Downtown commercial real estate markets in both Edmonton and Calgary are heading for better times with anticipated declining vacancy rates as the economy continues to improve, say office leasing professionals.
Oilpatch mergers and acquisitions have opened up some sublease space in the Calgary marketplace over the past year, and combined with some retrenching in some sectors – including telecom – the total downtown vacancy rate is sitting at 8.6 per cent, according to a report released this month by Colliers International.
Vacancy rate is usually defined as the amount of vacant space divided by office inventory.
“We would expect the numbers to probably hold steady for the next quarter, and we’re pretty optimistic about later on this year and early next year,” said Colliers broker Mark Kolke.
There is currently nearly 1.1 million sq. ft. of available sub-lease space in Calgary, with 10.9 per cent total downtown availability – which Colliers defines as vacant space plus occupied space which is currently being marketed.
Kolke said an overall ‘belt-tightening’ in the energy industry over the past 18 months has returned some space to the downtown market. But strong activity in Calgary’s financial sector, including law firms, accounting and stockbrokerage companies, has helped balance the bulge in sublease space.
“The oil and gas business has retreated through mergers and belt-tightening, but at the same time, the fallout of a lot of those mergers are people who sell out their companies and go and start a new one,” then require new property, Kolke added.
The Colliers International report lists downtown premier Class ‘A’ office space vacancy at 6.07 per cent, down from the first quarter of 2002 and year-end 2001, a decrease that can be partly attributed to a large lease by the federal government in Encor Place.
Colliers expects that as the economy improves as predicted over the coming year, vacancy will begin to decrease in the downtown core, and space made available by recent merger activity – particularly EnCana – will begin to be absorbed within the next six months.
“That’s what’s increased our vacancy rate quite a bit, the sublease space that has become vacant,” adds Colliers research co-ordinator Laurel Edwards.
Although no new offices have been built in downtown Edmonton, there has been about 60,000 sq. ft. of new office/retail space built in the Southside District, according to a recent office leasing report by Royal LePage.
Edmonton’s central area has continued to post increasing vacancy rates, with overall Financial District vacancy rates increasing from 11.2 per cent in the first quarter to 12.1 per cent, while Government District vacancy has increased from 11.5 per cent to 12.1 per cent.
Total downtown vacancy in Edmonton is 11.2 per cent, but Royal LePage anticipates that rate will decrease throughout the remainder of this year with the city’s forecasted robust economic growth.
“This is probably the best it has been in a decade, even though there’s been a minor bump in the vacancy in the last six months,” observes Dean Wulf, vice-president and general manager of Royal LePage’s commercial real estate division.
Wulf predicts even more positive moves for downtown commercial activity, driven by northern projects that will rely on Edmonton’s service sector.
“Calgary may be a head office city, but we’re not,” he adds. “We’re more blue collar, and our downtown is fuelled by expansion in the industrial (sector). And industrial is going through the roof in Edmonton, which equates to more business happening downtown.”
