Fears are mounting that the long-suffering Calgary office market will continue to feel pain through at least the first half of this year after a slim uptick in 2018.
With an overall vacancy rate of 22.3 per cent and 24.7 per cent of the downtown space empty, Avison Young notes that 2018 marked the first positive absorption in four years.
But, the agency noted in a recent report, “there are concerns of further market negativity in 2019.”
The take-up of space in the fourth quarter of 2018 was not evenly divided across the city. While the downtown achieved 400,000 square feet of leases, the neighbouring Beltline went negative by 87,000 square feet and the vacancy rate there increased to 19.4 per cent.
The glut of space has landlords making changes. Tenant sizes have shrunk, lease terms have gotten shorter and demand for amenities has increased.
Much of the angst is tied to the price of oil, which has failed to rally, due partly to delays in getting Alberta oil to foreign markets. As a result, energy companies are taking a “wait-and-see approach” to office space requirements in this year of both Alberta and federal elections and potential policy changes, Avison Young noted.
Average office lease rates are remaining fairly stable despite the highest vacancy rates in the country. Class AA buildings – the premier space – lease from $23 per square foot, with Class B properties averaging $16.68 per square foot.