Downtown Calgary’s office market is seeing some slow, but steady, improvement, with nearly 145,000 sq. ft. of office space absorbed in the second quarter of 2019.
- WeWork opening two coworking space locations in Calgary
- Small positive uptick for troubled downtown Calgary office market
- No sharp rebound for Calgary's depressed luxury housing market: report
- Vancouver and Toronto have North America's hottest office markets: report
According to CBRE’s latest Canadian office market report, this was the second consecutive quarter of positive office leasing activity in the city.
However, much of this positive growth can be credited to one company.
WeWork announced this year it is leasing a combined 10 floors in the Edison and Stephen Avenue Place, marking the co-working giant’s first entry into the local market. Both co-working offices are slated to open by the end of 2019.
“Shifts in workplace strategy continue to take place as tenants consolidate their office footprint and explore alternative work environments such as co-working,” reads the report.
“As the demand for modern technological infrastructure increases, the current wave of flight-to-quality will pose a challenge for landlords of lower-class product.”
Gains were also offset by credit defaults and capital constraints, with over 100,000 sq. ft. from four leases given back to the market.
Calgary’s suburban office market also experienced about 220,000 sq. ft. of negative net absorption.
“New capital required to sustain and grow energy companies remains non-existent and if this trend continues it will have adverse effects on office demand,” continues the report.
Currently, Calgary has 68.152 million sq. ft. of office space, including 42.4 million sq. ft. in downtown and 25.75 million sq. ft. in the suburban areas.
The vacancy rate is still remarkably high; overall citywide vacancy stands at 24.4%, while downtown and suburban areas are at 26.1% and 21.5%, respectively.
The average Class A office space rent plummeted from above $20 in early 2016 to just over $17 by the fourth quarter of 2018, with prices seeing stabilization and some small upticks ever since.