Calgary’s office market is still one of the best performers in the country, however a new report says the city will need a strong performance to absorb all the new supply set to come online.
In a report from CBRE, Calgary and Toronto were singled out as the best office markets in the country. Due to a heightened level of activity, the report did identify the possibility of an overabundance of supply.
“From a national perspective, the potential overshoots are in Calgary and Toronto, which are the same markets that were identified as risks in 2008,” said John O’Bryan, chairman of CBRE Limited. “These cities are the most dynamic in Canada in terms of office space absorption, but they will both need an economic performance similar to the post-2008 period in order to smoothly absorb all of the new supply that is coming on stream.”
Over the next two and a halfyears, Calgary’s downtown office market will be the recipient of six buildings with a total of 4.7 million sq. ft. of office space. Driven by dramatic growth in the oil industry along with a growing preference for living downtown, the report states the current development cycle will end in the fourth quarter of 2017.
The new development, as it’s currently planned, would equate to 12 per cent of the existing downtown office stock. Furthermore, there is an additional 2.9 million sq. ft. of downtown office space currently in the planning stage, about a million of which is expected to be brought to the market in 2017.
“There are parallels with the 2008 office development cycle both in terms of overall square footage and the markets that are involved. In order for there to be another positive outcome this time around, we require strong stimulus from a sustained recovery in the U.S., continued strength in commodity markets and an absence of major economic traumas for the next 24-36 months,” said Ross Moore, director of Research. “Increased business confidence will help spur the job growth that is necessary to absorb the new supply that is coming our way.”
Office construction has not been confined to downtown projects. The Beltline, which is separated from downtown Calgary by only a railroad track, has also emerged as one of the main beneficiaries of the construction boom. There are currently five buildings under construction in the Beltline, which will contribute 745,295 sq. ft. of office space to the downtown fringe once completed, plus another 1.2 million sq. ft. spread between four projects in the planning stage.