Demand keeps pace with office space inventory
While Calgary could be edging toward an office overbuild, downtown demand remains steady, says a new commercial real estate analysis.
The Cresa report says new developments will bring office space inventory to more than 12.3 million square feet since 2006.
“That is an increase of almost 40 per cent, yet incredibly demand has kept up and vacancy, with the exception of a small window in 2009/2010, has floated in the low single digits,” said the report.
“So are we set for an overbuild? It is possible, but only if the sublease market comes alive and/or demand flatlines to augment the wave of new developments.”
Adam Hayes, principal at Cresa, said it’s difficult to determine if demand will be sustained.
“With regards to supply, there’s going to be a number of buildings that are delivered between 2014 and 2018 and we know what’s being constructed, when they arrive, how big they are, how much space has been leased and what backfill space will come as a result of the ensuing game of corporate musical chairs.
“The tough thing, though, is to say ‘are we set for an overbuild?’ Well, no one knows ex- actly if we’re headed there.”
Hayes said Calgary’s downtown vacancy rate jumped this year from about 2.5 per cent to 5.5 per cent. Year-to-date, about 1.15 million square feet of space has returned to the market.
“We’ve seen time and time again how resilient the city is in creating demand and its long-term approach to business,” said Hayes.
Michael Gigliuk, vice-president of Newmark Knight Frank Devencore in Calgary, said the 10-year historical average for downtown office vacancy is 7.1 per cent.