The Calgary downtown office market experienced 144,812 square feet of positive net absorption in the second quarter of this year. That marked the second consecutive quarter of positive leasing activity, according to a new report by commercial real estate firm CBRE.
“A significant portion of absorption came from WeWork leasing a combined 10 floors in the Edison and Stephen Avenue Place. These two locations mark WeWork’s entry into the Calgary market, the first of which is slated to open in late 2019,” said the report.
“Credit defaults and capital constraints continue to take a toll on demand for office space in Calgary as over 100,000 square feet from four leases was given back to the market this quarter. New capital required to sustain and grow energy companies remains non-existent and if this trend continues it will have adverse effects on office demand.”
The downtown office vacancy rate decreased to 26.1 per cent in the second quarter from 26.5 per cent in the first quarter.
Following two quarters of positive absorption, the suburban office market recorded 219,751 square feet of negative net absorption, increasing the market’s vacancy rate to 21.5 per cent in the quarter, up from 20.9 per cent in the first quarter of the year.
“Shifts in workplace strategy continue to take place as tenants consolidate their office footprint and explore alternative work environments such as co-working. As the demand for modern technological infrastructure increases, the current wave of flight-to-quality will pose a challenge for landlords of lower-class product,” said CBRE.
The report said the Calgary industrial market experienced another strong quarter with 512,305 square feet of positive net absorption. Despite marking the 10th consecutive quarter of positive absorption, a large amount of new supply caused the availability rate to increase by 60 bps quarter over quarter to 8.4 per cent.
“Notably all of the 1.5 million square feet of new supply delivered this quarter was completed on a speculative basis. With over five million square feet of industrial product having been delivered since the start of 2018, it remains to be seen how this recent new supply will be received by tenants.”