2010 Global Market Report - NAI Commercial Real Estate

Calgary, Alberta, CanadaEdmonton, Alberta, CanadaContactNAI Commercial Calgary+1 403 214 2344Country DataAreaGDP Growth (%)GDP 2008 (US$ B)GDP/Capita (USD)Inflation Rate (%)9,200,000-2.48%$1,319.14$39,217.290.15%The global economic downturn continued to have a negativeimpact on the city of Calgary due to the influence the oil andgas industry has on our market. On top of that, the over builtdowntown office boom in Calgary has led to vacancy thatexceeds anything that we have experienced in the past.Downtown office leasing continues to be the major story inreal estate in Calgary. There is currently over 1.8 million SFof vacant sublease space and 1.3 million SF of head leasevacancy in the downtown core, with another 3.5 million SF ofnew space coming to the market in 2010. Companies arecontinuing to reduce space in order to cut costs. If the currenteconomic conditions continue, there is a potential for thesevacancy numbers to double by 2012.On the positive side, the industrial and retail markets haveremained relatively stable because they were not overbuilt.The industrial developers adapted quickly to the recessionand as a result, inventory growth was very low in 2009. Therewas continued strength in the sale of freestanding buildingsin 2009 as prices saw a slight decrease and interest ratesremained low.The investment market had reduced activity due to a shortageof top-quality, wel-priced products being offered for sale,which was not related to the weak economic conditions. Allsegments of the investment market are starting to show signsof new life. It is anticipated that positive recovery of thissegment will continue over the next 12 to 18 months.Although the downtown office leasing market is lookingbleak, investors still view Calgary as a relatively stronginvestment market. A prime example is the recent purchaseof a new $74 million office development, Stampede StationPhase One, by German Investors.ContactNAI Commercial Edmonton+1 780 436 7410Country DataAreaGDP Growth (%)GDP 2008 (US$ B)GDP/Capita (USD)Inflation Rate (%)9,200,000-2.48%$1,319.14$39,217.290.15%Edmonton and Northern Alberta weathered the economicstorm longer than most markets throughout Canada. Ofa provincial total of $240 billion in major projects proposed,currently under construction or recently completed, $189billion are slated for Northern Alberta. Oil and gasprojects make up 52.19% of this total. Throughout 2009, theinvestment market has seen a tightening of available creditand the creation of a vast disconnect between seller’sexpectations and buyer’s opinions of value.Even while the economy appears to be improving, credit andlending parameters remain tight from the effect of thesub-prime correction. Given these conditions, many ownersremain in a holding position and investment volumes aredown.With a total office inventory of 24,155,355 SF, vacanciesincreased to 6.45% in 2009 up from 4.01% in 2008. Officerents from the peak in 2008 have been in decline. The28-story, 618,000 SF Epcor Tower, still under construction,is now 70% committed. Redevelopment of the formerProfessional Building (240,000 SF) continues and theprovince has also announced a $356 million upgrade of theFederal Building which has been vacant since 1989.Edmonton’s retail inventory is reported at 25,438,598 SFwith a vacancy rate of 2.96% in 2009, down from 3.11% in2008. Despite challenging economic times, this segmentremains strong with the expansion of existing players andthe introduction of new entrants to the market.The total inventory of industrial space grew by 6.7% to88,289,785 SF in 2009. The overall vacancy in 2009 was1.92% compared to 1.30% in 2008. Despite such a lowvacancy rate, industrial activity has been down with thelargest vacancy increases being seen in the multi-baymarket. Given the economic news throughout 2009, tenants’expectations were that rents should be significantly reduced.Throughout the latter half of 2009, asking rents in varyingareas have moderated by about 10% with landlords offeringleasehold inducements in order to compete for lease deals.UnemploymentRate (%)8.33%UnemploymentRate (%)8.33%Interest Rate (%)0.25%Interest Rate (%)0.25%Population (Millions)33.637Population (Millions)33.637Calgary At A GlanceConversion .96 CDN = 1 US$ NET RENT/SF/YR US$ NET RENT/SF/YRLow High Low High VacancyDOWNTOWN OFFICENew Construction (AAA)Class A (Prime)Class B (Secondary)SUBURBAN OFFICENew Construction (AAA)Class A (Prime)Class B (Secondary)INDUSTRIALBulk WarehouseManufacturingHigh Tech/R&DRETAILDowntownNeighborhood Service CentersCommunity Power CenterRegional MallsSolus Food StoresCDN 32.00 CDN 42.00 $ 33.33 $ 43.75 7.8%CDN 24.00 CDN 28.00 $ 25.00 $ 29.17 9.2%CDN 14.00 CDN 24.00 $ 14.58 $ 25.00 13.7%CDN 23.00 CDN 28.00 $ 23.96 $ 29.17 6.3%CDN 20.00 CDN 25.00 $ 20.83 $ 26.04 24.6%CDN 13.00 CDN 20.00 $ 13.54 $ 20.83 12.6%CDN 4.75 CDN 7.00 $ 4.95 $ 7.29 5.7%CDN 5.00 CDN 8.50 $ 5.21 $ 8.85 4.0%CDN 7.50 CDN 14.00 $ 7.81 $ 14.58 2.4%CDN 25.00 CDN 95.00 $ 26.04 $ 98.96 3.1%CDN 23.00 CDN 30.00 $ 23.96 $ 31.25 3.5%CDN 26.00 CDN 35.00 $ 27.08 $ 36.46 2.1%CDN 60.00 CDN 150.00 $ 62.50 $ 156.25 3.1%N/A N/A N/A N/A N/ADEVELOPMENT LAND Low//Acre High/Acre Low/Acre High/AcreOffice in CBDCDN 35.00 CDN 250.00 $ 36.46 $ 260.42Land in Office ParksCDN 400,000 CDN 1,000,000 $ 416,666.67 $1,041,666.67Land in Industrial ParksCDN 400,000 CDN 600,000 $ 416,666.67 $ 625,000.00Office/Industrial Land - Non-park CDN 350,000 CDN 800,000 $ 364,583.33 $ 833,333.33Retail/Commercial LandCDN 600,000 CDN 1,600,000 $ 625,000.00 $1,666,666.67ResidentialCDN 50,000 CDN 600,000 $ 52,083.33 $ 625,000.00Edmonton At A GlanceConversion .96 CDN = 1 US$ NET RENT/SF/YR US$ NET RENT/SF/YRLow High Low High VacancyDOWNTOWN OFFICENew Construction (AAA)Class A (Prime)Class B (Secondary)SUBURBAN OFFICENew Construction (AAA)Class A (Prime)Class B (Secondary)INDUSTRIALBulk WarehouseManufacturingHigh Tech/R&DRETAILDowntownNeighborhood Service CentersCommunity Power CenterRegional MallsSolus Food StoresCDN 28.00 CDN 35.00 $ 29.17 $ 36.46 N/ACDN 25.00 CDN 32.00 $ 26.04 $ 33.33 6.5%CDN 15.00 CDN 25.00 $ 15.63 $ 26.04 6.5%CDN 23.00 CDN 28.00 $ 23.96 $ 29.17 6.5%CDN 18.00 CDN 22.00 $ 18.75 $ 22.92 6.5%CDN 11.00 CDN 18.00 $ 11.46 $ 18.75 6.5%CDN 5.00 CDN 11.50 $ 5.21 $ 11.98 1.9%CDN 5.00 CDN 13.00 $ 5.21 $ 13.54 1.9%CDN 5.00 CDN 13.00 $ 5.21 $ 13.54 1.9%CDN 18.00 CDN 37.00 $ 18.75 $ 38.54 4.6%CDN 16.00 CDN 32.00 $ 16.67 $ 33.33 2.8%CDN 24.00 CDN 35.00 $ 25.00 $ 36.46 2.6%CDN 30.00 CDN 125.00 $ 31.25 $ 130.21 3.4%N/A N/A N/A N/A N/ADEVELOPMENT LAND Low//Acre High/Acre Low/Acre High/AcreOffice in CBDLand in Office ParksLand in Industrial ParksOffice/Industrial Land - Non-parkN/AN/ACDN 200,000CDN 300,000CDNCDNN/AN/A650,000750,000N/AN/A$ 208,333.33 $$ 312,500.00 $N/AN/A677,083.33781,250.00Retail/Commercial LandCDN 350,000 CDN 1,000,000 $ 364,583.33 $1,041,666.67ResidentialCDN 85,000 CDN 1,000,000 $ 88,541.67 $1,041,666.672010 Global Market Report ■ www.naiglobal.com 37