Speculative construction to impact Calgary`s Office leasing Market
CALGARY - Over the next two or three years, speculative new construction will be one of the biggest issues facing the Calgary office leasing market, says commercial real estate firm Avison Young.
In a report, the company said between October 2009 and early 2012, about 6.3 million square feet will be added to the city`s office space inventory, an increase of 11 per cent, but only two-thirds of the space has been leased, with 2.3 million square feet not yet spoken for.
"Once occupancy does begin to occur, both the vacancy created by new construction and any resulting backfill space will add to the existing vacancy. This combined vacant space will impact the market heavily," said the company.
"Until positive economic growth results in job creation, corporate growth, and increasing commodity prices, vacancy levels are expected to remain high. The one counterpoint to the increase: as vacancy rises, asking rents will decline. Declining rents tend to entice tenants sitting on the fence regarding expansion plans to capitalize on the opportunity. Some tenants are expected to take advantage of lower rents available in the market to expand their space needs. Should sufficient movement into positive absorption be achieved in the next two years, vacancy will still increase, but at a reduced rate from the current forecast."
The semi-annual report, which covers current trends in the commercial real estate industry, said Calgary office vacancy has increased dramatically since fall 2008, and is projected to rise through the next couple of years.
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