When a large, national Real Estate Investment Trust decided to offload their Alberta assets, they wasted little time disposing roughly $200 million worth of office buildings. These sales come on the heels of writing down $748 million for their portfolio in Q2 of last year.
The decision to sell was likely driven by the large amount of office vacancy in Calgary. Jane Gavan, the REIT’s CEO, thinks the vacancy problem will persist for awhile still:
“Even if the economy recovers, we expect it’s going to take some time for businesses to add people and to require more space”
While much attention has been drawn to Calgary’s vacancy rate and the foreseeable challenges in that market, the REIT also elected to include a number of office buildings in Edmonton into the disposition. Data has started trickling in from a few of the recent transactions and the prices are quite startling.
HSBC Bank Place: 10250 – 101 Street. 324,767 square feet. Sold for $35,000,000. Previously sold in December 2010 for $83,400,000.
Enbridge Place: 10130 – 103 Street. 263,660 square feet. Sold for $25,000,000. Previously sold in April 2010 for $90,850,000.
HSBC Building: 10055 – 106 Street. 118,747 square feet. Sold for $12,250,000. Previously sold in August 2011 for $28,570,000.
Milner Building: 10030 – 104 Street. 177,645 square feet. Sold for $7,500,000. Previously sold in August 2011 for $40,170,000.
Those four buildings alone declined $163,240,000 in a matter of 6 – 7 years. It must be distressing for owners of similar properties, however, we do not believe these recent sales to be indicative of the market as a whole. This was a case where a seller decided they wanted to lower their exposure to a particular market and did so in quick order. It will undoubtedly distort the market for other downtown office towers, but we do not believe it will spill over into smaller buildings or other asset classes.
Chad GriffithsPartner, SIOR, CCIM
Chad is a partner with NAI Commercial Real Estate and focuses on the Greater Edmonton area. Chad entered the industry in 2004 and has completed over 400 commercial transactions with clients ranging from small, local companies to large institutional owners. Chad has been a top 15 producer with NAI Canada-wide since 2013.
Ryan BrownPartner, BCom, SIOR
Ryan is a partner with NAI Commercial Real Estate in Edmonton and is currently ranked nationally as one of NAI's top advisors. Having executed in excess of $100 Million worth of sales transactions and over 2 Million square feet of lease transactions, Ryan has developed a firm understanding of asset evaluation and an aptitude for building design, functionality, and long-term practicality.
Darcie is a licensed Commercial Real Estate Agent in the Province of Alberta with a focus on the Edmonton market and its surrounding areas. Darcie accomplishes custom solutions for her clients through her personable nature and results driven attitude. Darcie can help if you are looking to invest in commercial real estate or are looking for representation for a sale or lease transactions.
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