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Apartment sector leads lagging Alberta investment activity

Thursday, September 12, 2019

Altus Group’s latest report on investment shows that both Calgary and Edmonton’s commercial real estate sectors were down significantly in Q2, excluding the apartment sector  — and to a slightly lesser degree, the industrial sector  — which beat out hotel, office and retail in terms of investor interest.

In Calgary, 99 transactions over $1 million (representing a total value of $426 million) occurred overall in the second quarter. Of those, the apartment sector recorded 17 transactions worth $84 million — up 54 per cent from Q2 2018. The top transaction was the sale of Cedarbrae Manor to Mainstreet Equity Corp for $18.2 million.

“The apartment sector was actually one of the few positive notes to take out of this quarter’s results for Calgary,” said Ben Tatterton, Manager, Data Solutions at Altus Group. “The sector is down quarter-over-quarter, but it’s up 54 per cent from the same time last year, and on a year-to-date basis it’s up 150 per cent.”

In Edmonton, the apartment sector also led the way with 27 transactions, representing 31 per cent of market activity. Several large transactions occurred, including the acquisition of Insignia Tower by Boardwalk REIT. But overall, first half investment levels in Edmonton were down significantly from last year.

“Edmonton experienced a drop in apartment investment from both the previous quarter and the same quarter last year,” said Tatterton. “It’s also down 35 per cent year-to-date from the first half of 2018. However, along with the industrial sector, the apartment sector continues to gain more investment dollars than any other sector in Edmonton in 2019. There also continues to be interest from institutional buyers in Edmonton for apartment product, evidenced by the top deal in Edmonton in Q2, which was completed by Boardwalk REIT.”

Overall, the commercial real estate market in Calgary and Edmonton has been lagging throughout 2019 due to circumstances surrounding the greater economy in Alberta.

“The apartment sector hasn’t been immune to these forces and we’ve seen sporadic activity in terms of large transactions as a result,” Tatterton noted. “We anticipate this pattern will continue throughout the remainder of the year. However, there are market fundamentals, such as positive migration trends, rising unaffordability in the housing market, stable returns, etc. that will still drive and generate investment activity in multifamily apartments for Calgary and Edmonton.”

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