 Market Info
Calgary Office Market Forecast Study: 2006 - 2025
Calgary Economic Development
The nature of the office market in suburban Calgary is quite different from that of the central core. The downtown more closely approximates a single market, with most construction taking place in the Central Business District. Most office buildings are high-rise, and most are fairly good substitutes for one another, so that a single market rent and vacancy rate can be used to characterize the market. The suburban market, on the other hand, is more dispersed and more diverse in terms of product.
The tight downtown market is causing some companies to consider lower cost options outside the core. Demand for office space in the suburbs continues to grow because of its accessibility, space availability and parking. Over the next five years, we anticipate that most of the take-up of office space in the suburbs is likely to come from non-energy companies who get pushed out from the downtown due to increased rental rates. The most significant segments of the market that have opted for suburban office parks have been those engaged in the engineering and technology sectors, as well as medical and small professional service tenants.
The following discussion summarizes the make up of office activity within Calgary’s four suburban quadrants:
Southwest
The Southwest quadrant of Calgary constitutes the oldest industrial area of the city. Comprised mostly of light industrial uses (e.g. along Blackfoot Trail), redevelopment is expected to consist of commercial services, offices, retail and non-industrial uses. Also, excellent public transit near Macleod Trail provides a strong level of employee access, and makes it a strong candidate for future office developments.
In the last few years, the Southwest office market has been driven largely by the engineering sector. Other tenants who are considering expansion into this area include business and personal service industries such as financial planning and insurance companies which either depend on residential based customers, or act as “back office” operations supporting other business units.
Southeast
The Southeast provides strong access to Deerfoot Trail / Highway 2 and Highway 1. This section of the City accommodates most of the city’s heavy industries. In the future, it will retain its role as the city’s industrial heart, and for this reason offers limited opportunity for new office development.
Northeast
Much of Calgary’s northeast is subject to the Calgary Airport Vicinity Protection Areas Regulation that essentially predetermines non-residential uses on those lands. The Northeast sector benefits from access to Deerfoot Trail / Highway 2 and the Calgary International Airport and offers excellent access to suburban labour markets. The area is characterised by a mix of office and multi-tenant warehouse buildings. Since 1999, a number of high-profile businesses have moved into the Northeast, and have helped to expand the area’s profile as a business centre increasing the area’s prestige.
The Northeast Industrial Area is expected to continue to attract strong business growth because it offers a number of large, serviced parcels. The Northeast has also attracted several large office users including: high-tech training firms, software developers, couriers and business support companies.
Northwest
Large areas of urban development are not expected in this area beyond 2020. It is likely that much of the development in this sector during the next twenty years will be dominated by retail or non-industrial uses. The Northwest office market best supports small professionals firms, software start-ups and community services. This is a highly fragmented market-place where the typical office size ranges from five hundred to four thousand square feet in area. Also, the relatively small pocket of offices in the Northwest (near the University of Calgary) attracts professional firms and service based operations.
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The suburban market is poised for significant development activity over the next five years. In total the suburbs represent approximately 40% of all space under development or in consideration. The south-end of Calgary represents the most attractive suburban area for development, with approximately 3.5 million square feet of new space presently under construction or in pre-leasing. There are presently 19 active office buildings in suburban Calgary ranging in size from 20,000 square feet to 480,000 square feet. The median size of a suburban building is 150,000 square feet. In total, eight buildings under construction are larger than 150,000 square feet.
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The suburban office park will begin to play an important role Calgary’s office market. While Calgary has generally bucked the North American trend of suburban business parks, we believe that this product will capture a stronger foothold in the market over the 2011 – 2025 period. Generally speaking, we anticipate the construction of office buildings ranging from 100,000 square foot stand alone buildings, to 1+ million square foot “master planned” office projects meeting the needs of a select number of large corporate users.
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The suburban market is poised to see significant market growth over the long-term. On average, our forecasts suggest that suburban Calgary will account for 30% to 40% of annual growth. On an absolute basis we are forecasting that the suburban market will track at (or near) current patterns over the next decade, ranging between 270,000 to 460,000 square feet per year.
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