According to commercial real estate firm Avison Young, Calgary’s overall office market recorded its fourth consecutive quarter of positive absorption in the second quarter of this year. That hasn’t happened since 2014.
This trend carried through to the downtown office market, which also registered its fourth consecutive quarter of positive absorption. That hasn’t happened downtown for the past seven years, added the report.
“The cumulative absorption for Calgary’s downtown office market for the first half of 2019 was 446,000 square feet. This amount of absorption is more than all of 2018, which saw a total of 400,000 square feet of positive absorption for the year,” said Todd Throndson, Avison Young principal and managing director of the company’s Calgary office.
“This high level of absorption is the direct result of three net new leases that were signed in second-quarter 2019 in Calgary’s downtown office market: Golder Associates relocated from the northeast into Stephen Avenue Place and WeWork signing two leases in The Edison and Stephen Avenue Place. These three leases are responsible for more than 50 per cent of the Downtown absorption in the second quarter.
“Downtown Calgary’s peak office vacancy is already past. Even with the addition of Telus Sky in first-quarter 2019, vacancy did not rise above the peak vacancy of 26.4 per cent recorded in second-quarter 2017 when Brookfield Place was added to the downtown office market. At this time, even pessimistic assumptions about the forecast no longer push vacancy above the peak recorded in second-quarter 2017. Pessimistic and reasonable assumptions predict some increase in vacancy in the near future, while optimistic assumptions think vacancy will decrease from this point forward. Twelve months from now vacancy rate predictions for each scenario are: pessimistic – 26 per cent, reasonable – 24.8 per cent, and optimistic – 23.5 per cent.”
The report said Calgary’s downtown office vacancy rate was 24.4 per cent as of second quarter 2019, which was down from 25.3 per cent at first quarter 2019 and from 26 per cent 12 months ago. Avison Young said modest positive absorption is anticipated over the next 12 months.
“A collective sigh of relief arose from Calgary boardrooms following the announcement that the federal government had approved the Trans Mountain pipeline,” said Throndson. “However, until construction is completed and bitumen is flowing, skepticism will remain. While the announcement is a good first step, companies in Calgary remain cautious. Federal approval of the pipeline is a single step on along journey towards Calgary’s prosperous future and serves as a harbinger of local business confidence.”
Mario Toneguzzi is a Troy Media business reporter based in Calgary.