Calgary multifamily sees strong growth

Rental demand in the city center is driving growth.

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The city’s new multi-family residential sector is experiencing a renaissance, particularly downtown, with development in the first three months of the year far exceeding the historical average, according to recent figures.

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Avison Young compiled first-quarter market data showing the city saw about 1,800 new purpose-built rental and condominium units added to the market, well above the five-year average of about 700 units. .

“The big story, especially downtown, is the purpose-built rentals,” says Haig Basmadjian, partner at Avison Young, which tracks the Calgary market.

“The vast majority of projects in Calgary are purpose-built rentals due to what we’ve seen in previous years with the downturn in the condo market.”

The trend reflects Calgary’s years-long economic slump that prompted developers to switch condominium projects to purpose-built rentals as demand for condominiums waned, he adds.

“Historically, Calgary has never been as much of a city of tenants as other major Canadian markets.

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Today, developers are building concrete rental projects in central neighborhoods like the Beltline and converting downtown office buildings into rental properties, catering to young professionals working in a renewed energy industry and in fast-growing technology and finance sectors, says Mason Thompson, also a partner at Avison Young in the city.

“Today’s tenant is very different from 15 years ago,” he says. “They often rent out of choice rather than necessity.”

Since many have well-paying jobs, these workers are able to afford rents in excess of $1,700 per month. Thompson further adds that this reflects the fact that Alberta has the highest median after-tax income in Canada, according to Statistics Canada data.

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“Often they stay in one place for a year or two and then move out to test out another building.”

Amenities have become essential for new purpose-built rental projects, especially concrete constructions in the city center, in an increasingly competitive market, says Basmadjian.

“Amenities like underground parking, swimming pools, gyms and dog wash stations have become standard in many new developments.”

UpTen, a new concrete high-rise near the Beltline, “represents the trend of people looking for amenities,” says Shannon Mitchell, director of residential leasing at Strategic Group in charge of leasing the building.

Among its most requested features are those that facilitate remote working, including coworking spaces and virtual conference rooms.

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Other drivers of demand are rising mortgage rates and house prices, reflected by growing demand from young professionals moving out of Toronto and Vancouver, where prices are increasingly making home ownership out of reach, Basmadjian says.

“Many people are looking to Alberta and seeing a future where they can put down their roots and enjoy the affordability and lifestyle the province has to offer.”

Like housing prices, rents are lower in Calgary compared to other major markets, he adds.

Still, as prices continue to climb for single-family homes in Calgary, the city’s preferred housing type, the multi-family housing market may soon turn to condominium projects, Thompson says.

“Now that we’re seeing such demand for single-family homes with first-time buyer pricing out of the market, new condominium development is likely going to be explored,” he says.

“Anecdotally, it’s already a conversation the developers are having.”

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