If Red Deer’s economy is being hurt by low energy prices, the pain hasn’t yet radiated to the rental markets for commercial and office space.
The 2015 edition of Soderquist Appraisals Ltd.’s commercial and office vacancy rate study has concluded that the current numbers are slightly below the averages for the past several years.
In the case of commercial property, the 2015 vacancy rate was 4.26 per cent. That’s down from 5.06 per cent in 2014 and the 4.52 per cent average over the past four years.
For office space, this year’s vacancy rate was calculated at 10.31 per cent, which compares with the 2014 figure of 10.22 per cent and a three-year average of 10.86 per cent.
“This data indicates that Red Deer’s office and commercial markets have both been very stable in recent years,” said Mike Garcelon, senior appraiser at Soderquist.
He added that no major change in the rate for either market is anticipated in the short term, although the pending departure of Target from Bower Place mall and the December closure of Safeway in Parkland Mall could boost Red Deer’s commercial vacancy rate in the future. Garcelon pointed out that Safeway’s space in Parkland Mall was still classified as occupied in the Soderquist survey.
“Even though they’re not open for business they’re still using it,” he explained.
Garcelon said Red Deer’s commercial and office vacancy rates are comparable to those in other Alberta cities. He pointed out, however, that because the local survey is conducted only once a year it wouldn’t show a recent upward trend in rates.
“If we were going month to month, you might start to see some weakness in the last few months.”
But, said Garcelon, the current economic slowdown is unlikely to have hit commercial and office tenants as quickly or as hard as the recession did seven years ago.
“Unless it’s a major economic shock, like what we had in 2008, tenants are not going to break their lease.”
If current conditions persist, however, next year’s survey will likely show increased vacancy rates for commercial and office property. And Garcelon is expecting that his company’s annual survey of industrial properties, which it conducts every summer, will show a change from 2014.
“I do really expect that vacancy rate to jump up a bit,” he said, explaining that there has been quite a bit of industrial construction recently and a slowdown in occupancies.
Soderquist’s 2015 commercial and office vacancy rate study determined that there were 4,277,573 square feet of commercial space in the city, up from 4,255,572 square feet last year; and 2,014, 847 square feet of office space, as compared with 1,993,202 in 2014. Because of its proximity to Red Deer, property in Gasoline Alley was included in the survey.
Soderquist Appraisals, which has been operating in Red Deer since 1977, is a full-service real estate appraisal and consulting firm.