H&R REIT just sold Calgary’s iconic Bow office tower to Oak Street Real Estate Capital for $1.2 billion.
The transaction is part of what CEO Thomas Hofstedter called a strategic repositioning for his firm.
The sale of the 2.0 million sq. ft. Bow will reduce H&R’s Calgary office exposure from 9% of its portfolio to 3%. The deal also included the sale of the 1.1 million sq. ft. Bell office campus in Mississauga, Ont. for $457 million to Oak Street.
CBRE’s Alberta Managing Director Greg Kwong says the sale of The Bow, a 58-storey tower completed in 2013, should be seen as good news for Calgary’s commercial real estate sector.
“Oak Street is a major player that can buy real estate anywhere and they’re placing a big bet on Calgary when others are saying, Maybe not. This is a big vote of confidence from a group that looks at all markets and says, We like Calgary.”
"This is a vote of confidence from a major player who looks at all markets and says, We like Calgary."
The Bow is fully occupied by Ovintiv Inc. (formerly Encana Corp.) and Cenovus Energy, with long-term leases in place until 2038. H&R will hold on to 15% of the net rent from Ovintiv and will continue to own the block directly south of the tower.
A successful Stampede aside, it’s been a rough time of late for Calgary, whose downtown office vacancy in the second quarter hit a record 32.7%. Year-to-date, over 1.5 million sq. ft. of space has returned to the market.
But it's not all bad news! Technology continues to gain momentum in the downtown core, providing plenty of reasons for optimism. Most recently, Blackstone-backed global IT services company Mphasis announced it will be setting up a Canadian headquarters in Calgary, creating up to 1,000 local jobs.
Speaking of tech jobs, Calgary moved up six spots to #28 in CBRE’s 2021 Scoring Tech Talent report, which ranks 50 North American markets according to their ability to attract and grow tech talent.
Calgary saw 17.9% growth in its tech talent ranks over the past five years, for a pool of 46,700 workers. “Tech talent will be the key to a stronger recovery and a more robust economy going forward,” Kwong says.
And Oak Street’s big move on The Bow will no doubt encourage more businesses and investors to reconsider Calgary. “Oak Street has a great reputation and they’re smart people,” says Kwong. “If they see this as a good purchase, other investors should wonder what they might be missing out on.”