With an economy firing on all cylinders, insiders on Calgary's retail real estate scene are having to adjust to a market that forces them to forget everything they may have thought they knew about empty fields and the development-friendly cliché: "If you build it they will come."

In Calgary, it's more like: "We're sorry."

When it comes to retail space, Calgary offers a first-come-first-served market. If you wait until it's built, forget about trying to find a spot.

According to a new report by international commercial real estate company Colliers International, Calgary's retail vacancy rate hit an all-time low of 2.04 per cent this fall. Victoria, B.C., is the only Canadian city that may end the year with a lower vacancy rate, and since that city is widely recognized as a market anomaly, Calgary is obviously living up to its reputation as a primary focus of continental retailers, says Rob Walker, vice-president, partner and retail sales and leasing agent with Colliers' Calgary office.

If there's a downside to the figures in Colliers' latest semi-annual report on the retail market in Calgary, it's the fact that major retailers clambering for retail space just can't get it when or where they want it, says Walker.

Unlike Edmonton, which typically favours retail shopping and service areas in individual communities, Calgary's land-use policy encourages the development of town centres that often serve more than one community.

From a functional point of view, town centres such as those at Signal Hill, Westhills, Country Hills and Crowfoot work well. "From a competitive standpoint, for a retailer who's late getting into the market area, it may spell the end of them being able to get into that trade area ... because there's absolutely not a square inch of land available," notes Walker.

Calgary's approach also means land development is "a game now of pension funds and REITs, and the smaller developers generally can't play in that market. You're buying land for five years from now and that's a tall order for a smaller developer to pay, they just don't have the deep pockets."

All of which makes it "very challenging (for retailers) to get into new areas. There are areas of Calgary that Wal-Mart can't get into, or Safeway, or London Drugs," he adds. "The good thing is that Calgary's a great market. There's high income, rapid growth; all the major retailers want to be here."

Once relegated to B market status behind the likes of Vancouver and Toronto, Walker says Calgary "is now up there with Vancouver and Toronto as a place to be, day one, going in. This is a very strategic market because of the growth, because of the wealth here, because of the disposable income we have."

The Colliers report supports its conclusions with information from the Conference Board of Canada. It forecasts Calgary's GDP to hit 4.6 per cent in 2005. That's the highest in the country and it even beats Alberta's projected GDP of 4.2 per cent.

Echoing the same message touted by a strong residential real estate market in Alberta, the Colliers report credits record high energy prices, low inflation, low tax rates and a high disposable income for keeping Alberta retail sales above the national average.

Is there a downside to all of this success?

Not really, says Walker. "I would say if we were structured like Edmonton, yes, because there would be an overabundance of new construction. But because (the land is so controlled here) there's sort of a safety net."

Moreover, Walker sees no dark clouds on the retail horizon. First, the industry's strength is largely driven by residential growth.

The City of Calgary predicts 83,600 more Calgarians by 2010, with the outer suburbs posting the highest expectations for residential growth.

"With residential growth comes the need for basic services for people in a nearby area," says Walker.

In step with the strength of the current retail market, most major shopping centres in the city have already undergone significant rehabilitations to boost their competitiveness in a competitive industry, notes Walker. Others, such as Sunridge Mall in the northeast and Northland Village in the northwest, are in midst of renovations. The latter recently welcomed Calgary's first Designer Depot, one of the Hudson's Bay Co.'s first off-price retail store locations in Western Canada.

The influx of residential development in the inner core has also prompted dramatic changes in retail development in that part of the city. Walker expects the number of retail sites in the inner core to continue to rise, especially on the west side of downtown.

The Colliers report says new retail space construction planned or underway in Calgary further paves the way for continued strength. More than 2.7 million sq. ft. of space is planned or being built in northwest Calgary (most of it scheduled to open in 2007-2008). Six projects spanning another 1.2 million sq. ft. of retail space are also in the works for the southeast quadrant.

Deer Meadows is also poised for growth. Located off of Deerfoot Trail in the southwest, on a site Walker's peers describe as "probably the best power centre site in Canada," Deer Meadows will open its newest phase in 2006-2007.

Even with all this expansion, including another 508,000 sq. ft. in the northeast and 447,000 sq. ft. in the southeast, Colliers predicts Calgary's retail real estate market vacancy rate will drop even further between now and April 2006, bringing rent increases for streetfront areas and town centre developments.

All of which underlines the reasons for Walker's optimism. Retail sales may not drive Calgary's economy, but they're a good indicator of economic health and with so many arrows pointing up, it looks like this city's retail real estate industry is one boat that can't be rocked.

(Joy Gregory can be reached at joy@businessedge.ca)