Vacancy in Calgary’s downtown office market increased once again to 25.7 per cent in the third quarter, up from 25 per cent in Q2 and from 24.6 per cent in Q3 2019, according to a report by commercial real estate firm Avison Young.
But it said downtown Calgary’s office vacancy remains below the peak vacancy for this downturn of 26.4 per cent in Q2 2017.
There was negative absorption of 311,000 square feet during Q3.
“This was the largest negative absorption quarter Downtown Calgary has seen since Q3 2016, when -1.2 million square feet of absorption was recorded,” said Avison Young.
The report said total vacancy for the downtown office market is 11.8 million square feet – 9.4 million square feet of headlease (79 per cent) and 2.5 million square feet of sublease (21 per cent).
“There are 13 availabilities in Downtown Calgary with over 100,000 square feet as one contiguous block. These blocks of space represent 23 per cent of the total availability in the Downtown market with 69 per cent of this space available on a headlease basis,” said Avison Young.
Out of 169 office buildings currently tracked in downtown Calgary, there are four completely empty office buildings. There are an additional five properties that have greater than 75 per cent vacancy, it added.
“With an incredibly challenged market, landlords are looking everywhere for new tenants. We have started to see a migration of tech-based companies into Calgary’s downtown core. Two great examples of this are Symend and Userful. Combined, they took 105,000 square feet in First Tower through significant growth to their business. The combination of amenities, public transportation and cost competitiveness have allowed the downtown market to expand its reach throughout the city for new tenancy,” said the report.
“In counterpoint to this flow of companies into Calgary’s downtown core, suburban low-rise space has the potential to also increase in popularity as companies look to reduce their reliance on elevators and public transportation, due to COVID-19 sensitivities. Suburban space, with its high parking ratios and lower population densities, offers a different solution for companies. It will take time to see the larger pattern changes in the overall market, but we anticipate significant flux in what types of office space is popular. As such, office vacancy across Calgary is expected to be erratic in the coming quarters as companies decide their future drivers for space.”