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December 13, 2019 | After the Boom: Secular Rightsizing continues in Canada

Danielle Park

Portfolio Manager and President of Venable Park Investment Counsel (www.venablepark.com) Ms Park is a financial analyst, attorney, finance author and regular guest on North American media. She is also the author of the best-selling myth-busting book "Juggling Dynamite: An insider's wisdom on money management, markets and wealth that lasts," and a popular daily financial blog: www.jugglingdynamite.com

Where business cycle downturns can last a couple of years within a longer-term secular uptrend of higher highs over time, a secular downturn typically lasts 15+ years in a grind to lower and lower lows that finally expunge the excesses of the secular boom.

After the 16-year secular upcycle in Canadian debt and real estate from 2002 to 2018, a secular downcycle is now in motion. At the forefront of the 2001-2011 commodities boom, Calgary is now 8 years into the ‘give back’ process.  So far, its commercial vacancy rate has risen from 0.2 percent in 2011 to 25% today–the highest among major Canadian cities–and compares with Edmonton at 14 percent and the Greater Toronto Area’s downtown office vacancy of just 2.2 percent, thus far.  See Strategic Group puts 50 Calgary properties, with $650M in mortgages, under creditor protection:

“You look at historical absorption rates in Calgary, this is a 12 to 15 year solution before we get to a normal market. And that’s a long time to wait”.  Riaz Mamdani, CEO of Strategic Group, discusses the company being granted creditor protection amid a tough time for Alberta’s economy. Here is a direct video link.

Rising commercial vacancies are a symptom of the secular mean reversion process underway in the Canadian economy and signal intensifying headwinds for businesses, consumers, landlords, developers, property prices, lenders and governments.  The impacts will not be contained in Alberta alone.

Repurposing to new business models and property uses, as well as new and more efficient resource utilization, are essential parts of the rebuilding needed.  A community in Edmonton is on the right track, as explained in the clip below.

See God’s Green Home: Amazing net-zero church and social housing project for more outside the box solutions.
A church in crisis took stock of their assets and built the first net-zero church and social housing project in Canada. They saved the church, saved the school and partnered to build 16 net-zero townhomes for refugee families in Edmonton, Alberta

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December 13th, 2019

Posted In: Juggling Dynamite

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