Calgary’s development industry is urging council to accept a new suburban levy deal that adds about $8,000 per new home, but also demands the city commit to reining in the costs of building new communities.

The developers’ main lobby group hopes aldermen don’t tinker with the deal — although at least one admits she’s disappointed by it — but opposes the plan to make undeveloped areas help the city recoup three-quarters of the price tag for the proposed airport tunnel.

City hall’s debt and taxpayers citywide have long shouldered the burden for much of the costs of water systems, fire halls and the new suburban infrastructure.

The new deal doubles the land levies to help close the massive gap, bringing Calgary into the top one-third of Canadian cities’ developer charges, according to Mike Flynn, executive director of the Urban Development Institute-Calgary.

Developers are willing to swallow the added costs as long as council doesn’t intensify them, he said. But they draw the line at city planners’ assumption that the Airport Trail underpass primarily benefits new communities and therefore they should pay for it.

“To put 76 per cent of the tunnel cost on new homebuyers in the northeast communities is ludicrous,” Flynn said Friday, after the five-year agreement was released.

The industry instead wants the city to accept that the tunnel mainly benefits existing developments, which would mean the city would only recoup 17 per cent of the roughly $295-million project from new levies.

Ald. Jim Stevenson, whose ward includes the airport, said that new developments and existing ones should all share in the tunnel’s cost, since it’s a citywide project.

But the idea of getting back most of the millions for the controversial roadway is one Ald. Druh Farrell has been asking for.

“There was significant pressure from the nearby landowners to build the tunnel, so I would suggest that those who benefit, contribute,” the inner-city alderman said.

Farrell has been one of council’s strongest voices for ensuring suburban growth pays for itself. She said tripling the levies would have brought the city closer to keeping the burden where it should be.

“It’s certainly an improvement. However, we’re still digging a hole — we’re just digging it more slowly,” she said.

Mayor Naheed Nenshi has repeatedly warned new Calgary homes have been subsidized because of inadequate developer levies.

He said Friday that this isn’t a revenue grab, but an attempt to rebalance how the general public and new homeowners pay for interchanges, recreation facilities, and sewage pipes for the new homes.

“I want to understand if we’ve gone far enough,” the mayor said Friday.

Flynn suggested that if council wants to adjust the deal, it may as well just ask city managers and developers to start the negotiations all over.

“We can live with it, but it’s got to be near the tipping point to where development is going to move somewhere else,” he said, reiterating a well-used warning from the suburb-building sector.

Don Merlo, UDI’s chairman, noted that the $8,000-per-home increase would be lower in more densely built communities, and on townhouses or condos.

But Merlo also said that as that hike gets passed through home-builders and added into borrowing and profit-margin calculations, it will grow by the time it reaches new home buyers.

He said he’s comfortable with the deal, in part because of the city’s phase-in plan to only charge half the levy increase to much of 2011’s development. He also praised its commitment to study how to shave 10 per cent off the cost of the application process and technical specifications for new developments, such as concrete types and the strategic timing of sidewalk construction.

“That would go a big way to mitigating the impact to the . . . consumer,” said Merlo, senior vice-president of Brookfield Residential, Calgary’s largest suburban developer.

While the key negotiators are happy, Flynn admitted some developers “are going to go ballistic — but this is the best we could do.”

Meanwhile, the association for commercial property developers blasted the deal, releasing to members late Friday a letter that demands council not sign this deal without further study and consultations.

“Calgary has been known for years as a good place to do business. Such a reputation is hard to earn,” group president John Marotta, who wasn’t part of the negotiations, wrote in a letter to Nenshi before the deal’s release.

“The massive proposed increases in the commercial development cost structure are poised to ruin that reputation.”

The city is also agreeing to establish a fairer system of recouping growth costs for new projects that add density to existing parts of Calgary.

Positive momentum in the Calgary industrial real estate market continued into the first quarter of this year from a strong finish in 2010, says a report by Colliers International.

Vacancy declined from 5.57 per cent to 5.23 per cent — the sixth straight quarter of decreasing vacancy, excluding the Haworth manufacturing facility and the Enerflex fabrication facility, both over 300,000 square feet which became vacant in the fourth quarter of last year.

Those two buildings increased vacancy by 0.9 per cent on their own.

Joe Binfet, managing director of Colliers International in Calgary, said there are less options available for tenants in general and particularly in the big bay sector of anything over 50,000 square feet.

“We are seeing speculative development in the market. Three large distribution facilities are slated for the northeast,” said Binfet.

“Vacancy is decreasing. It’s a very positive market right now. We’re seeing retail driving some of the distribution expansion. Calgary is under-retailed and there is a strong demand for retail in town. We’re seeing distribution facilities pop up to support that demand.

“There’s continued optimism with the oilsands and oil over $100. We’re seeing companies poise themselves for growth. And the oil services sector continues to be strong in the industrial market.”

The Colliers report says continued stable demand is forecast for the remainder of 2011.

In the first quarter, there was positive absorption of 802,739 square feet in the industrial real estate market.

Sean Bradley, of the Advent Commercial Real Estate Group, said Calgary’s economy seems to have stabilized despite some pressing world concerns such as unrest in Libya and the aftermath of the earthquake and tsunami in Japan.

A Canadian dollar above par with the United States and $100 per barrel oil prices have contributed to positive momentum in the local real estate market, he said.

“Since the recession began two and a half years ago we have been slowly absorbing leftover vacancies from the boom times,” said Bradley. “The market now feels it’s time to ramp up the building development cycle.

“Contractors are busy quoting jobs that have a strong chance of going forward.”

According to commercial real estate firm CB Richard Ellis Ltd., the average net rent for industrial real estate in Calgary was $7.84 per square feet in the first quarter of this year, up from $7.71 in the previous quarter, and $7.35 a year ago.

CALGARY — First-time buyers have re-entered the Calgary resale housing market with “a renewed sense of confidence,” says a report released Tuesday by real estate firm Re/Max.

In the first two months of this year, 32 per cent of all sales occurred under $300,000 in Calgary, said the report.

Average price in the metro area was about $410,000, it said.

“The strength of the entry-level segment is good news for the spring market as sales of starter homes are expected to have a domino effect, prompting greater move-up activity in the weeks and months ahead,” said the report.

In the overall market, the number of homes sold in Greater Calgary is slightly below 2010 levels, with 3,199 properties changing hands as of February 28 versus the 3,297 sales reported during the same period last year.

“Rising consumer confidence levels, buyer’s market conditions, ample inventory and low interest rates continue to be the primary impetus among buyers, especially now that prices have resumed upward growth,” said the report. “Those who held off in late 2010 have finally jumped back into the fold.

“Overall, the majority of entry-level buyers are in their 20s and 30s. A growing number are singles, opting to get into the market earlier in life and build equity. With consumer confidence finally gaining momentum, an improving oil and gas sector and a brightening economy, demand for housing is set to rise this spring, while average price makes modest gains.”

CALGARY — Residential MLS sales in areas outside of Calgary fell in March compared with a year ago.

According to the latest Calgary Real Estate Board statistics, sales for the towns outside the city market fell by 22.93 per cent from 423 in March 2010 to 326 last month. Also, the average MLS sale price fell by 1.81 per cent to $354,262 from $360,805 a year ago.

In the country residential (acreage) market, sales dropped by 7.58 per cent to 61 in March from 66 in March 2010. The average sale price declined by 12.30 per cent to $850,930 from $970,295 a year ago.

And in the rural land market, there were only 13 sales in March compared to 23 in March 2010, a 43.48 per cent drop.

The average sale price, though, rose by 1.94 per cent to $462,712 from $453,926 last year.

The residential real estate market outside the city mirrored the trend in Calgary.

Single-family home sales dropped by 2.94 per cent in March compared with a year ago falling to 1,355 sales while the average sale price was down 1.77 per cent to $462,947.

Calgary’s condo market saw year-over-year sales drop by 4.6 per cent to 581 transactions while the average sale price also dropped by 5.35 per cent to $280,781.

When combining the entire MLS market in Calgary and area, total sales of 2,347 were down 7.42 per cent from a year ago, but Todd Hirsch, senior economist at ATB Financial in Calgary, said it was the highest monthly total in nearly a year. Plus sales in both the Calgary single-family home market and the city’s condo market were up in March from February levels.

“However, spring is typically a strong period for sales. So while the recent spike in sales is not surprising, it does suggest the market is in good shape,” said Hirsch.

“Rising inventory of homes for sale suggests the market remains in the buyers’ favour.”