Calgary's beleaguered office sector continues to struggle, with vacancy rates nearing 25 per cent as of the end of July, according to a major real estate company's analysis.
The 2016 Re/Max Commercial Investor Report, released Wednesday, highlights the impacts of the oil downturn on various types of properties in the city.
"In some asset classes, particularly office space, the sublease market is putting pricing pressure on the primary lease market," the report reads.
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"As a result of companies downsizing, lease-holders in long-term leases are looking to sublease, and in order to do so have to price below market rate. This is having the most impact on office space, but is affecting retail as well."
Adam Hayes with Cresa Calgary, a local arm of the international real estate firm, said there has been 5.2 million square feet of negative absorption in the city's overall office space from mid-2014 to mid-2016.
"To put it in perspective … that is about equal to the pace at which space was occupied and leased in 2011 to 2013, when Calgary was on its last bull run," he said.
Hayes said the "massive" amount of office space currently available in Calgary has even led to changes in the units people use to talk about.
"As opposed to how many floors are available, people are starting to talk about how many acres are available in the building," he said.
"There are buildings and complexes out there today that have a number of acres available, and there's going to be more and more."
Other asset types
Sales of commercial property in the first half of 2016 were down 12 per cent compared to the year before.
The retail sector "has rebounded somewhat and is fairly healthy," the report goes on to say, but continues to struggle in the downtown core.
"Some of the large retail spaces left by Target exiting the Canadian market have been filled by new tenants such as fitness facilities, while others have been leased to other large American retailers," the report treads.
As of the end of August, Re/Max said the retail vacancy rate was 3.4 per cent city-wide and 11 per cent downtown.
Office vacancy expected to rise, still
Calgary has historically been "a resilient market," the Re/Max report notes, and "a slow but eventual recovery is expected."
With several major projects still underway, however, it warns that the supply of office space is likely to continue to rise without a corresponding increase in demand.
"More office space is continuing to come on the market, while at the same time, the overall trend is for companies to shift to a smaller footprint," the report reads.
Cresa has a similar outlook for Calgary's office situation.
"The vacancy rate over the next 12 to 18 months, as far as we can tell, is going nowhere but up," Hayes said.
"I think the real question is: When does the market bottom and where does vacancy top out?"