Is the current rise in office leasing in Calgary’s downtown simply a flash in the pan?
In just 45 days, the first half of the third quarter, 200,000 to 220,000 square feet was taken up, just under one per cent of the 32-million-sq.-ft. downtown office market, says Andrew MacLachlan, vice-president of sales and general manager at Torode Realty.
The surge followed a first half in which there was a small absorption of 10,000 sq. ft. – a negligible amount on a market that size. Another large chunk of space left the sublease market as headleases expired and reverted to landlords.
“For the first time in 21/2 years at June 30, we showed positive change of some 10,000 sq. ft., and in the first 45 days of the second half we’re seeing a return of 200,000 sq. ft. of positive absorption, which is a strong indicator that the market has actually hit bottom and is beginning to see a recovery,” says MacLachlan.
The question remains whether the leasing activity is the start of a recovery in the downtown lease market, or pent-up demand for space from office users.
But after 10 quarters, it’s exciting to see positive absorption. Even if this is a recovery, it will still be a tenant’s market for a year or so. Vacancy would have to hit one million to 1.5 million sq. ft. for market equilibrium, where landlords and tenants have equal purchasing power. That would be about six-per-cent vacancy.
“Effectively, we’d have to wipe out the sublease space and start chewing into the headlease vacancy,” he says.
Torode’s figures put total downtown office vacancy at 12.4 per cent, or 3.87 million sq. ft. There is only 1.5-per-cent vacancy in the most prestigious, Class AA buildings, 16.8 per cent in Class A, and 13.9 per cent in both Classes B and C.
A 539-acre parcel of undeveloped land is on the market at Seebe, 28 kilometres east of Canmore and west of the Stoney lands.
Colliers International says the site, now owned by TransAlta Corp., will be sold by competitive public offering until Oct. 27. There is no asking price set. Rob McElhoes, with Colliers investment sales in Calgary, says the value will be driven by the developer’s vision. The land is currently zoned for agricultural conservation, but the municipality is considering rezoning for resort use, the most likely use.
The property has extensive Bow River waterfront and spectacular mountain views, and is 45 minutes from Calgary.
The cooling in Alberta’s housing market should bring a soft landing, says a survey by a national real estate company.
A panel of experts assembled by Century 21 Real Estate Canada Ltd. concluded that Alberta and Ontario markets have peaked.
House prices in British Columbia and Quebec should keep rising faster than inflation due to pent-up demand and low interest on mortgages. Supply hasn’t kept up with demand in B.C. and Quebec, so price increases are likely to continue, said Century 21.
However, Rosalee Krygier, president of the Calgary Real Estate Board, said sales are actually stronger than last year in Calgary.
More listings are coming in so there is more inventory and prices are stable, she said.
Sellers have to be aware that it isn’t a seller’s market anymore and they have to price their houses accordingly. “There has been no indication of a downturn yet, and I’m not sure if it’s going to happen,” said Krygier.
