'At long last,' office vacancy rate declines in downtown Calgary: report

There are signs that Calgary's huge glut of downtown office space is finally starting to get reabsorbed.

A report by the real estate brokerage company CBRE Ltd. says the vacancy rate is sitting at 26.5 per cent down from its peak of 27.8 per cent in the second quarter of 2018.

It's an indication that the layoffs have stabilized, said CBRE Alberta's regional managing director, Greg Kwong.

"They've just stopped the four or five hundred people being laid off like we saw a year or two years ago, where large companies like Cenovus and Suncor and basically all the major oil companies were laying off in droves we don't see that happening right now," he said.

Calgary saw 289,515 square feet of positive net absorption of downtown office space in the first quarter of 2019, the most significant quarter of positive absorption since the oil downturn started in 2014.

The report says tenants are now taking back space that they had listed for sublease, converting unused space to co-working configurations, and even turning unoccupied square footage into "amenity space" for their staff.

In Calgary's suburbs, the office market is relatively flat so far this year, with just under 15,000 square feet of net absorption in the first quarter.

"Due to comparable gross rents between Calgary's suburban and downtown markets, suburban landlords continue to face the threat of large tenants moving into the core in order to take advantage of superior amenities," the report says.

Warehouse sector thriving

By contrast, the report says Calgary's warehouse distribution sector is thriving, a reflection of the national trend to accommodate the shift to online shopping.

CBRE noted a large uptake in commercial warehouse space in the first quarter of 2019 by some major retailers, including Home Depot, which took a lease for a 418,346 square feetfor an e-commerce fulfillment centre in the High Plains Industrial Park.

"Calgary's industrial market, which has logged nine consecutive quarters of positive net absorption, had a further 649,080 square feetof space taken up in the first quarter of 2019," the report says.

Another 2.1 million square feet of industrial space is under construction and slated for completion this year.

"Both Calgary's office and industrial markets are offering promising indications that commercial real estate conditions in the city look to be improving at long last," the report says.