Calgary’s commercial market is expected to continue at its brisk pace through 2012 according to a special report by TD Economics.
Commercial vacancy rates in the city currently sit at about 7.5 per cent, a number that is forecast to decrease to seven per cent in 2012. The current vacancy rate is a significant drop from 2010’s posted 11.8 per cent vacancy. Industrial vacancy rates are even lower with a forecasted three per cent vacancy in 2012 compared to 3.1 in 2011.
“About 40 per cent of the world’s publicly-traded energy companies have their headquarters set up in Calgary,” said the report. “Roughly two-thirds of the downtown office space is occupied by energy firms. With crude oil prices staying firm throughout much of last year, all property classes recorded an improvement in conditions and higher transaction volumes.”
The highly touted Bow Building — the latest change to the Calgary cityscape — and its 1.9 million sq. ft. of office space has an expected occupancy date for the end of the year. The building is set to become the corporate headquarters for Encana and Cenovus Energy Inc.
“While much of the (Bow Building) available space has already been absorbed by future tenants, the supply should help to slow the downward trend of vacancy,” said the TD report.
Further developments for the downtown include Eighth Avenue Place, Calgary City Centre Phase I, Eau Claire Tower, Brookfield’s Herald Building site and H&R REIT’s The Bow South Tower adding a further four million sq. ft. of space in the next few years.
The TD special report also noted a shift in the quality of office space demand reporting a vacancy rate of only 0.2 per cent for Class AAA properties as of the end of 2011.
“Each class was also benefiting from the cyclical rebound in economic and employment growth that ensued following the recession,” said the report.
Throughout the rest of Canada, office demand in Edmonton has also increased with an expected vacancy rate of 7.2 this year while its industrial vacancy rate is expected to decrease from 4.2 in 2011 to four per cent this year.
“Like Calgary, Edmonton should be among the top metropolitan economic and employment growth leaders which buoy office demand prospects,” said the report.
In Ottawa, the government’s plans for eliminating 12,000 jobs in the next few years will in turn have its affect on the city’s vacancy rate. In 2011, commercial vacancy in the nations capital was 5.6 per cent and is expected to hit six per cent in 2012.
In Toronto, vacancy was at 8.3 per cent in 2011 and is expected to decrease to 7.8 per cent in 2012.
“In the downtown (Toronto) core, there has been noticeable pickup in renovation and construction activity in the financial district,” said the report. “The number of condo projects under construction may also help explain the demand for downtown commercial space — developers and landlords are benefiting from the high-density living arrangements and the mixed use commercial space that com along with condo development.”
What do you think of the ever growing downtown Calgary?