If you are like me, you may well have been asking yourself, “Why are developers still building more City Center residential towers when downtown employment is in decline. Doesn’t that mean the demand for living near downtown is also in decline?”
I thought it best to consult with someone who understands the dynamics of residential development in Calgary better than I. This led me to Urban Analytics (UA), a company specializing in maintaining data on current multi-family development projects in Calgary, Edmonton and Vancouver (available to industry stakeholders on a subscription basis).
Kimberly Poffenroth, VP Business Development and Andie Daggett, Market & Rental Data Analyst (Alberta) both shared some of their data on the 186 actively selling multi-family projects they track across the city.
I was surprised to learn, “Calgary’s rental market has remained strong throughout 2018 with 95% occupancy in the third quarter of the year.” Poffenroth added, “the new mortgage rules that came into play at the beginning of 2018 helped drive some success in the rental market, as many potential purchasers failed to qualify for a mortgage. This, in combination with the increasing number of amenities offered at new rental products, plus rental incentives offered at a majority of rental projects, helped maintain a strong new rental market across the city throughout 2018.”
Daggett add, “as a result, new rental product in Calgary has been able to increase the average net rent per square foot while maintaining low vacancy rates.”
Poffenroth, chimed in with “I don’t believe the end goal for most Calgarians is to rent forever. They want to buy a condo or a home. However, the new mortgage rules may push potential purchasers to rent for longer than they originally anticipated. Condo developers have responded appropriately to the changes in the current market conditions through launching price-sensitive product that allows purchasers to obtain home ownership at a more affordable price. There have also been a number of successful higher-end projects, appealing largely to a downsizer crowd, which have continued to show signs of success.”
Indeed, the 2018 Calgary survey “Calgary Growth Perspectives Tracking Study” by ThinkHQ Public Affairs found 79% of Calgary renters say that if it were feasible, they would like to own their own home.
Rental vs Condo
It is important understand the condo and rental markets are closely linked when it comes to multi-family residential development. The “waters are muddied” when you add in the fact that over the past few years, some condo developers have converted their unsold units into rental units for the time being.
In addition, many condo buyers are investors who rent their units. It is not uncommon for a new condo building to have as many as 25% of their units for rent.
Another factor linking rental and condo developments is that today’s renter could well become tomorrow’s buyer. I often say “empty nesters and young professionals should rent before they buy to determine how much space they really need and if they like the urban lifestyle.”
Renting also allows you to test drive the community to determine if it has what you want i.e. Inglewood is not the Beltline; Bridgeland is not Kensington.
New Condos, Good News
For the first time in three years, new condo projects have been announced in the City Centre.
Nude by Battisella is a 177-unit development in the end of the Beltline. They began selling units in September and have sold 35 units in the first three months. Their funky condo INK in East Village is now complete and purchasers have moved in. It has only 10 units left to sell.
TAK Developments started to market “The Fifth,” their 48-unit boutique condo at the corner of 17th Ave and 5th St. SW in the Fall of 2018. This is the beginning of CEO Frank Lonardelli’s vision of converting 17th Avenue into a vibrant high street with a mix of new retail, restaurant and residential developments. And just a few blocks away in Mission, Mission 19 Ltd. has launched sales of their 67-unit Matrix condo. Also, in Mission, Bowman Developments has sold 20% of the units in their recently announced 82-unit condo, The Nest.
Other City-wide hot spots
The new northwest inner city community, University District (by The University of Calgary’s West Campus Development Trust) has been a huge success to date. As of the end of November 2018, 128 residents have moved into Brookfield Residential’s Ivy and Truman’s Noble projects. It was also a busy year for new starts – Maple by Truman (independent living for seniors), Rhapsody by Gracorp (rentals with Sav-On Foods + 10 retail units), August by Avi Urban (just broke ground) and The Brenda Strafford Foundation’s assisted and long-term care building. As well, University District has a call for proposals for two mixed-use blocks across from the Cineplex complex.
In all, a whopping 800 multi-family homes are currently at various stages of construction in University District.
Westman Village in Mahogany has also been very well received. This unique, resort-style community that opened its first phase this year already has 230+ residents. This number will grow to 1,200+ people when all 860+ residences are completed.
It would appear there is a lot to be optimistic about when it comes to living near downtown. The 2018 census showed the Beltline was Calgary’s fastest growing community with 1,668 new residents over the past year. Downtown West and Eau Claire also showed healthy growth, with all communities surrounding downtown experiencing some growth.
So, while downtown is struggling as a place to work, its surrounding communities are continuing to bloom (not boom) as places to live!