The slow recovery of the office market in Calgary continued in the first three months of 2018.
The Downtown vacancy rate was 25.6% in Q1 2018, down from its 26.4% peak in the second quarter of 2017. The overall vacancy rate was 23.2% at the end of Q1, 2018 from 23.5% at the end of Q4, 2017.
Avison Young reports that the Downtown figures show the strongest rate of positive absorption for Calgary offices in three years.
“Second-quarter 2017 was the peak vacancy for this downturn,” comments Todd Throndson, Avison Young Principal and Managing Director of the company’s Calgary office. “Even with the addition of Telus Sky in about a year’s time, vacancy is forecasted to rise to 25.9%, below the peak value recorded in 2017. Given our current economic situation, our forecasting says that we will continue to see a slow, but steady decrease in vacancy from this point in time.”
Throndson says that the likelihood is for 100,000 sq. ft of positive absorption for the second quarter of 2018, flat from the first quarter; but then rising to 150,000 sq. ft. in each of the next two quarters.
He also noted that activity among smaller tenants is increasing, and there are some good deals in the market.
“Due to an abundance of existing options that are less than 5,000 sf and pressure on landlords to demise larger blocks of space that aren’t moving, rental rates remain competitive, and inducements – such as free rent and improvement allowances – are substantial in many cases. Meanwhile, the market for large pockets of space will continue to have significant competition for the foreseeable future, maintaining the downward pressure on rental rates within this category,” he said.
The full Avison Young First Quarter 2018 Calgary Office Market Report is available on the firm’s website.