Calgary Is Best for Commercial Real-Estate Returns on Oil Boom

Calgary was the best city for commercial real estate investors last year, according to a global survey by Investment Property Databank Ltd. in which the top 10 locations were all in North America.

Rental income and higher property values in Calgary produced a return of 21.6 percent, the London-based research firm said. The Canadian city benefited from the booming oil and gas industries and a restricted supply of real estate, IPD said. Sydney and Cape Town, also dominated by commodity companies, generated returns of 9.9 percent and 11.2 percent.

“Real estate returns have been influenced by stabilizing or improving income, recovery pricing and safety-seeking capital shifts,” said Bill Hughes, global head of real-estate research and strategy at UBS Global Asset Management, which oversees almost $580 billion of assets.

London had a 6 percent gain in property values last year, the most in Europe, while New York real estate appreciated by 8.6 percent. The U.S. and Canadian markets recovered from the global credit crisis about 12 months after Europe, IPD said. The survey excludes China and some other Asian countries.

“The financial centers of London and New York benefit from the quality of real estate and tenants as well as market transparency and liquidity,” IPD senior director Peter Hobbs said in a statement.

Unsustainable Returns

Nineteen cities, including Boston, Denver and Montreal, had returns of more than 12 percent, the survey showed. That level of returns is probably not sustainable because it was driven by investors seeking a haven for their money or to profit from a recovery in local property markets, Hughes said.

Dublin was the worst-performing market covered by the survey, producing a loss of 1.9 percent. An investment in the city returned 0.6 percent during the past decade as rental income was almost completely erased by the collapse in real estate values, IPD said.

The best-performing cities of the past decade were Cape Town and Johannesburg, returning 19.4 percent and 17.3 percent, according to the survey.

To contact the reporter on this story: Simon Packard in London at packard@bloomberg.net.

To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net.