By Robert Frank
Roman Drohomirecki believes that it’s wait-and-see as to whether new office towers, beyond those already announced, will be added to the downtown Calgary skyline during the next few years.
“We’re bullish on Calgary,” declared Ivanhoé Cambridge’s co-COO. “Given the tight market, though, most of our growth is going to be organic. We’ve got well-leased shopping centres that are generating great sales, so there’s potential opportunity for expansion and redevelopment.”
“Nonetheless, the city has a history of frothy development. A lot of office towers have already been announced, and currently there is a bit of a prelease frenzy going on.”
“We’re seeing there’s a fair bit of sublease space available now that can fulfill short-term needs, so we probably won’t see more announcements in the short-term.”
“The velocity of deals has slowed down dramatically,” Drohomirecki also observed. “When some of this new product hits the market in 2014, with more coming in 2016 and 2017, something will have to give a little. Although rates are holding at the moment, they may come off a bit.”
“We’re already seeing some of that in Vancouver,” he continued. “The deals that are happening mostly involve landlords who are trying to retain their existing tenants. They’re pursuing renewals years in advance, to pre-empt the risk that the occupants of their buildings might start to look around—provoking another development cycle.”
Drohomirecki underscored that interest rate movement is a key variable at the moment.
“It’s no longer a question of whether interest rates will move,” he emphasized. “They will increase, and—when they do—how quickly they jump and how high they go before they plateau will shape our real estate investment decisions.”
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