With Calgary Feeling No Pain, Work on 1M-SF Office Tower Continues

As major cities across the nation see office projects put on the sidelines for lack of pre-leases, in Calgary developers of speculative office projects like the 1 million-square-foot Phase I of the $1 billion Eighth Avenue Place aren’t giving much thought at all to the idea of bringing construction to a halt. “We’re not slowing down at all; we’re on moving as planned and we’re on schedule,” John Smith, vice president of Eighth Avenue Place’s manger VIC Management Inc., told CPN. It’s a comment rarely heard these days in the States. Montreal-headquartered international investor SITQ, Calgary’s Matco Investments Ltd. and Alberta-based Alberta Investment Management Corp. are owners of Eighth Avenue Place. Located in the heart of Calgary’s Financial District, the project, more familiarly known as Penny Lane Towers, is being erected on the former site of the Penny Lane Mall. The development (pictured) will ultimately consist of the 1 million-square-foot 49-story tower that is currently underway, and a 815,000-square-foot 37-story tower, which, as was originally planned, will be constructed as demand dictates. The first structure, scheduled for completion in 2011, will also feature approximately 60,000 square feet of retail space and a six-level underground parking facility to accommodate over 1,100 vehicles. The overall vacancy rate for Downtown Calgary office properties is just 4.64 percent, as per a fourth quarter 2008 report by real estate services firm Colliers International, compared to such previously hot cities as Manhattan, where the rate is 11.3 percent. Calgary undoubtedly induces occupancy envy in other metro markets, but the city’s real estate industry isn’t overconfident. That low fourth quarter vacancy rate was even lower, 3.21 percent, at the close of 2007. “We’re all taking it on the chin these days given the economic situation around the world, and we don’t know what it’s going to look like in two years,” Randy Fennessey, president of Colliers International Calgary, told CPN. Colliers is overseeing leasing of Eighth Avenue Place. But international economic turmoil and uncertainty are not halting building projects, predominantly because Calgary, as Colliers vice president Jim Rea pointed out, is the energy capital of Canada. “The economic industry of Alberta is the energy business, and Downtown Calgary is dominated by energy firms and energy-related businesses,” he explained to CPN. So even when the economic climate isn’t at its best, the energy sector–hobbled or no–usually keeps the city on its feet. “Calgary has always been a very strong market and we have high expectations of the market going forward,” Smith said. Many other office properties are on schedule to reach completion in Calgary two years from now, so Eighth Avenue Place won’t be without competition. Yet, the project’s team is still confident about lease-up. “This is a far superior building than any other in the city,” Smith said. “It’s Canada’s first office building to be pre-certified LEED-CS Gold, and the location and the quality of the property is very marketable. There are a lot of prospects for leases and we’ve been talking to a number of them.”