Here in Alberta, our recent economic boom was spurred by commodity prices increasing, especially oil. The oil boom brought a lot of corporate money into the province, lots of exploration, lots of production, and lots of employees.
Now that corporations are feeling the financial crunch of a slowing global economy. Many of them are cutting back on any excessive spending and cutting corners where they can. As a result, lots of them are giving up expansion plans and instead consolidating and shrinking down their physical size. As they get smaller, their footprint on the economy of Alberta also shrinks.
They lease less office space, emply less people, spend less money. Vacancies go up on office space, vacancies go up on residential properties, prices go down on office space, prices go down on houses. The effect is very logical.
With that being said, these corporations still need to exist and to operate. Their employees still need to live, eat, and survive in these cities. There is a realistic bottom to these things. Are we there yet?
Here is an article from the National Post that sums up alot of what is happened.
Alberta is leading a widespread jump in office vacancies across Canada because of a dramatic loosening in Calgary’s tight commercial real estate market in the last three months.
In Calgary, demand for commercial space continues to be impacted by sliding energy prices.
Total overall vacancy rates in the city jumped to 8.1% in the 90-day period to mid-March 2009 from 4.3% in the previous corresponding period, according to the National Office and Industrial Trends First Quarter Report from CB Richard Ellis Ltd., released Thursday.
"Capital investment in the province’s energy sector has been scaled back, while Alberta’s first provincial deficit in years contributed to business uncertainty in the first quarter," CBRE said in the report, which it uses to record trends and forecasts for clients.
A spokesman for CBRE said the figures are unlikely to be adjusted for the period between the middle and the end of the month and that allows the firm to refer to the report as a quarterly one.
The dramatic increase in Calgary vacancies means the Alberta city has gone from having the lowest percentage of available commercial real estate among Canada’s largest cities to one of the highest.
The figures will be watched closely by developers who are committed to building billions of dollars worth of new office construction in the city. H&R Real Estate Investment Trust had been struggling to finance the huge 58-storey Bow tower, EnCana Corp.’s future headquarters, but appears to be pressing ahead with the project.
Challenging economic conditions in the manufacturing, retail and resources sectors -- coupled with access to capital constraints -- all contributed to rising commercial real estate vacancy rates across the country in the first quarter of 2008.
Commercial real estate vacancy rates in both downtown and suburban markets rose from 6.3% to 7.5%, year-over-year.
Meanwhile, net absorption, aided by increased commercial inventory and rising unemployment, continued to decline, from 2,642,611 to 2,013,229 square feet, year-over-year.
"The residual effects of the Canadian economic downturn continued to impact first quarter commercial real estate market conditions," said John O’Bryan, vice-chairman, CB Richard Ellis. "In almost all cases, vacancies remained broadly based -- a trend we expect to continue for the balance of 2009 -- while more news regarding the slowing Canadian economy continues to surface."
Sublet space during the first quarter also increased, from 3,827,568 to 6,329,040 square feet, year-over-year, as more companies nationwide have begun "reconsidering their need for underutilized office space," said CBRE.
Western Canada, which has been harder-hit by falling energy prices and a decline in the resource sector, saw a steeper rise in vacancy rates, while Central Canada, with its more mature commercial real estate market, saw much less vacant office space, said the report. Several factors, including the completion of several landmark developments in Toronto and the continuing uncertainty in Ottawa’s tech market, are expected to boost vacancy rates in those cities in the coming quarters.
Here are a few of my favorite past articles from my Lethbridge real estate and mortgage blog you might have missed or wish to recommend them to a friend.
WANTED: Single Women: - Single women are a hot mortgage market
Common Financial Problems - Avoid these financial mistakes
Get Your Credit Score UP - Invaluable insight into your credit score
Mortgage Guidelines Get Tighter - Harder and harder to borrow money
Is Your Mortgage Company Out of Business in 2009? - What to do when your bank goes broke
What is wrong with MLS - Is your info being abused?
Survivor - Real Estate Edition - Let's vote a few more off the island
Robert May is a Realtor, as well as the broker and owner of Rainbow Realty of Lethbridge Alberta. He is also a licensed mortgage broker and mortgage financing expert with Canada First Mortgage of Calgary Alberta. He has been in the lethbridge real estate industry since 1993 and offers full MLS services to the Lethbridge real estate market and surrounding area.. He can be found online at www.LethbridgeLoans.com
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