There’s an additional 311,000 square feet of empty office space in downtown Calgary

There are four completely empty office buildings in downtown Calgary and another five that are two-thirds unoccupied as the economic downturn continues to push up vacancy rates in the city, according to the latest report from the commercial real estate firm Avison Young.

The firm’s third-quarter office market report says Calgary’s downtown office vacancy rate is 25.7 per cent while the rate for the city as a whole is 23.5 per cent — matching a record high set four years ago.

Downtown Calgary’s office vacancy remains below the peak vacancy of 26.4 per cent in the second quarter of  2017, the report says.

The downtown core has added another 311,000 square feet of unleased space and there are 13 properties in the core with more than 100,000 square feet of contiguous space available.

The total unleased space downtown is now 11.9 million square feet.

Susan Thompson, research manager for Avison Young’s Calgary office, says the vacancy rate in the core could go even higher.

“There is the potential for things to get worse in the next couple of years,” she said. “It’s possible we could see vacancy rise as high as 30 per cent in the coming years if companies continue to shed space.”

In fact, last month another real estate brokerage company, CBRE, reported that the core’s vacancy rate had almost reached that point, hitting 28.7 per cent in the second quarter. 

Thompson says this doesn’t mean the two firms are contradicting each other.

“There’s a difference in the way each commercial brokerage calculates, so what buildings do they include, when do they include a vacancy, and that can cause a little bit of fluctuation in the rates,” she said.

“However, all of us tend to trend the same way, so over time you’ll see the lines move the same way. It’s just what goes into our calculations is going to vary.” 

The lion’s share of the leases that are being signed lately are for spaces under 10,000 square feet, according to Avison Young.

“This predominance of smaller tenants being active in the market is pressuring landlords to better cater to this size of tenant,” the report says. “Traditional single-tenant buildings and larger floorplates are now being renovated to better serve the needs of smaller tenants.”

Thompson says that means good opportunities for companies that need space.

“If you’re a tenant in the market right now, landlords are pretty eager to work with you,” she said.

Out of 169 office buildings currently tracked by Avison Young in downtown Calgary, there are four that were completely empty in the third-quarter of 2020. (Avison Young)

There’s also a lot of empty office space in the Beltline and the suburbs.

Out of 109 office buildings with more than 20,000 square feet in the Beltline, two are completely empty and available for sublease.

Another four properties are more than 75 per cent vacant. 

In the southern suburbs, the vacancy rate is sitting at 20.6 per cent with 452,000 square feet and an additional 104,000 square feet under construction, the report says.

In Calgary’s northern suburbs, the office vacancy rate is 18.5 per cent with 146,000 square feet available and an additional 79,000 square feet being built.

The COVID-19 pandemic has the potential to convince some companies to look for office space outside of the downtown core, Avison Young says.

“Suburban space, with its high parking ratios and lower population densities, offers a different solution for companies. It will take time to see the larger pattern changes in the overall market, but we anticipate significant flux in what types of office space is popular,” the report says. 

View Source