The overall Calgary office market in 2019 saw its second consecutive year of positive absorption of office space since the oil downturn started in 2014, says commercial real estate firm Avison Young.
In a report, the company said the downtown office market also had its strongest positive absorption since 2011. Absorption represents the change in occupied space.
According to the fourth quarter 2019 Calgary Office Market Report, vacancy remains historically high at 22 per cent for the entire Calgary market and 24.2 per cent for the downtown market which has fallen from the peak of 26.4 per cent in the second quarter of 2017.
“The current outlook for Calgary’s office market is seen to be flat,” said the company. “Until business confidence grows, leasing activity is likely to remain consistent with the past two years of modest growth in occupancy – approximately 1.5 per cent per year.”
Positive absorption overall in 2019 was 689,000 square feet. In 2018, it was a positive 834,000 square feet.
Peak vacancy in Calgary’s overall office market was recorded in second quarter 2018 at 23.5 per cent.
“Improvement yes, but not significant enough to make any real change in perspective. 2019 is being called a ‘no growth’ year for Calgary’s economy,” said the report.
“Calgary has yet to recover from a downturn in the oil sector that began in 2014 and the overall value of Downtown office properties has fallen by more than $14 billion between 2015 and 2019, according to The City of Calgary’s assessment department. There is an improved economic outlook for Calgary in 2020 and beyond, according to the Conference Board of Canada, who predicts upwards of two per cent annual GDP growth per year going forward. However, this outlook is dependent on increased pipeline capacity and new oil sands investment.
“The long-term trend is one of improvement, but it is at a pace that will take Calgary a significant amount of time to return to a reasonable balance in the office market. The current outlook for Calgary’s office market is seen to be flat. Until economic growth returns to the market, leasing activity in Calgary will remain challenged and positive absorption of space may not be sustainable.”
Mario Toneguzzi is a business reporter in Calgary.
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