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Calgary soon to outstrip Montreal as office centre

Calgary soon to outstrip Montreal as office centre

Calgary is set to overtake Montreal as Canada's second largest market for office space

Calgary is set to overtake Montreal as Canada's second largest market for office space

Photograph by: The Gazette

MONTREAL - Driven by a commodities-fuelled boom, Calgary is expected to overtake Montreal as Canada’s second-largest downtown office market after Toronto, commercial real estate executives predict.

“Our expectation is that Calgary is eventually going to surpass what we have in our core,” said Louis Burgos, senior managing director of real estate services firm Cushman & Wakefield in Montreal.

“I would expect it.”

Strong demand by oil companies for large blocks of space in Calgary, combined with nearly a decade-long absence of new office tower construction in downtown Montreal, have narrowed the gap between the two cities over the last six years.

According to Cushman & Wakefield projections, Montreal’s central office inventory will hit 49.2 million square feet in 2016, compared with 48.8 million square feet in Calgary, a gap of just 400,000 square feet. In 2007, Montreal’s central office inventory was larger than Calgary’s by about 10 million square feet, Cushman data says.

The shift, that some say could occur by the end of the decade barring an unforeseen change in the energy market, reflects the strong growth in Canada’s resource-rich Prairies. Calgary is forecast to lead the country in economic growth between 2013 and 2016, averaging 4.1 per cent each year, the Conference Board of Canada’s Metropolitan Outlook for spring 2012, published Tuesday, says.

In the office market, data from real estate services firm CBRE Ltd. – although calculated using a different methodology – reveal a similar trend of Calgary catching up to Montreal. By the end of 2016, CBRE expects Calgary’s downtown inventory to be around 41.5 million square feet – compared with Montreal at 44.5 million square feet.

The firm currently estimates the gap between the two cities at around 6 million square feet.

“Calgary is going to overtake Montreal, it’s just a matter of time,” said Greg Kwong, CBRE’s executive vice-president and regional managing director for Alberta.

Currently, Calgary has about 3 million square feet of new office space under construction – including Ivanhoe Cambridge Group-backed Eighth Ave. Place – for delivery by 2014. By contrast, 230,000 square feet of Class A office space, within a mixed-residential project, are currently under construction in downtown Montreal.

Calgary’s downtown office market vacancy rate is at one per cent, compared to six per cent in Montreal, Burgos said. And large oil tenants who ask for 500,000 to 1 million square feet of office space are driving demand for new buildings in Calgary.

“We’re at the point where negotiations with landlords are increasingly difficult,” Kwong said.

“There are virtually no choices.”



Postmedia News contributed to this report