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Alberta leads in office recovery as leasing pares vacancies

Consecutive quarters of positive absorption push Calgary to 2014 strengths
Calgary office downtown
Calgary's downtown office market saw improvements in 2023 that are set to continue in 2024.

Alberta is seeing the greatest recoveries in office activity as demand normalizes following the return to work and the latest deliveries of new space.

“The Alberta markets continue to undergo market recovery with Calgary posting three consecutive quarters of positive net absorption, Edmonton with two,” national brokerage CBRE Ltd. reported in its year-end review of office markets, released earlier this month.

Calgary office vacancies now sit at 30.2 per cent and Edmonton 22.9 per cent of total inventory, according to CBRE.

While these are some of the highest rates among the major cities in Canada, they’re an improvement over the previous quarter as well as a year ago.

The third quarter saw vacancy rates of 30.9 per cent in Calgary and 24.2 per cent in Edmonton. And year ago, at the end of 2022, Calgary was at 32.6 per cent and Edmonton was at 23 per cent.

“Posting three consecutive quarters of positive momentum, the Calgary office market ended the year with a cumulative 677,000 square feet of positive net absorption, the market’s strongest performance since 2014,” CBRE reported. “Primary demand growth drivers included a slight resurgence of the energy sector, sublease spaces being reclaimed by tenants, as well as purchases by owner-users.”

A year ago, CBRE also hailed the downtown Calgary market as having experienced its strongest performance since 2014, but the gains were offset by large occupiers rightsizing their suburban locations.

“Flight-to-quality remains prevalent and landlords that have invested in capital improvements will continue to perform well in the year ahead,” it forecast.

The prediction appears to have been on the money, and it expects the progress to continue in 2024 as zero new space is set to be delivered to downtown and a modest 177,446 square feet is under construction in suburban markets – and 58.6 per cent of it is preleased.

Reports from Colliers and Avison Young were even more sanguine, pegging Calgary office vacancies at less than 27 per cent of the existing stock.

“There has been a notable surge in the demand for space within the Beltline, with three to four larger groups actively seeking new locations,” Colliers reported, noting that the gains have helped to offset ongoing rightsizing in suburban markets.

Avison Young also pointed to strong activity in the Beltline, but said perseverance characterized suburban markets, which have logged three consecutive quarters of positive activity in its analysis.

“Class A suburban spaces continue to experience strong demand and have been the main drivers of activity,” Avison Young reported. “These properties offer desirable amenities, along with easy access, ample parking, and proximity to residential areas, making them increasingly attractive to businesses looking to draw more employees to the office.”