Calgary Downtown Office Report VS 5 other major cities in Canada
Coming out of a quarter that saw a downtown office vacancy rate of 25.13% and a feeling of cautious optimism, that sentiment has taken a more pessimistic turn as oil prices continue to languish and the vacancy problem persists due to the long-term oversupply of inventory.
* The Q2 vacancy rate is now 27.20%, an approximate 2% increase from last quarter.
* With the downturn in the Calgary economy, landlords have become more creative and flexible in order to be competitive.
* Higher demand for finished space in move in condition has continued to be a prominent trend in the downtown office market.
Of the three major markets, Calgary has a slightly larger inventory at approximately 70 million square feet. This is followed up by Vancouver at 63 million square feet and Edmonton at 29 million. That being said, of the two Albertan markets, Edmonton is just under 18 per cent regional vacancy rate and Calgary is nearing 23 per cent, whereas Metro Vancouver has experienced a significant decline since the last supply boom, resting at a 6.3 per cent regional vacancy rate.
The demand in the Vancouver market is largely driven by the technology sector, which currently represents 18 per cent of the downtown market, and the current demand for space is nearly one million square feet (based on mandates tracked by Colliers internal reporting and understood as a proxy to the market). The decline in vacancy and solid market fundamentals is a result of the Vancouver market maturing and diversifying over the last couple decades, moving away from predominately mining and forestry related industries to professional service firms, health care, education, consumer goods, and, of course, technology.
The Calgary office market is still largely energy focused, with nearly 77 per cent of the downtown office market involved in the energy market: 55 per cent in oil and gas exploration, 10.66 per cent in engineering and energy services, and 10.89 per cent in pipeline midstream. That being said, Calgary is starting to see more technology related industries absorb high quality office space due to the opportunities with high vacancy and lower rental rates. With the market still recovering since the drop in oil prices, different industries within Calgary have seen this as an opportunity to attract talent from the Energy sector and grow their organizations within the market.