Calgary’s downtown office space glut could get worse before it gets better.
According to CBRE Limited, vacancy currently sits around 27.7 per cent, which is a record the city has never seen, according to the company’s Greg Kwong.
“This is probably the worst – at least the height of it – that we’ve seen certainly in most major markets in the world.”
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The addition of a new office tower space continues to push up vacancy.
With the last major project expected to be completed in 2018, Kwong says the vacancy rate could rise to 30 per cent.
“It’s a wait and see. Could be the calm before the storm.”
Empty floors litter the downtown core.
Now, desperate leaseholders and landlords are willing to give away space just to help cover their costs.
“In some scenarios, the company just evaporated and they’re just paying their rent,” Kwong told Global News.
To recoup that money, space is being subleased for free.
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The main rent cost isn’t charged; all the new tenants have to pay are the operating costs – utilities, taxes, etc.
In many cases, the short-term leases come with a discount of anywhere from 50 to 90 per cent of normal monthly costs.
“It’s very difficult to lease space that maybe has 10 to 12 months left on it, so a lot of sub-landlords are giving away space at huge discounts,” Kwong said.
There are also incentives to prospective tenants on longer-term leases.
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Acumen Capital Partners began looking for new space a year ago and found landlords were willing to deal more than in the past.
Brian Pow says he settled on space that freshened up his company’s brand and allowed it room to grow.
“We felt we were reasonably near the bottom of the market; that we weren’t at risk of leaving too much money on the table,” Pow said.
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Landlords are also trying to stand out in a crowded market by renovating tired, vacant spaces.
New paint, cubicles, offices and gathering spaces are being built to lure in prospective tenants.
“Just make sure you’re on the list of buildings to view when a company is out looking for space,” Kwong said.
Calgary Economic Development says it has attracted over 50 businesses to the city since last year to help boost the economy.