Office vacancy rate drops slightly in downtown Edmonton as market remains flat
Trend of increasing subletting spaces, report finds
A recent report shows a slight drop in vacant office space in downtown Edmonton as office vacancy rates remain flat despite the pandemic.
The report by commercial real estate company CBRE Canada found increases in vacancies and sublet space throughout Canada in the third quarter of 2020. The about turn comes after a historic run that, according to CBRE, has left Canadian office markets in a more resilient position.
Alberta's two main cities topped the list for office vacancies among Canadian cities, with Edmonton just below 20 per cent and Calgary just over 25.
But while Edmonton's overall office space vacancy remained about the same since last quarter, its downtown bucked the increasing national trend with a decrease from 19.7 to 19 per cent.
"I think it suggests that people are starting to see opportunities, that there is some stability still within the current dynamic, despite there being a pandemic," Nick Lilley, interim executive director of the Downtown Business Association (DBA), said in an interview with CBC Radio's Edmonton AM.
"Then it's a question of, where do we go from here?"
Lilley said some downtown buildings continue to appear empty as businesses choose to keep their employees working from home — but that is changing.
"We're starting to see a bit of a shift occurring as people are starting to understand how to best engage with the office environment," Lilley said, adding that companies are reimagining their spaces to allow for better physical distancing.
"The output of that is obviously that we're going to start to see more people re-entering downtown, in particular where we have a lot of our larger office environments."
In August, the DBA released a report outlining some of the ways businesses had adjusted to the pandemic and offering best practices to weather the storm. The report listed four areas that determine success: innovation, inclusivity, cultural vitality and interconnectivity.
"It gives us a bit of a roadmap for where we should be investing in our community and trying to create more opportunities for everyone to engage safely as we wrestle with this pandemic and look to the future," Lilley said.
Market remains 'fairly flat'
Suburban office vacancy rates increased by 2.5 per cent while Edmonton's overall rate went up 0.2 per cent.
CBRE Edmonton managing director Dave Young said a reported 51,000 square feet of negative absorption — meaning an increase in available space — was "fairly flat" for a market as large as Edmonton.
"I think the one thing that we're watching as a firm is what the impact of the sublet vacancy is on the marketplace," he said.
Sublease space has continued to rise throughout the city according to the report, increasing 69.5 per cent since the end of 2019. Short-term deals and renewals have also become prevalent as tenants seek out more flexible leasing options, it reads.
Young said there's an opportunity for the tech sector to take advantage of sublets and grow their business from those lower-cost environments.
"I think that's what we're doing and we're seeing as a city, is we're starting to see those tenants take advantage of those opportunities."
But Young also echoed Lilley's comments that even as vacancy rates have remained relatively stable throughout the pandemic, the challenge facing many tenants now is how to bring employees safely back into the office environment.
"It's going to be a very interesting next couple of quarters to watch."