THE PAST REBORN

are more flexible in negotiating
shorter-term leases in a softer
market, with blend-and-extend
options — using early renewal
to renegotiate a lease.”
Thompson says a softening in
the market will also bring back
tenants who were previously
kept out of downtown due to
high prices and extremely limited
availability — professionals
such as doctors and dentists
and even engineering firms
that had been located in the
Beltline and suburbs.
Meanwhile, she adds, there’s
also renewed international interest
in Calgary office space,
and Greg Kwong, executive
vice-president and Alberta
regional managing director for
CBRE Ltd., agrees.
Kwong says there are huge
amounts of capital — local,
national and international
— chasing product to buy in
Calgary. “I’m continually surprised
by the amount of global
recognition we get for a city
our size,” he says. “A number
of years ago, the word got out
that Calgary is an international
market that offers plenty of
opportunities.”
Kwong believes the available
properties are diverse enough
to satisfy tenant demand, and
what’s currently being built
will be absorbed quite comfortably.
Thompson agrees,
and says while concerns have
been expressed about some of
the larger projects being constructed
downtown, those are
all fully leased — so absorption
is looking very good.
And the current market
conditions are also providing
plenty of opportunities for
downtown tenants to upgrade
their space. Many have been
waiting for years to do just
that.
This causes a ripple effect
in which less-than-ideal spaces
are left vacant by tenants
taking advantage of move-up
Todd Throndson: “Flexibility
is usually the key. One
strategy is to take more
space than required initially
and sublet the space you
don’t need, to create
flexibility down the road.”
Susan Thompson: “I don’t
believe anyone thought
that we’d never see energy
prices drop again. Calgarians
are very resilient, and
even if it is more prolonged
we do have the ability to
get through it.”
Greg Kwong: “I’m continually
surprised by the amount
of global recognition we
get. A number of years
ago, the word got out that
Calgary ... offers plenty of
opportunities.”
opportunities, so building owners
are exploring options.
“People in the commercial
real estate industry are coming
up with some very creative
solutions, including looking at
non-traditional tenants and
the re-purposing of buildings,”
Thompson says. “That’s where
we see the old science centre
downtown becoming an art
gallery and 100-year-old brick
industrial buildings in the
Beltline becoming residential
housing.”
Despite the positive side
of the equation, there’s no
disputing that energy prices
do present a challenge to
the commercial real estate
industry, at least in the short
term. Energy companies are
controlling expenses by reducing
staff, putting excess space
on the sublet market, cutting
operating expenses, asking
service providers for cost
savings and trimming budgets
all around.
“It drives down demand for
space, not just in the energy
sector but in most businesses
in town,” says Throndson.
“This will increase vacancy,
drive down rent and potentially
create lower valuations for
buildings.”
He says the industry expects
to see mergers, acquisitions,
and even some bankruptcies
and foreclosures, which open
up more real estate, again creating
opportunities for those in
the market for space.
Thompson adds that in an
economy heavily reliant on one
industry sector, Calgary businesses
know how to deal with
vagaries of that sector. “I don’t
believe anyone thought that
we’d never see energy prices
drop again,” she says. “Calgarians
are just very resilient, and
even if it is more prolonged
we do have the ability to get
through it and move forward.
That is what we do.” ■
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