Activity in the downtown market simulated much of the Calgary commercial sector’s Q2 2019 dynamism, according to Avison Young’s study covering the city’s Q2 2019 performance.
The core reported “its fourth consecutive quarter of positive absorption, an occurrence that had not happened downtown for the past seven years.”
From January up to the end of June, the cumulative absorption for Calgary’s downtown market was at 446,000 square feet. This first-half volume has already outpaced the city’s performance for the whole of 2018, which amounted to approximately 400,000 sf of positive absorption.
High vacancy rates (24.4% as of Q2 2019) will likely continue to be the norm, however. Avison Young’s predictions for Calgary’s office vacancy levels 12 months from now are at 23.5% (most optimistic), 24.8% (most reasonable), and 26% (most pessimistic).
Combined with the growing number of small-scale tenants, these factors are pushing landlords to explore multiple options in terms of rental rates and incentives, Avison Young reported.
“Competitive and creative approaches by landlords are furthering the flight-to-quality across the Calgary office market. Tenancies in class B and C buildings are now able to consider space in better-quality buildings due to lower rent and the increased availability of options,” Avison Young principal and managing director (Calgary) Todd Throndson stated.
“Landlords and tenants are finding a market that offers both sides opportunities to make advantageous deals. Attractive rental rates and inducements are now at levels where tenants can either move into better quality buildings at similar or even lower rates than they are currently paying, or look at early renewals that offer to blend and extend their rates on a reduced financial platform.”