Target Realty Corp - Produits, offres, nouvelles

Expectations of and for 2016

Harvey Aronovich - February 2016 

While the downturn in the oil and gas industry has taken a drastic toll on Downtown availability and vacancy for 2016 reaching in the order of over 20%, while this may seem surprising, the industrial market has not been affected as dramatically.  The Downtown office market is predominantly filled with oil and gas companies who over the past year have cut back budgets and staff and reducing the amount of excess space is a necessity to keep costs down and cash flow on the positive side.

The industrial market (excluding the oil and gas service companies),  while not insulated 100%,  has been holding its own.  The industrial market is geared more to the consumer market,  whose businesses are down from recent years,  but are  resilient and will find ways to manage  this downturn. The overall city wide vacancy rate of 6.30% at the end of 2015  is even slightly skewed by the vacancies  created by the large multi-tenant speculative distribution buildings that have been either recently completed or are under construction in the Airport Industrial Area and in  the Great Plain Industrial Park,(Glenmore Tr and east of 56th St SE)  upwards of 900,000 sq. ft. In addition there a few  large sub-lease  vacancies each being in the magnitude  of 150,000-250,000 sq. ft.

These large buildings however attract only large tenants since property depths are a minimum of 200 feet deep and with 50-55 feet in width,  typically the minimal bay size is in the range of 30,000 sq. ft. and up.  So the smaller tenant, the 2,500 – 5,000 sq. ft., who is the major user class in the City is faced with the “older” product that is not being replaced.  As evidence, there is only one new small bay industrial project in the entire City of Calgary currently under construction.  Therefore the number of vacancies for the small bay user will continue to be minimal.

Another compelling fact about the industrial market is that in general the financial strength of the owners of the industrial buildings is very solid.   They are quite capable of weathering the storm and the weakness in the market.  They are very aware of the current market conditions but are reluctant to “give the space away”.  They are more apt to be creative in their negotiations looking for ways to be competitive, while still maintaining reasonable rental rates.

In addition there is a very limited supply of buildings for sale  either vacant or on an investment basis, hence prices have not come down that dramatically and there is limited historical data to support lower prices.  The consideration for constructing a new building  faces an extremely  long delivery period, in the order of a minimum of 18 months and the cost of new construction has not come down in price due to the weak dollar.  Commercial finance rates are still very attractive at between 3-4% - still making purchasing an attractive scenario buoying the demand factor.

So yes, If you are in the market for space either as a tenant or a buyer, the market is definitely in your favour.  There will be more spaces to consider than in past years and the deals will be more attractive.  The Landlords are  certainly aware of that and are  fully prepared to be creative and flexible to get a deal done.

As the largest and longest-serving independent commercial real estate group in Calgary, Target Realty offers clients the knowledge, insight, and expertise required for selling, leasing, investment, development, and tenant representation of industrial, office, and retail properties.

Our thorough understanding of market conditions and real estate cycles, our industry reputation, and client commitment have helped us deliver consistently outstanding results for over 26 years. In this challenging business environment, we help clients define and achieve their real estate objectives. Our commitment to service defines us and the way we do business.

Target Realty’s Associates come from diverse backgrounds. We are actively involved in our industry and continue professional development through ongoing education and a broad range of affiliations. We strive to maintain leading edge know-how and to constantly improve client services. We set new benchmarks by keeping pace with the ever-changing needs and expectations of clients and the marketplace.

Target Realty has taken its local real estate services to another level through partnership with CORFAC International. Through CORFAC International, we offer our full range of commercial real estate services to more than 150 markets in Canada, the US, and worldwide.