Nearly two weeks after the City of Calgary announced a Silicon Valley firm would be opening an office in Calgary, a local real estate broker told News Talk 770 it would have to be a company the size of Google to really move the needle when it comes to lowering office vacancy rates.
Adam Hayes, principal and broker at Cresa Calgary, told Danielle Smith “every little bit helps.”
But he said there is a long way to go to get back to a “normalized market.”
While the office vacancy rate is currently at 24 per cent, his company is projecting it will top out at 27 per cent in late 2017 or early 2018.
Hayes said because of the high vacancy rate in Calgary, companies that had previously eyed locations outside of the core are refocusing their attentions on the downtown.
“The economics of real estate transactions have somewhat been leveled as vacancy increases across all sectors, but in particular downtown,” he added.
LISTEN: Cresa on Calgary’s rising office vacancy rate
There are also two major developments under construction in the downtown core – Brookfield Place and Telus Sky – which could further shift vacancy rates higher. Although, Hayes admitted that a percentage of those projects were pre-leased.
Cliff De Jong, the City of Calgary senior projects officer, said Calgary has started to see an uptick in activity levels when it comes to new developments but adds lenders are being more cautious and the size and volume of the projects isn’t on par with previous years.
LISTEN: City of Calgary on stalled developments
Hayes said to bring the commercial real estate market back to equilibrium, about seven million square feet of office space would need to be absorbed, which is “the equivalent of over 20,000 jobs.”
He added that in this downtrodden economy, some companies are carrying internal vacancy rates closer to 30 to 40 per cent (10 to 15 per cent is normal) and will seek to occupy that space before snatching up external vacancies.
“We need a Google – that would make a big dent,” he said. “We really need to see a robust economy. We would need to see it last a number of years and then we’re going to see this vacancy rate start to be eaten up.”