Bright prospects for Alberta are setting the pace for Prairie real estate markets in 2024, as strong in-migration buoys the hopes of investors.
Record in-migration is fuelling the Alberta economy, delivering workers to new major projects, spurring housing construction and demand for goods and services.
“It's responsible for the strong economy, and Alberta's economy is running stronger and has higher prospects than elsewhere,” Peter Norman, vice-president, chief economist and head of economic consulting at Altus Group said in a Nov. 8 webinar.
The influx of workers, combined with a conversion program that has shaved several points off Calgary’s downtown vacancy rates, has helped move the province’s office markets beyond their dependence on the energy sector.
“We're still seeing a number of lend-and-extends for the tenants that still want to be in space,” said co-presenter Ray Wong, vice-president and head of data solutions with Altus Group. “We’re also seeing rents continuing to be pressured in the way of net effectives and tenant inducements but the good news is sublets have broken off a little bit.”
Alberta’s recovery will set the pace for the other Prairie provinces this year as economic conditions stabilize.
RBC Economics estimates at the end of the third quarter indicate that Alberta’s country-leading real GDP growth of 2.2 per cent last year will shift down to 1.7 per cent in 2024, while Saskatchewan will see growth accelerate from 0.8 per cent to 2.2 per cent to lead the country.
The signs have been building for months, says Michael Bratvold, senior vice-president and managing director in the Saskatoon office of CBRE Ltd.
“We have the same challenges as everyone else,” he said. “But I think we’re in a good moment.”
The past 18 months have seen five canola crushing plants worth billions of dollars announced for the province, and the uranium sector is also on the upswing.
“There have been a number of projects there that have come back online that have been mothballed for some time, so that’s been very good,” he said.
Potash is another bright spot, with BHP Group approving $6.4 billion for the second phase of its Jansen project last fall and selecting Fluor Corp. to oversee construction.
“That’ll be the largest potash mine of its kind in the world,” Bratvold said. “We’re already seeing the trickle-down effect of these announcements, where you’ll get engineering firms tied to some of that development and construction work that are looking for a little bit of extra space.”
This is good news for Saskatoon’s challenged office sector, where vacancies approach 20 per cent.
“BHP has taken a fair bit of space this year, which is a really good thing … but it’s going to take some time to churn through the vacancy,” he said. “We do expect that to continue into 2024 and perhaps into 2025.”
Winnipeg is also showing signs of life. Manitoba’s real GDP growth is set to hold the course at 1.2 per cent this year, down marginally from 2023, as new investment in the Winnipeg core buoys hopes of renewal and CentrePort Canada attracts ongoing activity.
CBRE pegged the city’s downtown vacancies at 17 per cent last fall. The rate will rise as Wawanesa Mutual Insurance Co. consolidates four existing offices into a new 300,000-square-foot tower at True North Square, but the sale of one of its largest existing locations will mitigate some of the increase.
Other downtown space is being reimagined for the new hybrid work environment.
“Winnipeg has recovered quite well,” said Wayne Berger, CEO, Americas, with IWG plc, which is opening a second coworking facility in the city’s Exchange district this year and scouting additional opportunities across the province and Saskatchewan.
“Organizations are not compelled at this point to invest in a long-term lease and the millions of dollars of capital required to outfit and drive technology through an office they’re not even sure would be used,” he said. “We are a very powerful solution for building owners to help them monetize their space because we provide companies and people with what they want, which is space on demand.”
