CALGARY – Calgary’s slumping downtown office market may have bottomed out after hitting a near record 20 per cent vacancy in the first quarter of 2016.
That is the highest vacancy rate in more than 30 years, but there some early bright spots with American investors looking at commercial deals.
“I’m talking with a group now–private equity–out of Newport Beach in California,” said David Wallach, president of Barclay Street Real Estate. “They are interested in buying office buildings here…that’s a good sign.”
In an update released Wednesday, commercial real estate firm CBRE Canada estimates the city’s downtown office vacancy rate was 20.2 per cent in the first quarter ended March 31, almost twice as high as the 11.8 per cent vacancy rate in the same period a year ago.
Greg Kwong, regional managing director at CBRE, said it’s the first time since 1983 that more than one fifth of office space was available in downtown Calgary, and the city is on track to possibly hit a new record above the 22 per cent rate last seen in 1983.
“It was amazing how robust the market was in November 2014, and literally within four or five months it was amazing how ugly it got here,” said Kwong.
Calgary’s office market has been hit hard as oil and gas companies continue to cut jobs and consolidate office space due to low crude prices.
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The city is now an outlier in Canada’s downtown office market, with Toronto’s vacancies up only slightly in the quarter to 5.3 per cent, while Vancouver’s dropped to 8.8 per cent and Montreal’s was down to 10.8 per cent, according to CBRE.
Vacancy rates also don’t account for the unknown amount of near-empty office space that companies haven’t tried to sublease because there’s no market for them, said Kwong.
“You’ll see some buildings where there are five people on a 40,000-square foot floor,” he said.
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An estimated 8 million square feet of office space is available for lease and sublease out of a total of 42 million square feet of commercial space in Calgary, according to the report.
With files from Global’s Gary Bobrovitz