Calgary suburban office vacancy continues to climb

"Landlords are expected to face steep competition from premium sublease space coming to market."

Suburban vacancy rates continued to increase reaching 17.5 per cent at the end of the third quarter, according to a report by JLL.

The quarter’s negative net absorption of 334,437 square feet pushed year-to-date net absorption into negative territory, erasing first quarter gains, said JLL.

“This trend was fueled by an increase of sublease vacancy from tenants temporarily downsizing during a fragile economic recovery amidst the COVID-19 pandemic. Large deals in the suburbs included a 6,000-square- foot transaction by Makita Healthcare Technologies at 110 12th Ave SW and a 15,000-square-foot lease by accounting firm KMSS at Hotel Arts,” said the report.

“In addition to deals done in Q1 and Q2, Alison College continued to expand in 3016 5th Ave NE with an additional 13,000-square-foot transaction. In other news, Calgary’s South Ring Road has been finally opened for traffic. The long-awaited highway expansion was first proposed in the 1960s and now opens up the city’s Southwest region for future development. During the highway’s inauguration ceremony, the Tsuut’ina nation, in partnership with real estate developer Candarel, officially launched Taza. The $12B development is the largest of its kind in North America. With flexible zoning and simplified development processes, it provides a unique of opportunity for new developments in the city. Taza is aiming to develop 25M square feet of residential, retail and office space in the next 25 years.”

The report said the approval of Bill 23 temporarily reduced the number of commercial real estate evictions in Alberta. 

“As the effect of this measure begins to dissipate,we expect vacancy rates to rise in the following quarters. Landlords are expected to face steep competition from premium sublease space coming to market. Favorable lease conditions and reduced rents will be key to attract new tenants.”

 

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