Downtown office vacancy rate hits new high of 33.7 percent

The vacancy rate is by far the highest in Canada, which has a national rate of 16.9 per cent in core cores.

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Downtown office vacancies inched up in Calgary in the second quarter after some improvements in the first three months of 2022.

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According to CBRE’s quarterly report published on Wednesday, the vacancy in the center increased to 33.7 percent, up 90 basis points. This is the second time the rate has exceeded 33 percent, reaching 33.2 percent at the end of 2021 before falling to 32.8 percent at the end of the first quarter.

The vacancy rate is by far the highest in Canada, which has a national rate of 16.9 per cent in core cores. The Waterloo, Ontario region has the second highest vacancy rate at 26.5 percent, while London, Ontario has 25.9 percent and Edmonton came in at 21.7 percent. Every other major metro market was below 20 percent.

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Greg Kwong, regional general manager for CBRE in Calgary, said the market is improving, but there will be ups and downs this year.

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“It will be turbulent, it will be choppy. One quarter it will be up, another quarter it will be down,” she said. “But at the end of the day, the business community is more optimistic today than it was a year ago. It’s okay.”

The increase in vacancy is primarily due to Shell Canada downsizing and abandoning the Shell Center earlier this year, resulting in 300,000 square feet of prime office space in the core returning to the market. Another four flats came back on the market due to Brookfield’s acquisition of Inter Pipeline.

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In total, nearly 380,000 square feet of office space was vacated in the second quarter, leaving 11.6 million square feet open in the core of a total of 43 million square feet.

Kwong said the market could see a rally from oil companies due to high oil prices, but they have yet to see those returns reinvested in the white-collar workforce in Calgary.

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“We don’t expect anything stagnant coming from that energy industry at all. So that’s probably the bright light,” he said.

He added that Shell’s downsizing is part of a global move toward sustainability.

Shell’s vacation of the Shell Center also represents a blow to downtown Class A space, previously a market stronghold, now with a 28.7 percent vacancy rate, the highest in the country.

Signage at the Shell Center is shown in downtown Calgary on Thursday, June 18, 2020.
Signage at the Shell Center is shown in downtown Calgary on Thursday, June 18, 2020. Jim Wells/Post Media

Kwong, however, says that this number should improve due to the demand for these types of spaces. He also pointed to a continuing shift in the market with a drive toward diversification and record venture capital investment in the city’s tech sector. He expects even bigger announcements in the next 18 months.

“There is so much focus on Calgary, we are the third best city to live in the world,” Kwong said. “All these good things are being spoken out and announced that someone will find out and say, ‘We should open a big office there.’ I hope it’s the game changer everyone is looking for.”

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This report was released on the same day that Telus Sky had its belated grand opening. Construction was mostly completed in 2020 and brought 750,000 square feet of office and retail space online, as well as 320 residential units at that time. Telus began moving its employees earlier this year.

Mayor Jyoti Gondek said after the ceremony that the latest CBRE report is just a snapshot and does not represent the work being done to address vacancy rates.

“We have to be confident in the fact that we have invited and attracted talent here, we have invited and attracted investment here,” he said. “We are very optimistic about our future.”

Calgary also posted a strong industrial property vacancy rate of 3.9 percent for the quarter. This is higher than the national rate of 1.6 percent, but Kwong pointed to the 1.93 million square feet of new space in the sector that has come online in the first six months of 2022, second only to Toronto. (3.99 million square feet) – with another 7.53 million square feet of space still under construction.

So far this year, 3.9 million square feet of industrial space have been absorbed in the Calgary market, including two million in the second quarter. Only Toronto had higher absorption levels on both counts.

[email protected]

Twitter: @JoshAldrich03

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