Downtown office space fills up at record rate
Central core vacancy drops to 5.7 per cent
By Mario Toneguzzi
Calgary Herald December 22, 2011
Demand for Calgary downtown office space reached new heights in 2011 with record leasing activity.
A report by CBRE Ltd., published Wednesday, says the downtown market saw net absorption - the change in occupied space - of close to 2.6 million square feet in Calgary in 2011. That pushed the overall central core vacancy rate down to 5.7 per cent in the fourth quarter of this year from 7.0 per cent in the third quarter.
A year ago, the downtown office vacancy rate was 13.0 per cent.
"The fourth quarter capped a stellar year for Calgary," said Greg Kwong, executive vice-president and regional managing director for Alberta for CBRE. "The delivery of The Bow in 2012 will mark the continuation of our momentum and will symbolize the bright future that lies ahead for Calgary.
"Office demand was high again this year for the same reasons as 2010. The oilsands sector is booming again and related companies are leasing space to accommodate expansion. . . . We should get at least one more new building announced next year."
The Bow and its nearly two million square feet of office space will be home to energy giants Encana and Cenovus.
On Tuesday, the owners of Eighth Avenue Place announced they were going ahead with the second tower on the downtown site, a 40-storey, 850,000squarefoot office building that should be ready for occupancy in 2014. A 49-storey, 1.1 millionsquare-foot office tower exists on the site of the old Penny Lane complex.
Oxford Properties is in the pre-leasing stage for a proposed 25-storey, 615,000-square-foot tower.
Susan Thompson, business development manager of real estate for Calgary Economic Development, said the downtown office market is primarily driven by the oil and gas industry. "And we've seen fairly strong growth in that category this year. They're obviously growing and looking for more space," Thompson said.
"Every indication is there that it will continue to grow in the new year."
In its report, CBRE said the overall Calgary office market, including the suburban category, saw its vacancy rate drop to 7.1 per cent in the fourth quarter from 8.0 per cent in the previous quarter and 13.2 per cent in late 2010.
CBRE said the Calgary industrial market added 900,000 square feet of space this quarter, the most since the fourth quarter of 2008 as developers look to take advantage of economic growth in the region.
The overall availability rate in Calgary's industrial real estate market rose to 4.9 per cent in the fourth quarter from 4.3 per cent in the third quarter.
In its National Office and Industrial Trends Fourth Quarter 2011 Summary Report, CBRE said total absorption of office space across the country was just under eight million square feet, up from five million square feet in 2010.
The vacancy rate for Canadian downtown offices fell from 6.3 per cent last quarter to 6.1 per cent in the fourth quarter. The suburban market, however, saw vacancy rise by 10 basis points to 10.7 per cent, the second quarterly increase this year.
"Despite the apparently never-ending problems in Europe, the Canadian commercial real estate market continues to move forward, albeit slowly," said John O'Bryan, vice-chairman of CBRE.
