Weak natural gas prices continue its grip on Alberta commercial real estate: CBRE
CB Richard Ellis Limited said two new properties being built in downtown Calgary - The Bow tower and Eighth Avenue Place - will add about 2.7 million square feet to the downtown office market in 2011, further contributing to a rising vacancy rate in Calgary.
“Year-over-year, overall vacancy rates in Calgary rose from 7.9 to 14.9 per cent during the first quarter, despite dropping slightly when compared to fourth quarter 2009 rates,” said the report. “Sublet space as a percentage of vacant space in Calgary’s downtown office market continues to be the highest in the country at 38.1 per cent, while lower, more competitive pricing per square foot for desirable Class A office space led some businesses to commit to new lease agreements during the first quarter.”
CBRE’s National Office and Industrial Trends First Quarter Report said that after more than a year of steadily increasing vacancy rates, signs of an improving economy – albeit modest ones – are starting to shape the 2010 Canadian commercial real estate market.
“While economic fundamentals have slowly reintroduced some consistency back into the Canadian commercial real estate market, conditions across much of the country remain challenging. Nationally,the downtown and suburban office markets that were burdened by oversupply for much of 2009 continued to struggle in the first quarter, as overall vacancy rates rose from 7.5 to 10.1 per cent, year-over-year,” said CBRE.
When compared to the fourth quarter 2009 overall vacancy rate – which stood at 9.9 per cent – this quarter’s vacancy rate increase represented a rise of only 20 basis points – a statistic that according to John O’Bryan, vice-chairman, CBRE, is an indication that Canada’s commercial real estate market may just be through the worst of the recession.
“A more promising employment picture, slowly improving leasing activity and the residual impact those factors have had on the country’s commercial real estate market is a welcome change from 2009 conditions,” said O’Bryan. “Expect to see a slow recovery progressively in 2010. With a few notable exceptions, the majority of Canada’s markets appear to be over the hump.”
In first quarter market activity, sublet space as a percentage of vacant office space in Canada, rose only marginally in the first quarter, up from 20.8 to 21.9 per cent, year-over-year.
mtoneguzzi@theherald.canwest.com
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