The final quarter of 2018 offered some hope for the beleaguered Calgary suburban office market.
According to commercial real estate firm CBRE, the suburban office market experienced 447,457 square feet of positive absorption in the quarter, marking the most active quarter since 2014.
For the year, absorption was a positive 436,671 square feet.
The suburban office market finished the year at a 20.9 per cent vacancy rate which was down from 22.9 per cent in the third quarter.
CBRE said positive absorption was fuelled by a few large transactions combined with tenants re-occupying excess sublease space.
“Despite positive fundamentals, there is still very little growth in the suburban office market with best in class product seeing the majority of the activity,” said CBRE.
Like the downtown office market, the suburban office market is seeing a flight to quality trend. In the fourth quarter, for example, Class A office space accounted for 72 per cent, or 319,918 square feet, of the positive absorption.
“Tenant migration from the suburbs to the downtown core has been another recent trend in office leasing. … This trend is the product of historically low rental rates for prime office product in the core and an increasing desire for high end amenities. In response to downtown competition, some landlords (in the suburbs) are now pursuing amenity improvements,” said CBRE.
The report said available sublease space decreased for the sixth consecutive quarter and is now 16.9 per cent of the total vacancy space or 900,702 square feet. At the height of the downturn it sat at 34.5 per cent.
CBRE said construction activity in the suburban office market saw a marginal increase in the fourth quarter. Two new buildings came under development which increased the pipeline to 157,915 square feet. However that is significantly down compared to the 10-year average of just over 1.1 million square feet.
Total inventory of the suburban office market in Calgary is just over 25.4 million square feet.
– Mario Toneguzzi