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Top Investor Edition: Why Downtown Calgary is Making a Big Comeback

by Corben Grant on 15 Sep 2022

Calgary presents an interesting case in the world of Canadian real estate, as the market in the city has seemed to follow its own course for many years. Now, as the rest of Canada corrects heavily amid rising interest rates, Calgary is holding much better than other markets, and the city that already presents great appeal to investors is starting to look even more appealing, especially in the multifamily sector.

To find out more about new opportunities in Calgary multifamily real estate, we spoke to Natasha Phipps, an investor, agent and founder of  Phipps Real Estate Group at CIR Realty. Phipps is also one of CREW's top investor agents for the city of Calgary.

According to Phipps, the market in the downtown core of Calgary was previously suppressed, first by the recession the city experienced in 2015, and later by the COVID pandemic that caused many to move towards the suburbs. Despite this, downtown Calgary is now making its comeback, and savvy investors may find great opportunities here.

“The inner city, the downtown sector was really the hardest hit during the recession in terms of low rents, high vacancy, and low economic activity, which caused landlords to struggle. Now it’s very much the opposite, where there are plenty  of people moving to Calgary, businesses are relocating to Calgary, and that story of our downtown and the inner city is shifting right before our eyes here.”

“The multifamily sector is so important for Calgary, especially as vacancies are dropping because we don't have a lot of density here compared to other major Canadian cities. I think with the shifting markets now and the increased economic activity in the city, it's a really good time to be looking at multifamily in Calgary, whereas several years back, I would have been more hesitant to recommend that to investors.”

There are a few reasons why downtown Calgary should be appealing to investors now. One is that given the past difficulty seen in the area, there are great options for investors looking to purchase underperforming properties and employ a BRRR strategy. The other appealing option is the many new developments being constructed in the city.

“For the resale sector, most of what you'll find are older buildings which might need some work. So, there's a good opportunity to use a BRRR strategy on these types of buildings. The reason for that is when we came into the recession in 2015, landlords were just trying to keep their heads above water, keep bills paid, and units filled as best they could. Capital expenses maybe weren’t at the top of their to-do list, so there are definitely tired buildings out there that could absolutely use some fresh management. That's a huge opportunity for investors willing to take advantage of that.”

“The second thing we're seeing is a lot more new construction in the small to medium-sized multifamily segment. A lot more developers are doing land assemblies and putting up 6 to 24 units. So buying new is an option as well, maybe not so much so as resale, but developers are certainly looking at Calgary.

Another benefit is that Calgary has very favourable taxes and landlord laws, which makes it ideal for property owners, especially those who may just be getting started. This is even more relevant in the multifamily space, where properties are run much more like a business, and their value is tied closely to their income. Alberta has some of the lowest business taxes which can help investors find even better returns.

“When you're looking at the multifamily sector your property value is determined similarly to a business. So your lender is going to care a lot about those income and expense numbers and how you're running your property. Some of the easiest ways then to increase a property’s value are with proper management and stabilization of rents for an underperforming building, and there's definitely a big opportunity for that here.”

“In Calgary, many of these multifamily landlords were just kind of hanging on for the last seven years or so. Now there's a good opportunity right now for investors to pick up these projects, and stabilize rents. And because we don’t have rent control, you can bring them up to market rents within a year's time of purchasing a multifamily asset, which will, in turn, increase the value of your building.”

It seems that even despite a changing market, Calgary is still moving ahead with its diversification and growth, in real estate and beyond. The rental market is very hot and new purpose-built rentals are being constructed regularly. Along with this, the diversification of the local economy and the influx of new residents means that investment now may pay off very well in the future, as the city continues to mature. 

“In the current climate in real estate, there is a lot of fear out there. In terms of property values dropping while interest rates are rising, that’s making people uneasy. What that also does is drive the average consumer to find affordability. Calgary is still a very affordable place to live, and the amount of interprovincial migration occurring right now combined with the incredible economic activity that's going on is going to really insulate Calgary from the same sort of  uncertainties that some other major Canadian cities might be anticipating.”

For those interested in getting started in Calgary multifamily, Phipps offers some tips that will be crucial, especially for those coming from single-family residential investing.

“Yeah, the most critical first step to getting into the multifamily space is really looking at the financing, it is a very different process. In multifamily the fees are very different, the due diligence is more substantial, and how we analyze properties requires a shift in mindset from residential. You also need to think about the structure of how you will be buying, such as using a corporation, or a limited partnership for example. All this upfront work really needs to be done before we can go out there and get to work on the buying side.”

The best way to get started: Talk to an agent or broker who knows the field well, and can steer you in the right direction. Natasha Phipps and her team have years of experience investing in Calgary and helping their clients to do the same. For more information on opportunities in Calgary and to take your first steps, visit Phipps Real Estate Group online, or join the discussion on the Calgary Real Estate Investing Facebook group.

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