David Keam on the roof-top deck of the building where he is renting an apartment in Calgary, on Feb. 11, 2022.TODD KOROL/The Globe and Mail
In the summer of 2018, Deanna Di Paolo moved to Calgary from Sundre, Alta., and leased an apartment at Versus, a purpose-built rental building in the city’s Beltline neighbourhood, located just one block south of the downtown core.
Seeking to enjoy the advantages of an urban lifestyle without the hassles of home ownership, Ms. Di Paolo had many options to choose from – but choice in Calgary’s rental market wasn’t always a given.
Unlike cities such as Montreal, Toronto, or even Edmonton, where the percentage of renter households is 64, 45 and 35 per cent respectively, less than 30 per cent of Calgarians rent their home, a situation that limited the construction of purpose-built rentals over the past two decades and favoured multifamily condo development instead.
“There was a huge building boom and a lot of rental apartments were constructed in the seventies and early eighties,” says Shamon Kureshi, CEO of Hope Street Management. According to CMHC data, in 2020 three in five purpose-built rental units in Calgary was completed before 1980, and as these older, cheaper units served the lower end of the rental market, investment properties in condo buildings filled the needs of the upper end.
Located in top quality, newer buildings, units in the secondary rental market used to be unique in offering amenities such as fitness centres, swimming pools and hot tubs, Mr. Kureshi notes. “If you were to look at a purpose-built property, even if it was marketed as being luxurious, it would [have been] very difficult to a developer to justify the increased expense of some of those amenities. That’s where a lot of the private landlords prospered when everyone else was suffering.”
In the past few years, however, that’s been shifting – and today, Calgary renters have more choice than ever.
Perched in the 23rd floor of Versus, Ms. Di Paolo gets more than a two-bedroom unit with a gorgeous view of the mountains, and renting has allowed her the flexibility she sought. “I love the fact that they had a concierge,” she says. “I knew I wanted to travel, so I wanted to live someplace where they could water my plants while I was gone.”
Completed five years ago, Versus was at the forefront of a growing trend that would revitalize Calgary’s rental market in the city’s core.
According to CMHC data, more than 2,400 new purpose-built rental units have become available since 2017 in the city’s downtown neighbourhoods, including Eau Claire, Chinatown, the Beltline and Mission; and about 1,650 units are currently under construction.
But these units no longer target the low end of the rental market. Today, purpose-built rental buildings have amenities comparable to those available in higher end condos, a situation that Matthew Boukall, VP of product management and data solutions at Altus Group, describes as having exacerbated the competition between the primary and secondary rental markets.
In a city where nearly 40 per cent of all condo units in multifamily buildings are rented out in the secondary market, this new rental stock is affecting some Calgary landlords. “It’s a very saturated and it’s a very competitive market,” Mr. Kureshi says, adding that “… there’s a huge supply but no demand. Developers chose to convert their projects from condominium sales to rental-specific property as a way to weather the downturn.”
Shane MacDonald is a Calgarian who owns property in the city but who currently lives in Montreal. He owns a unit at Union Square, a high-end condo tower completed in 2009 in Calgary’s Beltline. But despite being located in a relatively new building and having high-quality finishes, Mr. MacDonald’s one-bedroom condo has been vacant since November. MacDonald is currently asking $1,775 a month for the unit, which includes parking and heating).
“I was getting about 100 views a day,” he says about his listing on Renfaster. “But nobody was calling me, then I dropped the price – I’ve dropped it twice now.”
He believes part of the reason is the lack of amenities in his building. For a homeowner in a service-rich neighbourhood, the absence of additional features in the building meant lower condo fees; but as an investor in an increasingly competitive rental market, this has become a disadvantage.
“[At] Union Square there’s no common space, and that might sway people’s decisions,” Mr. MacDonald says, relating to the appeal of in-building amenities for young professionals looking to live in a vibrant neighbourhood. “There’s rooftop common areas in some of these buildings; some of them even have swimming pools,” he says about newly built rentals near Union Square.
Indeed, last September David Keam rents a one-bedroom apartment at Upten, a purpose-built rental building completed in 2020 that’s located just five blocks south from MacDonald’s building. Mr. Keam pays $1,700 a month, which covers heating, and an additional $200 for reserved underground parking.
“We looked at probably 10 different buildings,” Mr. Keam says, but while he did consider renting out a unit in a condo building, the combination of incentives, services and amenities offered at a purpose-built rental were hard to beat.
“If you’re looking to rent a place downtown,” he says. “I don’t know why you wouldn’t go to a purpose-built [rental] building.”
At Upten, besides an assortment of common areas available to all residents, such as a rooftop patio and a co-working space, Mr. Keam says “there’s concierges and managers and people who can help you with things.” Similarly to Ms. Di Paolo, Mr. Keam also wanted a more relaxed living arrangement.
Furthermore, receiving a discount for signing a year-long lease meant Mr. Keam would save about $100 every month, an incentive that a private landlord such as Mr. MacDonald wouldn’t have been able to offer.
“If I can’t rent it for $1,700 or above, then I start to think about selling the unit,” Mr. MacDonald says. “Otherwise I’ll be losing money every month.”
Over the past year, rental units at new-builds such as Upten have quickly stabilized, according to data from housing market analysts Zonda, despite the increased competition, investors still have a pricing advantage over purpose-built rentals.
“If you are an owner who has one, two or three units, you’re going to price them at the higher end of the market, and negotiate down to fill that space,” Mr. Boukall explains, whereas purpose-built rental building managers resort to incentives such as rent-free months, free internet or free parking because they need to lease out the whole building.
The growing supply of purpose-built rentals shouldn’t be an issue for investors. As house-price growth in Calgary boosts rental demand over the coming months, the price differential between higher-end units in both the primary and secondary markets is likely to narrow.
“We’ve seen pretty strong demand for rental accommodations,” Mr. Boukall says, highlighting that this demand “is not being influenced by sudden shifts in employment, like we’ve seen in the past in Calgary.”
“We’re seeing demand for people wanting to live in the Beltline and in the downtown core.”
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