It’s a tenant’s market if you’re on the hunt for office space; not so much if you’re looking for commercial premises.
These appear to be the findings of a vacancy rate study completed recently by Soderquist Appraisals Ltd. The Red Deer company has calculated that the local commercial vacancy rate is 4.08 per cent, while the figure for office space is 12.04 per cent. Both percentages are based on total area available in each category.
The commercial rate is up slightly from last year, when a similar study conducted by Soderquist placed the figure at 3.73 per cent. But company CEO Mike Garcelon pointed out that last year, a big chunk of the former Sears store space in Parkland Mall had a temporary tenant in it.
“We take that out of the equation, and we’re almost on par with last year.”
In fact, he said, the 4.08 per cent vacancy rate appears to be tilting the commercial leasing balance in favour of landlords.
“We’re just starting to see in the past few months, lease rates starting to go up in this market.”
The Soderquist study concluded that there is 2.3 million square feet of total space in strip malls, of which 3.52 per cent is vacant; 1.1 million square feet in enclosed malls, with 8.42 per cent of this available; and 926,000 square feet in power centres, with a 0.49 per cent vacancy rate.
These areas are comparable to last year, said Garcelon, when the vacancy rate was 4.16 per cent for strip malls, 5.56 per cent for enclosed malls and 0.62 per cent for power centres.
He said the study did not include other types of commercial premises, like those in Red Deer’s downtown, because they’re often difficult to classify as retail or office.
Strip malls, enclosed malls and power centres account for most of the commercial space, he added, and provide an accurate indication of market trends.
Because this is the first year that Soderquist has looked at office vacancy rates, it’s tough to know what direction the market is headed. A 12.04 per cent rate is high, acknowledged Garcelon, but a lot of new office space has been added in recent years.
The relatively new Executive Place and the addition to Millennium Centre accounted for approximately 150,000 square feet, he said, with other projects including five, two-storey office buildings in Gasoline Alley and a new residential-office building on the corner of 49th Avenue and 46th Street.
“It is slowly starting to soak up.”
Garcelon pointed out that office vacancy rates are usually the last to recover after an economic downturn.
Demand for industrial space usually picks up first, and Soderquist concluded last year that the local vacancy rate in this category was just 3.33 per cent.
“Industrial is getting really tight,” said Garcelon of the current picture. “We’ve really seen industrial lease rates increasing in the last six months and there’s more construction out there.”
Soderquist plans to re-assess industrial vacancy rates again this fall.
hrichards@www.reddeeradvocate.com