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from the Star:
Calgary rents skyrocketing
Tops Toronto as the priciest place in Canada to lease office space
Nov. 21, 2006. 07:25 AM
TONY WONG
BUSINESS REPORTER
Armin Martens started his real estate investment trust two years ago with one $8 million property in Calgary. Today, his Winnipeg-based company has a portfolio of more than $500 million worth of commercial space, more than half based in Calgary.
"I keep flying to Bay Street to get the money, then flying back to Calgary to give it to them," Martens said in an interview. "The place is swimming in money. You won't be able to recognize it in 20 years."
Martens, the CEO of Westfield REIT, is building two new office towers in Calgary and he has no shortage of clients. As for his existing properties, Martens said he is virtually doubling rents as they come due.
Driven by Alberta's oil boom, Calgary has surpassed Toronto as the most expensive place in Canada to occupy office space, according to a global survey released yesterday.
The city moved up four places in a six-month period, to 31st place, in the study of occupancy costs in downtown financial areas by commercial realty firm CB Richard Ellis.
"We've always acknowledged that the Londons and Tokyos of the world were more expensive than Toronto, but that Toronto was at the head of the pack for Canada. But now that's changed, and it puts a different spin on things," said Ray Wong, national director of research for CB Richard Ellis.
It now costs the equivalent of $53.51 (U.S.) per square foot to carry an office in Calgary, compared with $52.80 in Toronto. Calgary's 0.6 per cent vacancy rate is the lowest in Canada as companies scramble to hire and keep workers. Toronto, in comparison, has a 9.7 per cent vacancy rate.
"If you want to be in the oil and gas business, Calgary is the place to be," said Wong.
"It's incredibly tight. You have clients anxious to get into space and creating multiple-bid situations where your vacancy rates are essentially zero," said Greg Kwong, executive vice-president and managing director of CB Richard Ellis Calgary.
Six months ago when the survey was last taken, Toronto was in 32nd place, edging Calgary by three spots. While the city actually surpassed Toronto in the third quarter of the year, it is the first time that this has been acknowledged in the high-profile study.
"Toronto will always be the financial-services capital, and that segment is still growing, but just not as quickly as Calgary," said Wong.
Over the next 18 months, about two million new square feet of office space will come onto the market, but that is already fully leased, said Kwong.
Space is so tight that some tenants are moving out to the suburbs, or even considering other cities altogether, such as Edmonton.
"If the situation continues, in another decade or so you might see another city develop out of Calgary such as you have in Mississauga," said Kwong.
Martins said his investments in Calgary have paid off handsomely, in the most unexpected ways. The cost of monthly parking, for example, has nearly doubled over the last year alone.
"When we purchased the buildings, we really didn't even think about parking as a revenue generator," said Martins. "But it's certainly nice to have."
The rise of Calgary is even more impressive once you factor in taxes, which are about half Toronto's, said Wong.
A top office building in Calgary costs $14.63 per square foot in taxes, while a similar building in Toronto would cost $29.85. High commercial realty taxes have long been a sore point in Toronto.
As other rents increased globally, Toronto actually fell two spots to 34th place in the survey, which looks at net rents, local taxes and operating costs to determine total occupancy costs.
Still, Canadian office costs are a relative bargain when compared globally.
Calgary is about one-fourth as expensive as London's West End, which tops the list at $212 per square foot.
Internationally, Asia-Pacific was the fastest-appreciating region, with many markets in India and China showing a greater than 30 per cent increase in occupany costs in only six months.
Calgary rents skyrocketing
Tops Toronto as the priciest place in Canada to lease office space
Nov. 21, 2006. 07:25 AM
TONY WONG
BUSINESS REPORTER
Armin Martens started his real estate investment trust two years ago with one $8 million property in Calgary. Today, his Winnipeg-based company has a portfolio of more than $500 million worth of commercial space, more than half based in Calgary.
"I keep flying to Bay Street to get the money, then flying back to Calgary to give it to them," Martens said in an interview. "The place is swimming in money. You won't be able to recognize it in 20 years."
Martens, the CEO of Westfield REIT, is building two new office towers in Calgary and he has no shortage of clients. As for his existing properties, Martens said he is virtually doubling rents as they come due.
Driven by Alberta's oil boom, Calgary has surpassed Toronto as the most expensive place in Canada to occupy office space, according to a global survey released yesterday.
The city moved up four places in a six-month period, to 31st place, in the study of occupancy costs in downtown financial areas by commercial realty firm CB Richard Ellis.
"We've always acknowledged that the Londons and Tokyos of the world were more expensive than Toronto, but that Toronto was at the head of the pack for Canada. But now that's changed, and it puts a different spin on things," said Ray Wong, national director of research for CB Richard Ellis.
It now costs the equivalent of $53.51 (U.S.) per square foot to carry an office in Calgary, compared with $52.80 in Toronto. Calgary's 0.6 per cent vacancy rate is the lowest in Canada as companies scramble to hire and keep workers. Toronto, in comparison, has a 9.7 per cent vacancy rate.
"If you want to be in the oil and gas business, Calgary is the place to be," said Wong.
"It's incredibly tight. You have clients anxious to get into space and creating multiple-bid situations where your vacancy rates are essentially zero," said Greg Kwong, executive vice-president and managing director of CB Richard Ellis Calgary.
Six months ago when the survey was last taken, Toronto was in 32nd place, edging Calgary by three spots. While the city actually surpassed Toronto in the third quarter of the year, it is the first time that this has been acknowledged in the high-profile study.
"Toronto will always be the financial-services capital, and that segment is still growing, but just not as quickly as Calgary," said Wong.
Over the next 18 months, about two million new square feet of office space will come onto the market, but that is already fully leased, said Kwong.
Space is so tight that some tenants are moving out to the suburbs, or even considering other cities altogether, such as Edmonton.
"If the situation continues, in another decade or so you might see another city develop out of Calgary such as you have in Mississauga," said Kwong.
Martins said his investments in Calgary have paid off handsomely, in the most unexpected ways. The cost of monthly parking, for example, has nearly doubled over the last year alone.
"When we purchased the buildings, we really didn't even think about parking as a revenue generator," said Martins. "But it's certainly nice to have."
The rise of Calgary is even more impressive once you factor in taxes, which are about half Toronto's, said Wong.
A top office building in Calgary costs $14.63 per square foot in taxes, while a similar building in Toronto would cost $29.85. High commercial realty taxes have long been a sore point in Toronto.
As other rents increased globally, Toronto actually fell two spots to 34th place in the survey, which looks at net rents, local taxes and operating costs to determine total occupancy costs.
Still, Canadian office costs are a relative bargain when compared globally.
Calgary is about one-fourth as expensive as London's West End, which tops the list at $212 per square foot.
Internationally, Asia-Pacific was the fastest-appreciating region, with many markets in India and China showing a greater than 30 per cent increase in occupany costs in only six months.