Down but not out

Downtown office market begins bounce back

People who have lived and worked in Calgary for a long time know that the downtown office market is a great barometer of what's happening in the city's overall economy.

For the past couple of years, record vacancy rates in the heart of the city have made headline news, not only in Calgary, but nationally.

However, a recent report by commercial real estate firm Avison Young suggests we've hit the bottom and there's nowhere to go but up.

"Calgary has returned to positive growth, but a cautious outlook on the market remains," said Todd Throndson, Avison Young's principal and managing director of the company's Calgary office.

"After two years of crushing recession, Calgary's economy began to grow again in 2017. Despite the recession officially being behind us now, the negative effects continue to linger. The path to recovery for many businesses remains long and difficult. Looking forward, the forecast is not for clear, blue skies, but there are no storm clouds gathering either. This year's focus will be about building momentum for the future."

That momentum began in the first quarter. Avison Young says Calgary's downtown office market recorded the highest amount of positive quarterly absorption (the change in occupied space) in three years, at 169,000 square feet.

That's a big change compared with the -3.1 million square feet of annual absorption and average quarterly absorption of -767,000 square feet in 2015; the -2.2 million square feet of annual absorption and average quarterly absorption of -551,000 in 2016; and the -189,000 square feet of annual absorption and average quarterly absorption of -47,000 in 2017.

The downtown office market vacancy rate peaked at 26.4 per cent in the second quarter of 2017, but has dropped to 25.6 per cent in the first quarter.

"While energy companies continue to make up a large share of the leasing transactions being recorded, increases from areas such as information and technology, not-for-profits, government, business services and green technology are definitely being noticed," said Throndson.