An overview of the downtown Calgary office market, for Q4 2015.

1. Availability rate increases
Source: JLL Research
Sublease market continues to rise
Source: JLL Research
Downtown overall asking net rental rates decline
Downtown overall asking net rental rates
(9.2% decrease from Q3)
Source: JLL Research
Tenants look to capitalize on current market conditions
Although the oil price decline hasn’t been beneficial to the downtown Calgary office
market, it isn’t all bad news. Tenants currently looking in the marketplace have
opportunities. There are over 700 options in various sizes within the downtown
market for tenants to view, totaling almost 8.1 million square feet of marketed space.
However, tenants should note options within the sub 3,000 square foot range are
limited. Only 18.3 percent of the over 700 options meet that size criteria and, as a
result, is creating a competitive sub-section of the market. Additionally, average asking
net rents declined quarter over quarter by 9.2 percent, to $18.84 per square foot.
These factors indicate all downtown sub-markets in 2016 are likely to remain tenant
favourable as rental rates continue to drop and the number of options grows.
Decrease in demand continues
Demand for downtown office space continues to weaken. In Q4 2015, the downtown
Calgary office market saw its fifth consecutive quarter of increased vacancy rates,
reaching 14.1 percent. This represents a quarter over quarter vacancy rate increase of
2.6 percent. If the vacancy rate was to include space occupiable within the next six
months, it would increase to 17.2 percent. In Q4, there was negative net absorption of
675,255 square feet. This totals a negative 2.6 million square feet of absorption in
2015. The addition of Calgary City Centre to inventory augmented negative net
absorption, as tenants moving to this new building leave space behind, 232,021
square feet of that space is currently on the sublease market. We anticipate continued
lack of demand for office space through 2016 if depressed oil prices persist and
tenants in the downtown core, primarily energy industry companies, take further
austerity measures as a response.
Inducements increase
Q4 2015 saw landlords find creative ways to entice tenants to fill current building
vacancies. Inducements such as free rent periods, increased tenancy
improvement allowances and lease buyouts are examples of such
encouragements. Furthermore, with the majority of activity in the sublease
markets landlords will need to continue utilizing inducements in 2016 to compete
in attracting and retaining these tenancies.
Perception is everything
Availability rate Q4 2015
Office Insight
Downtown Calgary | Q4 2015
41,682,752
Total inventory (s.f.)
-675,255
Q4 2015 net absorption (s.f.)
$21.13
Average Class A asking net rent
2,940,430
Total under construction (s.f.)
14.1%
Total vacancy
-2,619,260
YTD net absorption (s.f.)
-38.3%
12-month net rent growth
68.9%
Total preleased (excl. option space)
0%
20%
40%
60%
0
2,000,000
4,000,000
6,000,000
8,000,000
Q4
2008
Q4
2009
Q4
2010
Q4
2011
Q4
2012
Q4
2013
Q4
2014
Q4
2015
Direct Sublease Sublease as a Percentage of Available SF

2. Current conditions – submarket Historical total available sublease space (s.f.)
Source: JLL Research Source: JLL Research
Total net absorption (s.f.)
Source: JLL Research
Total vacancy rate (%)
Source: JLL Research
Average Class A asking net rent ($ p.s.f.)
Source: JLL Research
511,834 430,809
120,671
-926,629
1,782,007
2,577,705
2,053,340
-609,595
-117,667
-2,619,260-3,000,000
-2,000,000
-1,000,000
0
1,000,000
2,000,000
3,000,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Landlordleverage
Tenantleverage
Peaking
market
Falling
market
Bottoming
market
Rising
market 416,683 298,198
1,327,678 1,298,384
3,242,601
0
1,000,000
2,000,000
3,000,000
4,000,000
2011 2012 2013 2014 2015
©2016 Jones Lang LaSalle IP, Inc. All rights reserved.For more information, contact: Trent Peterson | Trent.Peterson@am.jll.com
Calgary,
Downtown
3.0%
1.6%
3.6%
6.9%
11.0%
4.3%
3.6%
4.5%
6.6%
11.5%
14.1%
0.0%
5.0%
10.0%
15.0%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2015
*
$52.95
$55.44 $54.36
$24.78 $25.55
$37.17
$42.10
$40.01
$34.27
$21.13
$15.00
$20.00
$25.00
$30.00
$35.00
$40.00
$45.00
$50.00
$55.00
$60.00
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
*Rate indicates only current vacancies. If vacancies were to include availabilities within the next 6 months, then vacancy would spike to 17.2%