Calgary’s commercial market is flying high and spreading its wings. Once thought of as a bastion for homebuyers, the allure of the suburbs is beginning to wear off on commercial clients.
According to CBRE, the cost of renting prime office space in Calgary’s suburban market rose 16.3 per cent over the last year, placing the market amongst the top 10 risers in the world.
In a report tracking changes in costs across 133 global markets, Calgary’s suburban office market came in eighth, ahead of hot spots like Manhattan and Houston, and even topping Calgary’s red hot downtown market, where prices rose 11.1 per cent. As of the third quarter of 2012, the vacancy rate in Calgary’s office market sat at 4.4 per cent.
“Cost-conscious corporate occupiers in need of large blocks of space in markets with limited availabilities of prime office space sought opportunities in neighboring submarkets,” said the CBRE report. “This trend drove large increases in occupancy costs in Calgary (Suburban), Boston (Downtown) and Houston (Downtown) in the Americas; and Hong Kong (West Kowloon) in Asia Pacific.”
Heaping more praise on the health of the Calgary suburban office market is another report from Avison Young, which again highlights the growing importance of the city’s outlying areas.
“The lack of vacant large-block options in downtown Calgary has pushed some tenants into the suburbs, including Imperial Oil, which made an unprecedented decision to move to Quarry Park in the suburban south,” stated the report.
Also included in Avison Young’s findings was the fact Calgary was the only centre out of 33 cities surveyed to post an all-property returns rate of more than 20 per cent as of mid-year 2012. While such statistical highlights may prove noteworthy to few, the overall picture is that of a city with a thriving commercial market, whether it’s downtown or elsewhere.
Looking further into 2013, Avison Young anticipates Calgary’s commercial sector to remain one of the nation’s top performers.
“Market conditions are expected to remain favourable in 2013, with the commercial real estate sector continuing to benefit from growth in the energy industry,” stated the report. “The Conference Board of Canada forecasts Calgary to lead the country in economic development with an average annual growth rate of 4.1 per cent for 2013 through 2016. Multi-residential and office buildings are anticipated to be the assets sought most by investors, while developers will focus on adding much needed space to the retail market.”
According to Statistics Canada, Calgary’s retail market boasted the highest provincial year-over-year sales growth in the country in 2012. The increase in sales, coupled with the growing presence of American retailers in the city, had led to a serious drop in Calgary’s retail vacancy, which sits at just 2.3 per cent.