Friday, March 30, 2012
Friday, March 23, 2012
A new office development cycle has officially started in Calgary, marked by construction commencing at Eighth Avenue Place II (West Tower), as record breaking downtown office leasing activity over the past two years has restored the market to pre-recession vacancy and lease rate levels.
In 2011, 2.4 msf of downtown office was absorbed and vacancy dropped from 10.6% to 4.5%. In the fourth quarter alone, there was 650,000 sf of absorption and a 1.7% drop in the downtown vacancy rate (6.2% to 4.5%). Consistent with previous quarters, most of this leasing activity has been in Class “A/AA” spaces. Class “A” vacancy in the downtown is now 2.5%, and Class “AA” vacancies are virtually non-existent at 0.3%. Scarcity of space in Class “A/AA” buildings is also having an effect on the Class “B” vacancy rate which has been in steady decline over the past year. Only the Class “C’” market has not recovered as dramatically since 2008, with vacancy now at 15.4% having remained in the mid-high teens since 2009.
The flight to quality trend continues to shape Calgary’s office leasing market and has prompted a new development cycle. Eighth Avenue Place II (West Tower), Eau Claire Tower, Herald Block and City Centre would add a combined 3.3 msf to the downtown market over the next five years and have a relevant impact on vacancy.
Calgary’s downtown office leasing market is tightening at a pace that surpasses the 2004 to 2007 levels. This tightening has naturally renewed interest in the development market for a number of new Class “AA” towers. Analogous to 2004 when Livingston Place, Centrium Place and OPUS 8 were announced as potential developments, Calgary’s downtown market is void of new office development in the core for the next 30+ months. As such, our opinion is that we are in the early stages of a notably increasing lease rate environment.
Historic Review of 2004 & 2007 Office Markets in Calgary
One of the most telling metrics out of the highlights listed on the chart above are the energy land sales numbers. 2004 was the first time since 2000 that energy land sales (excluding oil sands land) grossed more than $1B in revenues for the Alberta Government. In the following two years this level of investment was exceed by a $1.8B year in 2005 and a $1.4B year in 2006. As land leases purchased from the government must be proven (drilled and put into production) in a 2-5 year period (depending on the area in Alberta the land was leased in) the land purchased in 2004 to 2006 put in motion the massive expansion seen in Alberta’s energy sector thereafter.
Of course the expansion seen in Alberta’s energy sector was dampened both by the Government of Alberta’s royalty review in 2007 which drove a number of key producers into British Columbia and Saskatchewan, and by the global financial crisis.
Looking forward we feel that the energy production land purchased in 2010 and 2011, which set all time record highs in terms of total investment dollars and total hectares purchased, will keep activity levels in the province of Alberta strong through the next five years, possibly outpacing what we have seen in recent cycles because of favorable oil prices and a stable royalty system.
One major difference between recent cycles and today that cannot be overstated is the market value of crude oil. At today’s prices both exploration and development of existing leases is viable because we have oil prices stabilizing at above $90 a barrel, which is a roughly $20 per barrel cushion above the breakeven point of the more expensive oilsand plays in Western Canada. Compared to 2004 when Calgary’s downtown office market was tightening with $44.09 per barrel oil we feel that the next three to four years will provide for a much tighter and more robust office leasing and development market.
Monday, March 19, 2012
by Dan Gonzalez
The Rosslyn-Ballston (RB) corridor of Arlington, located conveniently to Reagan National Airport, the Orange Line of the Metro, and I-66, has become one of the more popular residential and office locations in North Virginia. The corridor -- Rosslyn, Courthouse, Clarendon, Virginia Square, and Ballston -- has shown strong growth in the residential market and the thinking is, this will help improve the commercial market.
Despite increased vacancies in 2011, office space rental rates increased 1.6 percent to $30.92 per square foot (PSF), partially due to the strong demand that still exists in the Washington DC region. Vacancies were around 12 percent in the area at the end of the year, compared to a whopping 16 percent on a national basis.
Three projects, with almost a 1.4 million square feet of space, are either under construction or just completed, including one from Monday Properties which is over 500,000 square feet alone. Accenture moved to the RB corridor from Reston to occupy part of a 302,000-square-foot building at 800 North Glebe Road developed by JBG. It remains to be seen how quickly this new space will be occupied despite increased concession packages being offered. The third project is the Shooshan Company’s recently-completed 675 N. Randolph St., a 555,000-square-foot building fully leased by DARPA (Defense Advanced Research Projects Agency).
Due to continued uncertainty in the economy, many companies continue to choose renewals rather than looking for new space and shorter-term leases are expected to continue through 2012.
Notwithstanding the Department of Defense closings and the unknown impact of federal budget cuts, Northern Virginia (and the Rosslyn-Ballston corridor in particular) continues to be one of the most attractive areas in the country operate a business. With the aforementioned new properties by the Shooshan Company, JBG, and Monday Properties, a lot is riding on the continued growth and popularity of Rosslyn-Ballston which has historically been tied to government related activities. In future entries I will discuss some very exciting entrepreneurial efforts being deployed to diversify this submarket’s corporate identity.
Wednesday, March 7, 2012
By Mark Rose (Toronto)
For the past three and a half years, every person associated with Avison Young has been working toward the goal of creating the leading global real estate services company in our industry. From our Principals to our property teams and our managers to our administrative staff, each individual has powered our growth and proudly waived our flag. We have recruited top talent and won major mandates and…… we have stayed true to our culture and believed in our mission.
We are now the largest (and I believe the best) privately held, Principal led, Canadian company in North America. And it is with extreme pride that we announce the distinction of being recognized as one of Canada’s 50 Best Managed Companies for 2011. The prestigious national award is sponsored by Deloitte, CIBC, National Post, and Queen’s School of Business. The announcement was made by the national sponsors and in a special report in the National Post.
Established in 1993, Canada’s 50 Best Managed Companies national awards program recognizes Canadian companies that have implemented world-class business practices and created value in innovative ways. Applications are reviewed by an independent judging panel that evaluates how companies address various business challenges, including new technologies, globalization, brand management, leadership, leveraging and developing core competencies, designing information systems, and hiring the right talent to facilitate growth.
This recognition would not have been possible without our incredible roster of clients and their commitment to Avison Young. As our pristine reputation, cutting edge solutions and superior execution continues to be noticed throughout the global commercial real estate services industry, we are even more committed to listening to "The Voice of Our Clients." We hear that they want solutions, not just services. We are listening when they want the teams servicing their accounts to have both direct financial and reputational risk as owners of the Company. And we pay attention when clients demand a service provider who has a clear cut vision and the balance sheet stability that comes with no debt and strong profitability.
We believe these are the foundations for a well-managed organization and are honored that we were recognized as one of Canada's 50 Best managed Companies for 2011.