Office vacancy rates in Calgary will peak at almost 18 per cent by the third quarter of 2016, according to an annual forecast from a U.S.-based real estate investment firm.
The overall vacancy rate for office space in Calgary is 17.5 per cent this year, compared to 13.1 per cent in 2014. Next year, CBRE predicts it will reach 17.7 per cent.
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Calgary still has the seventh lowest industrial availability rate in North America, says CBRE Limited's 2016 Canadian Commercial Real Estate Market Lookout, released on Tuesday.
"It appears that the bulk of downsizing has already occurred which will allow the pace of vacancy rate increases and rental rate declines to slow," CBRE says.
"In 2016, additional clarity around oil supply and demand will allow tenants, owners and investors to act with more certainty."
Investment in office real estate sank to $105 million this year from $709 million last year. It's predicted to pick up again next year, reaching $267 million.
"The confidence within Calgary's local business community has only faltered slightly despite the second largest drop in oil prices in history and the most protracted decline," the report says.
"The prevailing opinion is that the market is facing a man-made downturn in oil prices, not a structural shift that would undermine long-term investments."
For multi-family dwellings, Calgary's overall vacancy rate this year is 3.5 per cent, up from 1.4 per cent. CBRE predicts the rate to be 3.7 per cent next year.
Non-energy sectors showing strength
CBRE's relatively rosy prediction for Calgary in the face of the economic downturn is partly based on the strength of non-oil and gas sectors in the city.
"Accountants and law firms remain active and the hotel and resort sectors are also posting strong numbers as Albertans vacation closer to home and tourism from the U.S. increases," the report says.
CBRE also says Calgary is becoming an important distribution and logistics hub for Western Canada.
"Third party logistics companies and distribution activity will continue to act as a hedge against the oil and gas sector," the report says.
CBRE cautions that the province's planned royalty review, if deemed detrimental to the energy sector, could dampen real estate investment.
Construction of the southwest leg of Calgary's ring road, set to get underway next year, is also going to be important, according to CBRE.
"The development will further unlock real estate by providing access to land that is currently only accessible via side roads and circuitous routes," the report says.