Vacancy rates in Calgary’s office market have risen more than two per cent from Q1 2015, moving from 10.67 to 12.75 per cent in Q2.
According to the recent Collier’s Calgary Office Market Report Q2 2015, this level hasn’t been recorded since the last downturn in 2010. Now, Class A asking rates are $26.00 per square foot compared to $20.00 five years ago, a difference showing that asking prices from downtown office landlords aren’t compatible with current market conditions.
Also, a large gap between those asking rates and the rate where lease transactions may be completed shows more negotiating room for tenants who can take advantage of the market conditions.
The report forecasts favorable conditions for tenants amidst a drawn out recovery, which will linger as 3.8 million square feet of construction is on its way between 2016 and 2018.
Also on an upwards trajectory is downtown sublease space, now at a record level of 2.6 million square feet. This level exceeds head-lease space for the first time since Q4 2009, a number that began to rise during the end of 2014 when oil prices dropped and international energy companies started relocating capital to other countries.
Meanwhile, due to difficult market conditions, energy companies have held on to vacant or excess space as they determine long-term business strategies. Known as “ghost vacancy,” this space is expected to be absorbed upon rebounding energy prices and company hire-backs.