Vacancies: 8.1% ↑
Rents: $1,100 ↓
Fundamentals for New Apartment Construction Work Well in Calgary and Edmonton
For the past twenty years, increasing oil prices have meant spectacular economic times for this western Canadian province. Alberta has led Canada in growth; by 2007, its GDP per person was the highest in the country ($74,825), and the median annual family income after taxes was $70,986 (compared to $60,270 for Canada as a whole). This significant increase in jobs has resulted in correspondingly large population growth. Alberta’s population has grown by almost a million since 2001 and now stands at 3,720,945.
This influx of jobs and migration to Alberta’s heated economy and the specialized nature of some of the jobs around the oil industry has fed demand for housing, especially short-term, multi-family housing. Throughout the province, at least 7,500 new units were added to the apartment universe in the past decade, with the bulk of that growth coming in Greater Edmonton (3,300 units), Calgary (1,500 units) and Fort McMurray (1,181 units). Fort McMurray’s explosive population growth (a 68% increase since 2001) has meant that new construction now takes up 40% of the local marketplace.
There was a brief interruption in Alberta’s economic good news, as the 2008 recession reduced demand for oil, but oil prices are increasing again, and the outlook for the commodity is good. The apartment rental market has also shifted in relation to the rise and the fall of the condominium market. The condominium market was stronger in Calgary ten years ago, resulting in a boom of construction that significantly increased supply. Now that the condominium market is softer, more developers have been drawn into rental. Edmonton’s building boom is already underway, and we predict that Calgary’s new apartment construction will explode.
In terms of rents, Fort McMurray’s average rents are higher than Toronto or Vancouver. Edmonton and Calgary’s rents are also on the increase, with Edmonton’s rents rising over 28% over the past five years, and Calgary rising by 15% over the same period.
These rising rents, combined with a more landlord-friendly tenancy act and development charges that are lower than those seen in Ontario and British Columbia, have made new construction highly economical, especially in wood-frame low-rise construction where, in many cases, the resale market has increased building prices beyond replacement value. In addition to Calgary, Edmonton and Fort McMurray, new construction has also taken place in Lethbridge, Camrose, Grand Prairie, Medicine Hat, Red Deer, Wetaskiwin and Sylvan Lake.
As oil prices are likely to stay high for the foreseeable future, the commodity should remain the mainstay of Alberta’s economy in the years to come, with considerable activity taking place in and around Fort McMurray as the oil sands are developed. Spin-off growth should also benefit Calgary and Edmonton, and vice versa.
Alberta has also taken steps to diversify its economy, building its high-tech sector. This will mean an increase in high-paying, high-skilled jobs, and an influx of young professionals to Alberta’s largest urban areas. Calgary and Edmonton are responding to the problem of urban sprawl by enacting official plans that call for the intensification of their urban cores, with increased densities along major transportation corridors.
More importantly, as Alberta’s population continues to grow, so to will the need for new educational institutions, and there will be a corresponding need for new student housing to serve those institutions. Alberta already has six universities serving 136,361 students in Edmonton, Calgary, Lethbridge, Camrose, Athabasca, and the University of Alberta has plans to expand its new campus on the south side of Edmonton.
Alberta’s diversifying economy and its strong commodities sector bode well for new apartment construction for the foreseeable future.
CALGARY’S NEW APARTMENT CONSTRUCTION WILL EXPLODE, WITH AS MANY AS 2,500 UNITS STARTING CONSTRUCTION IN THE NEXT TWO YEARS.
CONSTRUCTION INFLATION CAN RAISE COSTS OF NEW DEVELOPMENT
In any heated construction market, construction inflation is a concern to developers as it can raise the costs of new developments beyond what is economically feasible to build. In Alberta, the development of the oil sands and related growth, not to mention the rush to meet the increased housing demand resulting from job growth and migration, can absorb construction labour and building supplies, raising prices in the apartment construction industry.
In Calgary, concrete costs significantly more per metre compared to other centres like London, Ontario. In Alberta, this has given a considerable advantage to low-rise wood-built developments over high-rise concrete ones. Though the apartment markets in Calgary and Edmonton are so heated that older buildings are selling for more than the replacement cost of wood-built buildings, they haven’t reached the replacement cost of concrete buildings, yet.
INTERESTED IN NEW APARTMENT CONSTRUCTION IN THIS REGION? FILL OUT THE FORM BELOW TO REQUEST THE RECENT TRANSACTIONS.
Global Director Buildings
Mansoor Kazerouni is an Architect with over 27 years of experience and a significant portfolio of projects completed or underway across Canada, the United States, the UAE, Jordan and India. These include high density high-rise residential buildings, hotels, office, retail, institutional, and complex urban mixed-use developments. A number of these projects have been nominated for and received Urban Design and Architectural Design awards.
Mr. Kazerouni is the Global Director of Architecture at IBI Group, leading a team of over 1,400 Architects, designers and Engineers located in 60 offices worldwide.
Mr. Kazerouni has been a guest lecturer on the subject of architecture and mixed-use design at universities, conferences and various panels. He has also been interviewed on the subject by newspapers, architectural publications, television and other media.
Mr. Kazerouni's abilities and expertise in his field have been recognized by his appointment to the City of Mississauga's Urban Design Advisory Panel, the City of Markham’s Urban Design Advisory Panel and the City of Vaughan's Urban Design Advisory Panel. He is also a past Advisory Board Member of the Urban Land Institute, a member of the Ontario Association of Architects, the Alberta Association of Architects, the Nova Scotia Association of Architects, the Architects Licensing Board of Newfoundland and Labrador, and a member of the Royal Architectural Institute of Canada. He has testified as an expert witness at the Ontario Municipal Board and at Arbitration Hearings related to development sites.
Darryl McCullough CCIM SEC
Broker - Royal LePage Lakes of Muskoka Realty Inc., Brokerage
President - Crescent Equity Management Inc.
Since 1972, I have been given the opportunity to interact with seasoned partners and clients in structuring and organizing both simple and complex real estate transactions involving acquisition, disposition, finance, and consulting in Canada and throughout the United States. It has trained me to bring a unique, personal client-centered approach to each assignment, from simple to complex transactions and the diverse clientele who own them.
In 1984 I received the Certified Commercial Investment Member, CCIM, designation (www.ccim.com); an internationally recognized identity confirming amortized knowledge in the disciplines of investment, development etc.
Another prominent membership I thankfully am able to continue holding is with the U.S. based Society of Exchanges Counselors (www.secounselors.com). This organization shares my belief in pursuing and demonstrating problem solving techniques in the real estate industry based on proven principles of integrity, professionalism, and accountability. Through this organization I continue to dedicate myself to what is true in the discipline of real estate problem solving.
Technology coupled with a learned research and analytical skill set now allows me to carry out these functions with selected projects from my adopted Muskoka home.
I continue to maintain an ever changing “student” learning status not only related to the physical asset, but equal or more importantly, drawing out corporate/personal situations and objectives and then knitting together ultimate benefit packages based on creative solutions via time honoured formulas.