Calgary office vacancy moves further into uncharted territory as nearly a third of space sits empty
Many office buildings in downtown Calgary remain empty as the vacancy rate dropped to a new low of 32.7 per cent in the second quarter of this year.
in a report from CBRE, Canada’s leading commercial real estate service firm, year-to-date analysis shows over 1.5 million square feet of office space has returned to market, making this the worst half-year of fundamentals on record.
CBRE says the Calgary office market recorded 266,000 square feet of negative net absorption this quarter as vacancy advanced further into record highs.
Calgary lags behind other major Canadian cities where most are currently experiencing a gradual increase in downtown office leasing.
A recent resurgence in oil prices has given Calgary’s prominent energy industry new life but it isn't bolstering the office market as many companies no longer require the same number of office workers due to streamlined approaches to operations that began during the pandemic.
The suburban office vacancy rate rose a further 140 basis points to 25.5 per cent in Q2, breaking the record high set in the first quarter of this year.
Despite these negative fundamentals, the planned reopening of Alberta following pandemic-related restrictions promises new activity in Calgary that is expected to carry on throughout the year but may also lead to negative absorption as companies resize and shift their workplace strategy.
GROWTH IN INDUSTRY AND TECH
However, it was not all bad in Calgary's economic and office outlook. The CBRE report makes mention of the fact the technology sector continues to gain momentum in the downtown core, providing green shoots of much needed optimism.
Most recently, Blackstone-backed global IT services company Mphasis announced that it will be setting up a Canadian headquarters in Calgary with intentions to create upward of 1,000 local jobs over the next two to three years.
The report also shows growth in the industrial market for the first time in the last two years.
The industrial market recorded over two million square feet of positive net absorption for a second consecutive quarter. The 4.1 million square feet gain this year represents the largest two-quarter total in over 15 years.
Industrial space availability rate reached 6.6 per cent this quarter, a level not seen since before the 2015 recession.With little speculative development slated for completion in 2021, the availability rate is only expected to further contract.