Calgary's Office Market Shows Signs Of Recovery

Downtown Calgary’s office market recorded its first quarter of positive tenant demand in three years, according to CBRE’s Canada Q3 2017 Quarterly Report.

The report says Calgary’s downtown core had 113K SF of positive absorption, dropping the office vacancy rate by 30 basis points to 27.4%.

That is high when compared to Toronto, where Class-A downtown vacancy rates sit at 3.6%, according to the report. But the Calgary number represents the first decline in office vacancy since the oil and gas downturn. 

The increase in tenant demand was also reflected in Calgary’s suburban market, which saw a drop in vacancy from 22% to 21.4% during the quarter.

“The Calgary office market still faces extensive challenges, but in a marketplace that has been devoid of good news for the last three years, this is a very encouraging sign,” CBRE Canada Regional Managing Director of Alberta Greg Kwong said in a news release.

“There is a greater sense of confidence amongst business owners, the wider economy is strengthening and there has been an, albeit modest, pickup in both drilling and hiring. While we’re confident that the office market has now found the bottom, the bigger question mark is around the pace of recovery,” he said.

The positive quarter in Calgary was also reflected in the city’s industrial market, which saw its strongest quarter of tenant demand in over two years. An additional 1.7M SF was absorbed in Q3 2017, dropping the availability rate 80 bps to 8.5%, the lowest since the end of 2015.  

In Toronto, industrial availability dropped to an all-time low of 2.3% in Q3 2017.

Calgary’s renewed tenant activity comes at a time of growing momentum in Canada’s national office market, which has experienced the best start to a calendar year since 2007, with over 6M SF of absorption. 

Nationally, the report found Canada’s office market continues to gather momentum. Tenant activity is being propelled by an economy that is set to lead the G7 in growth and a falling unemployment rate of 6.2%, which is below pre-financial crisis levels.

The report found the national average office vacancy rate fell by 30 bps to 12.8%, with Vancouver and Montreal leading the way in tenant demand. Downtown Vancouver’s vacancy rate fell by 190 bps to 5%, the lowest since Q2 2013, and downtown Montreal fell by 70 bps to 8.7%, the lowest since Q4 2013.

“2017 is emerging as a standout year for the Canadian office market and its success might no longer be one of Canada’s best-kept secrets with international investors increasingly taking note,” CBRE Canada Executive Managing Director Paul Morassutti said.