There are a couple factors at play.
First is absorption rates. Calgary's Vacancy stood at 15% not even a year ago, in the past 12 months 3 million square feet has been absorbed, dropping the vacancy rate below what even the most bullish of estimates called for. Given expected high absorption the rate is expected to drop much further. Second and more to addressing your question is submarkets. While total Vacancy is roughly 8.5-9% Class A downtown vacancy is 3.7% and is the most supply constrained of any, so it will likely drop to near 0 in the next year or so. Class A vancancies are what cause new office towers, as 99% of new build downtown office space is class A (or AA or AAA depending on what the specific brokerage is calling it). If class A vacancies are low, as they are in Calgary (and Vancouver) it will spur a new round of office development. As an example Toronto's overall vacancy rate is 10.2%, identical to Vancouver, yet their class A downtown vacancy stands at 9.2%, much higher than Vancouver's 4.5%. This is why you will see relatively more office activity in Vancouver over the next 12-18 months. Over that time Toronto will absorb the class A space and will be ready for another round of new office buildings, while Vancouver will see a lull in activity as it absorbs the new space. Real estate cycles 101. |
I certainly wouldn't gamble on Vancouver seeing more office activity than Toronto over the next 18 months. There are several large RFPs out there which is reason why we are seeing a dozen projects dusted off/updated and aggressively marketed on top of the towers already under construction. There's only a few modest towers being pursued in Vancity with one or possibly two that will break ground. Toronto's market is an elephant to Vancouver's vole and a number of other Canadian submarkets that put Vancouver's 4.5% to shame.
Please don't say you were refering to a highly specific, utterly nonsensical stat such as, for example, percentage increase in inventory. You'll never top Lindsay Ontario's new subway restaurant addition. |
^^^yes. while the numbers show more demand in Vancouver, the fact is, that is just percentages. the reality is this. Toronto demand is probably 10 times what is needed in Vancouver, or even Calgary. so you will see much more new office development in Toronto as a result of this.
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And its not nonsensical for local markets, in fact its about the only metric regarding inventory that matters, and gives a true representation about the health of local markets. Anyway going forward downtown To and Van will add similar amounts of absolute office space over the next 5 years, the GTA vs Metro Van is an entirely different story however as total GTA office growth will dwarf total metro van growth. |
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That's true. I'm just so fed up by stats relative to their markets being used as a direct comparable between two separate markets. Still, I really think you're putting far too much emphasis on vacancy rate and positive absorption. I doubt Bay Street's demographic and work space architecture has ever experienced such a dramatic shift. The major growth sector has been and continue to be dead end low paying jobs. Competition is quite fierce in attracting over qualified, 20 somethings to these positions. One way is through hip, cool workplaces with exposed mechanicals and polished concrete floors in conventional class A space. Anyways, to make a story short, its cheaper to build new from scratch than to retrofit the older buildings will miles of redundant systems hidden behind ceiling tiles. The lease rates of the new developments outside of "the MINT" are easily 30% less. It's just specualtion but, I do believe Toronto will see a significant commercial building boom even as vacancy rates climb. |
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:banana: I wish we could trade the 3 - 500 footers for one 900+ footer though.:) |
sure, encanas old space is leased. but where will the companies moving into their old offices move from?! their offices will be empty. i see caltrane's point. somewhere in calgary some office is going to be sitting empty when the bow comes online. whether it is encanas old office doesn't matter.
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The space that is going to be lost in the shuffle here is Class F (if there was such a thing) or worse. It is a market reserved to the most junior of O&G startups, non-profits and Primerica suckers. I have been through plenty of this space in the last few weeks as an affiliated company seeks expanded space. Originally we wanted to shack up in EAP together but the timing didn't work.
I suspect some of these buildings will start coming down as the decade wears on. Others, Epcor Place for instance is being gutted to bare concrete and will be reborn AAA. I suspect the ball will swing first in Eau Claire. |
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There are 3 major towers ready to go with DP's as we speak (EAP2, City Centre and Oxford's Eau Claire Development). Dont be surprised when one or more are given the green light in the next 6-12 months. |
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Quebec City's overall office vacancy rate for the second quarter was 4,4% and residential vacancy was 1,0%.
http://www.avisonyoung.com/library/p...4_11_Final.pdf http://www.quebecinternational.ca/ec...terly-analysis By the way, here's a pretty good overview of the Canadian office market. It might be a petty concern on my part but it always bothers me that Quebec City rarely is included in these lists, considering that Quebec is Canada's biggest city east of Montreal. If its office market was somewhat similar to that of Montreal I could understand but it is actually very different (rant over). Anyway, here is the market overview: http://www.cbre.ca/NR/rdonlyres/D6AF...nal2q11ofc.pdf |
St. John's vacancy rate is 3.84%, by far the lowest rate in Atlantic Canada. Since last year our class A vacancy rate has been at 0%, I bet no other city has a lower rate then that.
https://www.turnerdrake.com/survey/attachments/102.pdf |
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And it's not healthy for a market to have a rate that low anyway, so it's not something that should be striven for. http://www.avisonyoung.com/library/p...ter.Spring.pdf Regina has a Class A vacancy rate for its competitive office market of 0.86% (not healthy), and an overall rate of 1.8% in the competitive office market. If you include the non-competitive market (company owned buildings, Government occupied, long-term leases), the overall rate drops down to 1.01% out of about 6.3 million sq ft of office space. This is why there is a tower currently under construction, one in the final planning/proposal stages, another one or two rumoured to be in the works, and a shorter building downtown currently in the prepping stages to provide some Class B spaces for smaller companies. With all of these developments, the market might finally approach a vacancy rate that's healthy... but who knows, with the way the economy is, it's anyone's guess as to how quickly it will be absorbed. |
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http://www.thestar.com/business/arti...-office-demand |
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