Calgary’s near-downtown and suburban areas have seen a decline in office vacancy rates.
A report by commercial real estate firm Colliers International says the vacancy rate in the fourth quarter in the Beltline area, just south of downtown, dropped to 22.6 per cent from a 23.05 per cent vacancy in the previous quarter.
Vacancy the suburban office market fell from 16.87 per cent to 16.12 per cent.
“Calgary’s suburban office market was relatively quiet this past quarter, although a significant event did occur with the Strategic Group filing for creditor protection covering 56 properties in Alberta, many of which are located in the auburban and beltline markets,” said the report. Those properties have since been put into receivership.
“Overall absorption was limited in Calgary and resulted in the lowest quarter-over-quarter change experienced since Q1 2017. This, however, is not to say that the market has stagnated, as Q4 marked the fifth consecutive quarter of growth across the beltline and suburbs.”
Absorption is the change in occupied space in a market.
Suburban absorption was a negative 25,126 square feet in the fourth quarter compared with a positive 162,290 square feet in the third quarter. For the Beltline market, absorption was a positive 48,312 square feet in Q4 compared with a positive 87,389 square feet in the previous quarter.
“Activity in Calgary’s ever-growing technology sector remained steady with increases in occupancy in the suburban market. Calgary-based FLYHT Aerospace Solutions finalized a deal in Deerfoot Junction III that will see them grow their employee base by about 30 per cent,” said the report.
“CoolIT, a leading-edge tech company with local roots and its global headquarters in northeast Calgary, have extended their commitment to the city by expanding their office and R&D capabilities. CoolIT plans to repatriate a large portion of their manufacturing back from China.”
Colliers said migration from the suburbs to Calgary’s central business district remains an ongoing trend. The real estate company advised the landlord on an 80,000-square-foot deal in the fourth quarter between Telus Sky and Absorb Software, which migrated from its roughly 35,000 square feet in two facilities located in Inglewood and Ramsay, to the new AA class downtown office building.
“This movement is an example of an innovative technology company looking to upgrade their space and employee experience over reducing cost – a common trend among companies attempting to attract and retain top talent,” said the report.
“Moving into 2020, Colliers expects to see little absorption in the Beltline market as it continues to be most directly affected by the flow of tenants into the Downtown Core. In the Suburban market, traditional spaces largely in B & C Class buildings may also see an increase in vacancy as tenants like Absorb continue to capitalize on opportunities in A & B Class buildings located in the central business district.
“Nevertheless, success is still expected to be found in the Suburban market in 2020 primarily in medically zoned properties as well as A Class office and mixed-use projects as they attract tenants to their unique offerings. Despite recent growth, Colliers expects both Beltline and Suburban near-term vacancy to marginally increase as tenant composition shifts but we do anticipate growth through the year.”
Mario Toneguzzi is a business reporter in Calgary.
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