Calgary’s First Speculative Industrial Development Since 2015 Commences

Building to start on 400,000 sq. ft. best-in-class industrial facility in Balzac

Calgary – September 14, 2017 – In a sign of growing investor confidence in Calgary’s recovery, Bentall Kennedy in partnership with Highfield Investment Group and Hillwood, are commencing construction of a 400,000 sq. ft. industrial facility on a speculative basis. In commercial real estate, building ‘speculatively’ is the practice of starting construction without having pre-leased any of the space, and is widely regarded as a strong sign of confidence of the future prospects of a market. Located on High Plains Industrial Park in Balzac, it represents the first major speculative industrial development since early 2015, when declining oil prices started to substantially impact the Calgary economy.

“This is a real statement of confidence in the long-term vitality of the Calgary market,” commented Iain Ferguson, Executive Vice President of CBRE Canada, who is leading the marketing of the project to potential tenants. “In recent years, the Calgary industrial market has grappled with the challenge of large amounts of new supply being delivered at the same time when tenants became increasingly hesitant to move due to the oil and gas downturn. However, tenant activity has roared back in Q2 2017 with absorption, the commercial real estate industries’ measure of tenant demand, back to levels consistent to the pre-downturn era. 

“As the recovery gathers steam, and Calgary’s importance as a distribution hub for Western Canada continues to grow, we expect tenant demand to remain high throughout 2017 and 2018. Given there has been no new supply of note for over two years, the High Plains facility is set to enter the market at a time when we predict falling industrial availability rates and a shortage of modern buildings that today’s tenants increasingly demand to fulfil their distribution needs.” 

Calgary’s industrial availability rate peaked at Q4 2016, climbing to 9.8% and has since fallen 50 basis points to 9.3% as at Q2 2017 with 584,000 sq. ft. of positive net absorption recorded in the quarter. With only 357,000 sq. ft. of industrial buildings currently under construction, and tenants expected to take up between 1.3 to 1.8 million square feet of space in 2017, CBRE forecasts the availability rate will likely dip below 7% by 2018. 

“Our decision to speculatively build such a large facility in Balzac is twofold. Firstly, it reflects our confidence in the long-term outlook of the Greater Calgary Area market and our appetite to increase our asset base in the city. Secondly, Calgary continues to evolve as a leading logistics hub in Western Canada with the effect of e-commerce driving this evolution. From 2018 onwards, we believe there will be a dearth of available buildings that meet the specialized requirements of retailers growing e-commerce fulfillment needs. Today’s retailers need high clear heights, dual loading and a large power supply to support future automation, all of which our facility will provide,” commented Adrian Munro, President of Highfield Investment Group.

The new facility at High Plains Industrial Park is set to benefit from Balzac’s emerging status in recent years as the premier destination for regional distribution in the Prairies. Located within Rocky View County, which comprises less than 5% of the total inventory of industrial buildings in the Greater Calgary Area, Balzac has attracted seven of out of the 10 largest industrial lease transactions in the last three years, totaling almost 3.5 million sq. ft. of space.

“Balzac has emerged as the destination of choice for large tenants looking to establish a distribution presence to serve not only Calgary, but all of Western Canada. Not only does it provide superior transport access due to its location on Highway 2 and Stoney Trail, it offers tenants approximately 50 per cent savings in property and business taxes compared to locating in the city of Calgary. We’re confident that our new facility at High Plain Business Park, and new partnership with Bentall Kennedy and Hillwood, will add to the success of Balzac as an industrial market,” added Munro.

About CBRE Group, Inc.
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