Calgary’s downtown office market continues to struggle with its vacancy rate rising again in the second quarter of this year, according to a report by commercial real estate firm Avison Young.
The report, released on Thursday, said the office vacancy rate was 26 per cent, slightly up from 25.6 per cent in the first quarter but down from the peak of 26.4 per cent registered a year ago.
Second-quarter absorption – the change in occupied space – was a negative 290,000 square feet in the core.
But Avison Young said the market has stabilized.
“Calgary’s economy seems to have found its bottom for this downturn and it appears to have stabilized for the time being,” said Todd Throndson, principal and managing director of Avison Young’s Calgary office.
“Average asking rents, vacancy and market activity are all sticking within the same set of data points quarter-to-quarter. Businesses, for the most part, also seem to be holding steady. They aren’t growing or downsizing on an overall basis. There is hope in the air on oil, which is trading at US$77.85 per barrel for Brent Crude as of June 28. The entire province is watching how the federal government delivers on its promise to expand the Trans Mountain Pipeline from Strathcona County (near Edmonton) to Burnaby, British Columbia.
“Large tenants are not the dominant force in Calgary’s office leasing market at the moment. On the whole, the average office tenant has shrunk in size. The lion’s share of deals being completed today are less than 10,000 square feet. This is leading landlords to make some tough decisions about repositioning their buildings to attract this smaller tenant type.
“In the past, landlords have enjoyed full-floor or multiple-floor tenancies in buildings with larger floorplates. Landlords of class B and older class A buildings are feeling the impact of this shift to smaller tenancies the most. While the costs associated with these repositioning projects are significant to landlords, they are a necessity to maintain the viability of their buildings and to reposition themselves for the active part of the market.”
Respected business writer Mario Toneguzzi is a veteran Calgary-based journalist who worked for 35 years for the Calgary Herald in various capacities, including 12 years as a senior business writer.