COMMERCIAL LEASING REMAINS STRONG

Demand for Calgary downtown office space remains strong
Second Eighth Avenue Place tower nears being fully leased
By Mario Toneguzzi
Calgary Herald April 27, 2012

CALGARY — Continued demand for Calgary downtown office space has been so strong that the latest skyscraper project is getting closer to being fully leased.

Joe Binfet, managing director for Colliers International in Calgary, said the commercial real estate firm has received “tremendous traction” in leasing the West Tower of the Eighth Avenue Place development.

“There are only seven unencumbered floors left on which we can do lease deals on and remember this is a 40-floor, 841,000 square foot office tower. So that’s a significant sign of the strength of the Calgary economy downtown,” he said.

There’s about 150,000 square feet of vacant space in the second tower on the site which just recently began construction.

The owners of the project, which comprises a 49-storey tower on the site of the former Penny Lane block, recently said initial occupancy on the 40-storey second tower is planned for the spring of 2014.

The project is co-owned by Alberta Investment Management Corp., Ivanhoe Cambridge and Matco Investments Ltd.

The existing 49-storey tower, comprising 1.1 million square feet of office space, was completed in early 2011. Its construction began without any pre-leasing.

“There’s continued demand for AA and A space,” said Binfet.

“It’s not a frenzied pace like we were seeing earlier in the year but we are seeing cautious optimism in the marketplace and that bodes well for downtown office space right now.”

A downtown office report by Colliers said there has been 866,351 square feet of absorbed space in the first quarter of this year, marking the 10th consecutive quarter of positive absorption. The overall downtown vacancy dropped from 4.49 per cent in the previous quarter to 4.20 per cent “despite projections that the completion of The Bow, Encana and Cenovus’ new head office, would push the vacancy rate up across all building classes,” said Colliers.

It said AA and A class markets remain very tight with the AA vacancy rate at just 0.59 per cent. This is the lowest AA vacancy rate since 2006.

“Many companies with a long-term outlook for Calgary, and Alberta alike, are looking to new developments as their best leasing solution, given the limited availability within existing buildings,” added Colliers.

A downtown office market report by Avison Young said new office construction is not just possible but necessary.

“Vacancy models assuming even modest annual absorption in the area show downtown vacancy below three per cent for the next five years,” it said.

“It is likely that given the modest absorption rate we will reach sub one per cent vacancy in the downtown by mid-2013. What this means is that at least some major developments currently in pre-leasing will likely commit to construction within the year.”

Avison Young said this has already happened with Cadillac Fairview’s City Centre project while other major downtown developments could move ahead as well.

“Likely candidates include: Brookfield’s Herald Block, Oxford’s Eau Claire Tower, Aspen’s Palliser West and H&R REIT’s Bow South. All these developments are on a four-year or longer timeline so vacancies will remain very low.”

Photo by: Surrealplaces

BOW WOW

Calgary's The Bow: a new skyline symbol

NATHAN VANDERKLIPPE
CALGARY— From Wednesday's Globe and Mail
Published Tuesday, Nov. 16, 2010
 
More than 200 metres above Calgary’s streets, a crane swings a long metal beam atop the West’s new architectural crown.


The five-tonne length of steel is designed to support the upper reaches of the Bow, a building that is a study in superlatives: the largest building in the Canadian West and the biggest steel project in Canadian history


Kerry Gillis watches the beam move, and shrugs.


“Piece of cake on this job,” says the chief operating officer of Ledcor Construction Ltd., which is building the Bow and has hoisted steel pieces three times as heavy.

Earlier this month, Ledcor finished assembling the building’s steel. The building’s diamond-shaped “diagrid” supports will be completed by year’s end; the walls of glass will be installed by late spring. The Bow, the largest North American construction project outside of New York’s Freedom Tower, will then be externally complete.

There is a certain hubris that comes with building a two-million-square-foot tower that, long before workers had so much as dug the first spadeful of earth for its parking garage, was expected to become the new calling card of Calgary. Even competitors say the Bow is an icon for the city, a glass-covered fist thrust in the face of the recession.

It did not escape the downturn unscathed – financing problems by owner H&R Reit resulted in the suspension of plans for a second building. But construction on the main tower never stopped, and the money issues were eventually resolved with a $425-million financing deal last April.

Now, the building’s upper reaches are taking shape at a time of resurgence for Calgary, which has profited from a new wave of development in the oil sands, driven by sustained strength in crude prices.

As some of the final beams are lifted into place, Mr. Gillis glances across the skyline – or, more properly, down on it, from the lofty heights of what will soon be the new headquarters of Encana Corp. and Cenovus Energy Corp. Several blocks away, crews have pushed another huge new tower, the million-square-foot Eighth Avenue Place, high into the sky. It, too, is a construction monument in a city that is nearing completion on two new landmarks.

But Mr. Gillis scoffs at that tower, too.

“Piece of cake over there. This,” he says, casting a glance around the complicated work of erecting the Bow’s curving structure 58 storeys into the sky, “is real construction.”

The Bow contains 45,000 tonnes of steel connected with 45 tonnes of welding and 800,000 structural bolts, some of them so big they barely fit in a man’s hand. It has 40 elevators and is so tall workers talk about the different climate at its summit. From the ground, its enormous walls of glass – which span an area the size of 14 CFL fields – swallow the sky.

For its builders, all of those attributes have combined to make the Bow Canada’s most prominent billboard – a building that remains on budget, although it may be completed slightly later than expected. It’s a feather in the cap that Ledcor’s most ardent competitors have acknowledged.

“I would call the Bow a signature building in Calgary,” said Roger Dootson, the vice-president and district manager for PCL Construction Management Inc., who also chairs the Alberta Construction Association. “And signature and iconic buildings do help out a company’s résumé for future projects.”

Ledcor has a long history in Alberta. Founded in 1947, it has grown into one of Canada’s largest construction companies, with $2-billion a year in revenue. But in Calgary, the Bow has been a coming-out party of sorts for Ledcor, whose efforts in Western Canada have focused largely on the less-glitzy work of building pipelines and oil sands projects. For Ledcor, the Bow has become something of a marketing exercise for its bread-and-butter business of putting together industrial structures.

Standing on top of the Bow, the reason is obvious. In its nearly-complete shadow stand the head offices of much of corporate Calgary. Suncor Energy Inc. is a next-door neighbour. TransCanada Corp. is so close that Ledcor once received a call from a safety executive at the pipeline company, who had spotted a lapse on site through his office window. The problem was quickly fixed.

Ledcor has toured all of its major corporate clients through the construction site, in hopes of creating a profitable halo effect from the building.

“It’s expertise. They can see that we’re not just a one-line company,” said Bob Scott, the Ledcor senior project director who has led the Bow project.

And there is little denying the scale of the Bow construction effort. Because it was building in the middle of a crowded urban environment, Ledcor had little spare space to work with – and has had to warehouse most of its construction materials at a large offsite yard. The company was obligated to turn delivery timing into an art form.

Another unique aspect: To save time and costs, each of the restrooms in the building was built in Ontario as a fully-finished, fully-furnished unit inside a container. Each container was then shipped, lifted into place and connected to plumbing, ready for use. Even the light bulbs were screwed in several thousand kilometres away.

Ledcor also had to contend with hiring up to 1,250 staff – the Bow’s peak labour requirement – in a province that was, when construction began, suffering from an overheated economy. But it got lucky: The downturn came just as construction ramped up. Suddenly, workers from Fort McMurray became available.

That doesn’t mean the Bow has been Ledcor’s most profitable endeavour.

“These big trophy assets are difficult, and at the end you say, ‘I could have made more money building 10 smaller towers,’ ” said Greg Kwong, regional managing director for CB Richard Ellis in Calgary. “But at the same time, you need these big trophy assets as far as stars on your chest are concerned, to help promote your company.”