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miketoronto

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It seems Calgary, which is considered the most centralized city in North America can now claim another fame. Check out this article.

Calgary is having great success in its downtown with keeping employment centred, and building office skyscrapers instead of office sprawl on the outskirts.

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It is Calgary, Canada.

www.cbre.ca/NR/rdonlyres/...q06off.pdf

According to this Report by market analysis firm, CBRE Richard Ellis Calgary in the first quarter of '06 surpassed the last hurdle, Tokyo, to have the lowest downtown office vacancy rate of any major city in the world. The vacancy rate now sits at a scant 1.2% of downtown Calgary's roughly 32 million sq. ft inventory.

Annual absorption rates for this metro-area of 1 million have been over 1.5 million sq. ft per year over the past couple. There is currently about 1.5 million sq. ft under construction right now, with 100% of it pre-leased.

There are several projects in the approval and design phase right now waiting to take off including EnCana's 2 million sq. ft, Norman Foster designed headquarters. Imperial Oil, is also rumoured to be in the design phases for their own head offices. Several other large towers ranging from 40-60+ storeys are also said to be in the hands of architecture firms as we speak.

As a result of the shortages in space, renst have skyrocketed and Calgary's office space is among the most expensive in North America at $42.50 per sq. ft for 'A' class space.

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Downtown Advantage

"Compared to most U.S. cities, Calgary has a big, impressive downtown... the skyline is powerful, dense and dramatic... most U.S. downtowns would suffer in comparison to Downtown Calgary."

Dave Feehan, President of the International Downtown Association, 2003
 
It seems Calgary, which is considered the most centralized city in North America
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It is? By whom? I've heard sprawl is a huge problem there.
 
It seems Calgary, which is considered the most centralized city in North America can now claim another fame. Check out this article.

Calgary is having great success in its downtown with keeping employment centred, and building office skyscrapers instead of office sprawl on the outskirts.
Click to expand...

You do realize having vacancy rates this low is a huge problem don't you? It's not actually a good thing. They have no room for growth and are basically pricing people right out of Calgary. Actually a healthy mix of suburban office parks would be a good thing for Calgary at this point.
 
It is? By whom? I've heard sprawl is a huge problem there.
Click to expand...

Calgary has lots of suburban housing, but when it comes to office employment, it is the most centralized in North America. Calgary has no major suburban office park areas, and its downtown office employment is fast approaching that of its bigger cousin Vancouver(Vancouver has a little de-centralization problem).

So yeah, the Calgary guys have always pointed to the fact that Calgary is the most centralized in studies of North American cities. Thats why Calgary has such great transit ridership growth, and is the only major city in N.A. putting up major office towers.
 
wow, i didn't know toronto and new york weren't in north america. thanks for the tip mike.
 
Calgary has lots of suburban housing, but when it comes to office employment, it is the most centralized in North America. Calgary has no major suburban office park areas, and its downtown office employment is fast approaching that of its bigger cousin Vancouver(Vancouver has a little de-centralization problem).
Click to expand...

You've just posted an article on why centralization is NOT a good thing. Again, with rates this low it forces people right out of Calgary. If you are a business looking to move to Calgary you can't because there is no space and the little space which is available is severely over-priced. The downtown at this point is too over burdened, can't keep up with demand and hurting Calgary's economic development in the process. Not a good situation at all.
 
How many times do I have to post this article?

Forget the Rolaids.

When it comes to alleviating the stress involved with the quest for space in Calgary's office market, many are looking to the 'burbs for relief.

A heated economy, the high cost of office rental space in the downtown core and a host of cost-of-business issues related to employee and client access to office space and parking, have "some tenants ... rethinking the need to be downtown," says Brad Krizan, director of leasing for Opus, a Calgary-based commercial developer/ contractor with a number of suburban office buildings now under construction or in the pre-leasing stage of project development.

All told, Krizan estimates Opus has 11 sites in the works, with 2.8 million sq. ft. of buildable space. Only one site is in the downtown core.


Illustration courtesy of Opus
Commercial developer/contractor Opus has 11 sites in the works in Calgary. This is Stampede Station, in the Beltline on Macleod Trail.
A quick review of some of these projects offers an apt illustration of what makes space "beyond the core" increasingly attractive for some firms.

The Opus 8, at 607 8 Ave. S.W. (approximately 261,795 sq. ft. of mostly office space), will be ready for occupancy March 2007 at a basic rent rate of $40 per square foot on the main floor. The building offers 76 parking stalls at $350 a month.

Another Opus project is in the Beltline, technically just outside the downtown core. Located at Macleod Trail and 13th Avenue S.W., Stampede Station Phase I is scheduled for completion by the fourth quarter 2007.

The 153,300-sq.-ft. building has a projected basic rental rate of $26 to $28 per square foot, and each of its 199 parking stalls is projected to generate $250 a month.

Further out, the Opus II Interplex Business Park (252,220 sq. ft. of space at 2535 3 Ave. S.E.) is scheduled for completion in early 2008.

Its basic rent is currently set at $22 to $24 per square foot, with 232 underground parking stalls at $150 a month and another 140 surface stalls available at $35 a month.

Move on to Sunpark Professional Centre, a 69,333-sq.-ft. office/medical building just off Macleod Trail near Lake Sundance, and basic rent prices start at $19 per square foot. Opened last year and with leasing almost complete, the centre offers 85 underground parking stalls at $100 month and another 122 surface stalls at $50 a month.

Krizan notes that basic rents do not include operating costs and taxes, but rather "are a net rental number independent of those costs."

"Typically, operating costs are 40 to 50 per cent of what the nets rents would be, based on market conditions today," he adds.

In addition to the break on basic rent and parking, some tenants like the way suburban office buildings give smaller tenants a chance at a higher profile.


Illustration courtesy of Opus
Opus II Interplex Business Park, south of the downtown core.
"The core has lots of clients in the 80,000-sq.-ft. range, but in the suburbs, that could be over half of the building," notes Krizan. "The suburbs offer the opportunity to be a big fish in a small pond."

Price breaks aside, the real issue is space - and the rising demand for more. Calgary's office sector has "the lowest vacancy rate in Canada, bar none," says Kevin Watson, a vice-president and suburban office leasing agent with Colliers International, the brokerage firm that dominates Calgary's suburban office market.

With demand for space high in the downtown core, landlords have been taking back sub-leased space to rent out at head lease prices. Largely the byproduct of energy industry mergers, those sub-leases no longer make sense in a market where major tenants need additional space - and will pay more to get it.

Watson says AAA space in the downtown core is reaching prices as high as $45 per square foot.

The move out of the core is led by engineering, high-tech and legal firms with links to the energy industry, adds Watson, who sees the move as "a reflection of the heated market you have in Calgary."

And this is where the news for tenants is good and bad. It's good because there's a growing pool of space to choose from. A report prepared by Watson shows 41 new buildings in Calgary under construction or in the design and development phase. About 27 of them are in the suburbs, says Watson.

He's especially excited about the Glenmore Professional Centre, a "smart technology" building under construction at Glenmore and 68 Avenue S.W. Scheduled to open early next year, the 130,000-sq.-ft. tower has a projected rental rate of $23 per square foot. Watson predicts tenants will be impressed by built-in technology that makes this building the only one of its kind in Calgary.

On the bad news side, most of that space won't come onstream until later this year and well into 2007 and 2008, meaning little short-term relief for tenants feeling the space squeeze right now.

If there's an upside to that situation, it's the fact tenants have some time to research product coming on the market. With most of the new suburban sites offering good road access to the rest of the city, good parking for employees and clients and good access to public transit, Krizan expects they'll like what they see.

Historic Lows

A report from CB Richard Ellis puts numbers behind the space squeeze in Calgary's downtown and suburban office markets. Highlights include:

* Fourth-quarter 2005 vacancy rates in downtown and suburban office markets in Calgary were "at or approaching historical lows."

* Calgary's vacancy rate in the downtown core is pegged at 2.1 per cent, lower than the national average of 8.1 per cent and significantly lower than Edmonton's fourth-quarter rate of 7.1 per cent.

* The national average for suburban market vacancies in the last quarter of 2005 hit 10.8 per cent, with Calgary registering at 7.6 per cent and Edmonton at 8.2 per cent.

* Average lease rates in Calgary's downtown and suburban office markets rose 35 and 15 per cent, respectively, over the course of 2005. Edmonton posted a 20-per-cent rise in downtown lease rates over the year, with more moderate increases in the suburban market.

* Notable downtown and suburban office lease rate increases are expected in 2006 in both cities.

(Joy Gregory can be reached at joy@businessedge.ca)
 
Jobs shifting from the core to the 'burbs represent a natural evolution. The only special thing about Calgary in this regard is that it hasn't reached that point yet. But it will, and quickly, as the article points out. Eventually prices in downtown Calgary will rise to the point where it won't make sense for many current occupants to remain.
 
'Suburban' Calgary sometimes means sites just a few km from downtown - these sites will be comparable to office development in inner-ish suburban areas like Yonge & Eglinton or along the DVP until Calgary really starts sprawlling (which it hasn't, really, so far).
 
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