Calgary’s downtown office market has been very dynamic over the last few years, with more than five million square feet of absorption over the past three years alone. It’s not likely this level of activity will continue in the long term, however.
Demand for office space has tapered off, for one thing. Another reason the commercial property market is likely to fall to more normal levels is that there are constraints on the supply of new office developments meaning less offices will hit the market for a couple of years.
David Routledge, the vice-president of real estate management for West for Oxford Properties, commented recently that the Calgary market is likely to decline. The city’s historical averages are in the range of 600,000-800,000 square feet per year.
To date in 2012, the office absorption has been less than that level but the numbers have still been positive, according to Bob MacDougall, the senior managing director of Cushman & Wakefield in Calgary.
MacDougall said things are slowing in the downtown, but this is due to a lack of supply rather than a slowing of demand. He referred to it as a pause in the market and said that landlords and developers alike are going to be taking longer and harder looks when deciding to proceed with new projects.
MacDougall went on to state there are several million square feet of proposed development on the table, only a portion of which will go ahead. Developers are less likely to build on spec and are interested in finding tenants who are prepared to commit to pre-leasing before the project is started. According to MacDougall, one or two projects are likely start in the next year.
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