises.

With new Members of Parliament heading to Ottawa, Albertan’s also saw the release of the dreaded UCP budget for the upcoming fiscal year. Jason Kenney’s budget is expected to see a 2.8% cut in spending over the next four years, which will hopefully bring Alberta back to a balanced budget. Although they have floated the idea of provincial employees taking pay cuts, this budget will come at a cost to property owners as well, as property taxes are expected to increase by approximately one percent in Calgary come next year. Nenshi noted that the province has prided itself on cutting taxes, however, the increase in property taxes results in the most unfair regressive tax that every homeowner must pay. Ironically, the province is having its own trouble paying its property taxes yet has no issue ensuring that everyone else’s property taxes are paid across the province.

Overall, the cities of Calgary and Edmonton have given up approximately 40% of their funding and are now being subjected to an additional 9% cut. Projects like the Green Line will become a major challenge for Calgary as their promised funding of $555 million over the next four years has been cut to $75 million and will inevitably put further jobs at risk. The City of Edmonton will also face tough challenges ahead as city council will have to make do with an approximate $150 million loss over the next four years. This will likely have an immediate impact on funding slated for the Terwillegar Drive expressway conversion and the Stadium LRT station rehabilitation. Mayor Don Iverson noted that council will make every effort to avoid increasing property taxes, but it will be extremely difficult if the city plans to implement the various projects in had in place prior to the release of the budget. There is no doubt that the mayors of both cities will have to look for economic efficiencies without impacting the most vulnerable.

To generate more demand for office space, the provincial government hopes that the reduction of the corporate income tax rate from 12% to 8% by 2022 will encourage large corporations to relocate to cities such as Calgary, where the overall vacancy rate currently stands at 15.3%. This initiative also aims to diversify the economic base of the province. Despite this, Calgary was issued a fresh wound at the hands of Encana, who announced they were becoming American, and moving their headquarters to the U.S. Encana, which is also renaming itself to “Ovintiv”, has stated that the move will allow it to increase the company’s long-term value, but reiterated that it will not impact investment or employment plans in Alberta.


Even with the gloomy outlook for the province, Calgary is starting to show signs of positive rental growth.

  • Gross office rents have increased by 4.0% over the past 12 months (this does not take into consideration any tenant inducements that are part of the lease negotiations, and as such expected net effective rents (NERs) to remain flat at best)
  • N asking rental rates in Edmonton have increased at a much slower rate recently, up by only 0.9% year-over-year.
  • Calgary and Edmonton have seen average market prices decline by 6.0% and 2.7%, respectively, year-over-year.

The drop in market prices provide an optimal opportunity for investors who are interested in the long-term prospects of Alberta. Office cap rates are hovering in the 7% to 8% range in both markets, which leaves substantial room for investors to create value-addition if they are willing to invest long-term.


The industrial markets in Calgary and Edmonton are much more stable in comparison to their respective office markets, however both markets have seen net rents decline over the past year.

  • Calgary industrial rents have declined by 2.7%.
  • Edmonton rents have declined at a much more severe rate of 5.9% compared to the same time last year.
  • Market prices have also declined in both markets, down between 4-5%.
  • Both markets saw declines in net absorption.

Although industrial demand has cooled, leasing activity is expected to pick up in both markets by the end of the year, with Edmonton expected to outperform Calgary.


The relative bright spot in the province rests within the retail sector.

  • Two major markets in the province are posting vacancy rates below 4.0%.
  • Consumer spending will only grow by approximately 1.0% in 2019, which is well below the expected 1.7% growth rate for Canada.
  • The lower tax rates and higher disposable incomes in Alberta, when compared to the rest of Canada, have helped the retail sector here.
  • The cannabis sector has played a pivotal role as new retail stores continue to open their doors, and the influx of openings has led Alberta to be the leader in cannabis sales across the country.

Edmonton’s retail market is expected to remain stable, even with Holt Renfrew’s planned move-out next year. The potential influx of 29,000 square feet placed back on the market should be easily offset by Walmart, Cabela’s and Home Depot securing space within the 1.2 million square foot development at Windermere Shopping Centre. Much of the development occurring in Edmonton will be focused on the suburban market with a concentration on big-box store development. Additionally, both Chinook Centre and West Edmonton Mall will continue to attract the attention of international and premium retailers due to the heavy foot traffic in both major malls.

What are your thoughts on the Market? Leave your comments… and let’s discuss.

November Market Report - Last 30 Days Chart

*Last 30 days

Find your ideal commercial property, search Let’s talk about your next investment and take advantage of our land / properties that may not be listed! Call Aaron at 403-301-7738.

Photo Credit:: Photo by Philip Davis on Unsplash
Content Credit: CoStar Canada

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