Despite mounting evidence to suggest a slowing market, vacancy in Calgary’s downtown office sector continues to fall. Marking the eleventh consecutive quarter of positive absorption and overall decreases in vacancy rates, a new report from Collier’s International shows that nearly 260,000 sq. ft. of office space was leased in second quarter of 2012.
As a result, the overall vacancy rate in Calgary has dropped from 4.2 per cent in the first quarter of 2012 to just 3.53 per cent in the second quarter – the lowest overall vacancy rate recorded in the city since the first quarter of 2008 (3.32%).
While the report does suggest that vacancy rates could be negatively impacted by a weakening oil and gas market, the lack of new AA class space coming online in Calgary means leasing possibilities could be numbered.
“With no other downtown office construction projects set to deliver additional space until Q3 2014, vacancy rates are expected to remain low, but the impact of weakening oil and gas prices may lead to additional merger and acquisition activity, which could result in additional space being made available over the next two to three years,” stated the report.
With the Eighth Avenue Place West Tower completely leased, the reports suggests tenants looking for AA class space in a newly developed office tower will now have to set their sights on some of the other new projects scheduled to begin construction in the coming months. Listed amongst the projects are Cadillac Fairview’s Calgary City Centre tower at 3rd Avenue and 2nd Street SW (the only other downtown new development confirmed to start construction), Oxford Group’s Eau Claire Tower, proposed to be built on 3rd Avenue directly west of Centennial Place, Brookfield Properties` 225 – 6th Avenue, proposed to occupy the block located on the south side of 6th Avenue SW, between 1st and 2nd Street SW and Aspen Properties` two phase development project, Palliser Square East and West, located at 131 – 9th Avenue.
Moving forward, Colliers expects the downtown office market to “continue to moderate” during the rest of 2012, with the province’s “strong presence in the global energy sector” continuing to drive growth in the economy. Approximately 75 per cent of the downtown tenants are involved in the oil and gas industry.