Greater Calgary Area

June 3, 2020 | Canada

As this unprecedented situation continues to rapidly evolve, Avison Young’s briefing notes are intended to provide an up-to-date assessment of the impact on the commercial real estate market.

Period covered: May 16th to 29th, 2020

General trends, news and market observations

  • Alberta Premier Jason Kenney says Calgary and the city of Brooks will get a lot more advance notice this time around opening up their economies during the COVID-19 pandemic. Kenney says a decision will be made and announced Friday, May 22nd on whether those two communities will be allowed to reopen restaurants and hair salons on Monday, May 25th as proposed
  • Companies bidding to work on Calgary's new downtown arena should find out soon if they will be hired for the job. Bidders for the roles of design team, construction managers and specialized consultants for the $550-million arena are making their final pitches this month
  • A key part of the Southwest Calgary Ring Road is on track to open this fall, not 2021. The ring road is a key part of Tsuut'ina's economic development plans. A massive commercial, retail and residential development on the eastern edge of the reserve called Taza is being planned
  • The Alberta government is urging commercial landlords and tenants in the province to fill out a survey on its website to get a better sense of challenges businesses are facing in meeting their “financial obligations during the COVID-19 pandemic.” In a news release issued Monday, May 25th, the government said such challenges could include paying rent or developing payment schedules
  • New businesses 'stopped in their tracks' by COVID-19 struggling to ride out the crisis. The near-universal stress and strain are perhaps being felt most by new businesses. According to the City of Calgary, there were 1,321 new business licences awarded between January 1 and March 31, 2020. Many of these businesses, barely had the chance to get off the ground before shutting down in the face of an unprecedented global pandemic and a series of strict public health orders

Office market observations

  • Calgary's Plus 15 walkway network to open intermittently as businesses reopen. With businesses reopening thanks to stage 1 of the province’s Relaunch Strategy, downtown Calgary is starting to see more and more visitors. During the initial shutdown of non-essential services at the start of the COVID-19 pandemic, the city’s network of Plus 15 walkways first operated on limited hours before closing completely
  • As office buildings in Canada are prepared for workers to return, the big question is how much space companies will need in the new reality with COVID-19 impacting revenues, and the potential increase in remote work. That question is even more significant for the beleaguered Calgary downtown office market which continues to see an elevated vacancy rate due to persistent low oil prices
  • Things have not changed much in the last few weeks in the office market. Most deals being done are because of lease-term expiration
  • Free rent terms are getting longer on new deals
  • Starting to be some tour and deal activity again. Companies are starting to make decisions again as the market passes 60 days of shutdown
  • Rents were already low pre-pandemic and landlords are not prepared to go lower at this time
  • A number of tenants are looking at their space requirements. Activity could remain slow until September or once things reopen more fully. It is mostly tenants that have to do deals (expirations, resizing) that are in the market right now

Industrial market observations

  • A COVID-19 outbreak was confirmed at Flyer Force distribution centre in northeast Calgary. Flyer Force is listed by Alberta Health as one of 34 sites in the Calgary zone hit by outbreaks, with the majority at long-term care or supported-living residences
  • Skyline Commercial REIT has acquired a four-property industrial real estate portfolio in Calgary, comprising more than 1.1 million square feet of space, for $132 million. The four properties, which consist of 11 buildings and total space of 1,177,202 square feet, are 98% occupied
  • Small, local tenants appear to be feeling the biggest impact of the shutdown. Particularly service-related businesses. Activity is flat, but not seeing the same impact as retail or office
  • It may be some time before smaller tenants are able to pay full rent plus deferred rent

Retail market observations

  • A new Real Canadian Superstore in Calgary’s East Village opened May 15th. According to Loblaw Companies Ltd., which owns the Superstore chain, the East Village location is approximately 80,000 sf and represents the country’s first “urban” Superstore location. Other Real Canadian Superstore locations in the Calgary area are between 125,000 to 155,000 sf, the company said.
  • Calgary restaurants scrambling to deal with excess food after province pushed back re-opening. Alberta Premier Jason Kenney announced Wednesday, May 13th that stage 1 of the province’s relaunch plan would move at a more gradual pace in Calgary and Brooks than other parts of the province due to the higher local numbers of COVID-19 cases. Restaurants, bars, hairstylists and barbershops in Calgary have to wait until May 25th to reopen. So, with less than 24 hours’ notice, many restaurants in the city were left scrambling to figure out what to do with the excess food they had prepared
  • Calgary restaurant owners angry about the province’s last-minute decision to push back their scheduled reopening date want the government to reimburse them for out-of-pocket costs. The Alberta Hospitality Association says its members were caught off guard by Premier Jason Kenney’s announcement that certain businesses — including restaurants, cafés and pubs, as well as hair salons and barbershops — will not be allowed to open at 50% capacity until May 25th. The announcement — which singled out Calgary and Brooks, two communities that continue to see a disproportionate number of COVID-19 cases — came less than 24 hours before many Calgary restaurants were set to reopen as part of stage 1 of the province’s relaunch strategy
  • Calgary’s enclosed malls have tentatively reopened. Many businesses at the mall are still closed and the foot traffic is low. Many mall tenants haven’t yet completed preparations for the relaunch, a mall operator said in a statement
  • Calgary Mayor Naheed Nenshi said May 14th he wishes Calgarians had received more notice about the city’s delayed reopening during the COVID-19 pandemic, but he thinks the province made the right call. Some businesses in Calgary had already prepared to relaunch by the time they heard the provincial government’s Wednesday decision to hold back. The province had been saying for weeks that hairdressers would be able to see clients and restaurants could open for limited dine-in service as early as May 14th, but only if the spread of COVID-19 was sufficiently contained. Alberta Health Services’ Calgary zone currently has 80% of all active COVID-19 cases in the province
  • Alberta leads the country in the percentage of small businesses that have fully reopened as provincial economies begin to relaunch, according to a study. The latest poll by the Canadian Federation of Independent Business found that nearly one-third of small firms across the country are back up and running, an increase from just 21% a month ago. More than one-third of Alberta business owners also indicated that one of the main reasons they are still hesitant to fully reopen is due to concerns about potential shortages of personal protective equipment, such as masks, gloves and hand sanitizer
  • Alberta Premier Jason Kenney needs to ban evictions for commercial renters until businesses can make their storefronts profitable again, NDP Opposition Leader Rachel Notley said May 21st
  • Calgary and Brooks joined the rest of Alberta by allowing bars, restaurants, hair salons and barbershops to open on May 25th, while more COVID-19 restrictions will be lifted across the province on June 1st. The rest of Alberta got the go-ahead more than a week earlier to move to the first stage of the provincial relaunch plan, but the two southern Alberta cities were told to hold off on opening some businesses due to high COVID-19 infection rates — a last-minute announcement that caught many businesses off guard
  • Mayor Naheed Nenshi supports bigger patios for bars and restaurants in Calgary, but he’s cool to the suggestion that Stephen Avenue should become pedestrian-only this summer
  • After a decade of operation, Brasserie Kensington has announced it will be closing its doors. While Brasserie owners Cam Dobranski and Jacqueline Warrell will be shuttering this current concept, they teased that they are not keeping the 100-1131 Kensington Road doors closed for long
  • On May 25th, Calgary and Brooks will be allowed to join the rest of the province in relaunching businesses like restaurants and hair salons. While some have adapted new protocols and are all set to open their doors, others say there is more work to do before resuming some aspects of business
  • Some Calgary shops are choosing not to fully open their doors despite COVID-19 restrictions being lifted. For some businesses, such as restaurants, without high enough occupancy loads, it is not worthwhile to open their doors
  • The sudden closure of five Planet Organic stores in March came as a shock to many, but Certus Development, the owners of the leased property in Royal Oak Park shopping centre had heard rumours of financial difficulties and had already started to search for a replacement tenant. A-Mart opened a week ago in the space and is doing a roaring trade with its Asian specialty foods
  • A lot of landlords are dealing with the fallout from Reitmans’ bankruptcy
  • Food-related tenants are planning on keeping their online platforms and delivery because they were profitable

Property Management observations

  • Preparing for phased business return
  • Every week the preparations for reopening increase. Ramping up to relaunch
  • Likely going to be a lot of change in ownership of assets in the coming quarters as investors rebalance what assets, sectors and markets they want to be in

Multi-Residential market observations

  • New home starts headed in opposite directions in Calgary and Edmonton in April, according to the Canada Mortgage and Housing Corporation. Calgary recorded a year-over-year decrease of 40%, while Edmonton saw an increase of close to 37%
  • A lot of buyers are being stymied by cautious lenders

Investment market observations

  • Raising equity in the public market is being postponed to Q3 or Q4
  • Retail and industrial are the most sought-after assets
  • May be a need for landlords to partner/invest in restaurants to keep them going

For more information please contact:

Susan Thompson +1.403.232.4344

For more on the virus’ potential #CRE impacts, read the latest briefings on our Avison Young Resource Centre:

The spread of COVID-19 and the containment policies being introduced are changing rapidly. While information in the briefing notes is current as of the date written, the views expressed herein are subject to change and may not reflect the latest opinion of Avison Young. Like all of you, Avison Young relies on government and related sources for information on the COVID-19 outbreak. We have provided links to some of these sources, which provide regularly updated information on the COVID-19 outbreak. The content provided herein is not intended as investment, tax, financial or legal advice and should not be relied on as such.