January 2008 Leasing Report

Commercial real estate market in the Bow Valley (Banff, Canmore and Exshaw) has been increasingly strong and steady over the past few years. There is still a reasonable supply of retail space as a result of new construction downtown, on Railway Avenue and Bow Valley Trail. Office spaces are found in varying sizes and quality throughout town as a result of the revised land-use bylaw that considers second floor offices as a discretionary use Elk Run. Industrial bays remain scarce in Canmore and Banff thus creating demand for space in Exshaw. Sale prices have seen significant increases and purchasers continue to demand property in all sectors.

Availability: The newer major commercial buildings are now filling up.  These new buildings are off of our popular Main Street and tend to be slightly more expensive due to construction costs so they take longer to attract tenants.  There have been no new industrial buildings since 2004.  A new industrial building will be built in 2008 with lease rates from $18 to $22 per square foot.  

There is virtually no vacant retail space on our Main Street, but there is limited available new space in locations, such as 10th Street Railway Avenue and local neighborhoods.  

Office space is typically easier to find due in part to the revised land use bylaw in Elk Run, which now permits second floor offices as a discretionary use. 

Industrial bays remain scarce and have been since 2005 when the last industrial project came to the market.

Rates: Lease rates in all sectors have increased modestly over the past several years, despite a marked variance in availability of space.  A unique phenomenon in Canmore is that the rental market has not responded to scarcity with large rate increases because many local tenants are very small businesses that are unable to take on significant amounts of new work and thus have limited growth potential.

Average net lease rates per square foot per annum as follows:

• Industrial bays  $14 to $18 Second level industrial $8 to $12
• Offices $16.00 to $22.00
• Main Street retail $30.00 to $35.00
• Secondary retail downtown and Bow Valley Trail  $22 to $28

The above noted rates will vary by property depending on amenities and location.

Sales prices for commercial properties continue to increase*. Recently we have seen smaller properties selling for capitalized rates as low as 6%, compared to the “cap” rates between 9% and 11% of just a few years ago.  This is driven by owner-occupant buyers who are prepared to pay significantly more for a space than they could rent it for over a ten -year period as they have the down payment, prefer mortgage payments over rent and have confidence that the market will continue to grow. 

The few major building sales we have seen have been in the 7% range. Property owners have been reluctant to sell, so major sales have been scarce. Demand for revenue and development properties remains strong. Developers and investors recognize that the town has grown in size and sophistication and see the potential of our commercial property.  

Land prices have also increased because Canmore has a limited supply of land. Bow Valley Trail land has sold at $1.3 to $1.6 million per acre this past year. Downtown land lots have sold for $1 million and more.

This report is intended as an overview of the Canmore Commercial real estate market. Every property and every transaction is unique. Please contact our office to discuss your particular requirements.