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Call it a rental boom.
A new report shows that Calgary’s commercial real estate sector is driven by demand for housing, resulting in unprecedented purpose-built rental development in the city.
“We’re seeing more multi-family purpose-built rentals constructed than apartment condominiums,” says Darryl Terrio, broker with Re/Max Complete Realty in Calgary. The Re/Max 2024 Commercial Real Estate Report notes purpose-built rental development starts overtook condominium starts for the first time in 2023.
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Driving that growth has been record migration to the city leading to Canada Mortgage and Housing Corp. reporting that rental vacancy was 1.4 per cent in the fall of last year.
“The influx of interprovincial migration and immigrants is challenging the city’s housing stock, with vacancy rates at the lowest level in a decade,” the report notes.
That led to “more than 3,000 new units” in the city in 2023 “in the Beltline, downtown and the North Hill areas.” Terrio adds that recent changes to zoning bylaws in the city, allowing for higher density housing in typically single-family detached home neighbourhoods, have spurred a boom in small-scale multi-family projects.
“It’s just so much more affordable and feasible now to build multi-family rental,” he says.
A factor in that is CMHC’s MLI Select program allowing builders to get financing with only a five per cent down payment providing the new build, or renovation on an existing building, meet certain affordability, accessibility and climate compatibility metrics.
“Everybody is wanting to build a fourplex or put a suite in their house, but once you’re into five units or more, you can qualify for this CMHC program offering 95 per cent financing,” Terrio says.
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The Re/Max report notes that multi-family development — next to industrial real estate — is not just the hottest sector in Calgary. It’s leading development across Canada due to record high international migration, sparking huge demand for housing that has outpaced supply.
“The big story is how much investment there is in multi-family unit residential affordable housing units,” says Chris Alexander, president of Re/Max Canada.
“For the foreseeable future we will see a lot of that going to purpose-built rentals and affordable multi-family housing.”
The report notes that — besides Calgary — Vancouver, Regina, Winnipeg, London, Ottawa and Halifax had vacancy rates below 1.8 per cent, driven by net international migration of more than 1.2 million people in 2023. Yet Alberta stands out in particular, adding about 202,000 more residents last year, or 4.4 per cent growth, the fastest rate since 1981.
The Re/Max report also highlights Calgary’s success in redeveloping downtown office space into rental and other housing, noting that by next year more than 11,000 people will live in the downtown core.
Alexander adds that Calgary’s multi-family market reminds him of Toronto’s market in the early 2000s.
“There was a lot of new construction development with condo towers and investors looking to rent them out,” he says. “There were a lot of people wanting to move to the city at the time, as well as investing in from across Canada and outside the country.”
That growing demand helped push prices to where they are today, with the average selling price of an apartment condominium in May sitting at nearly $700,000 in Toronto.
Alexander notes those investments 20 years ago were “big time” successful.
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