Brookfield Office Properties Inc. is planning a development in the centre of downtown Calgary that would include the tallest building in the city, which has quickly become one of the most expensive office markets in the country.
Amid dropping vacancy rates and rising rents, Brookfield is announcing plans for a $1-billion-plus project called “225 Sixth.” The company says it believes the location, between 1st and 2nd Streets and 6th and 7th Avenues SW, represents one of the best remaining undeveloped sites in town.
Assuming the project comes to fruition, it will be home to a 56-storey or 247-metre tall tower, which will stretch above those that already exist downtown, as well as another 42-storey building. A three-storey glass pavilion, dubbed the winter garden, will sit between the two. There will also be an outdoor plaza and some retail space.
The vacancy rate for office space in central Calgary fell from 3.6 per cent in the first quarter of this year to 3.1 per cent in the second quarter and is one of the lowest in the country, according to real estate firm Cushman & Wakefield. A year ago, the rate was 6.9 per cent. In comparison, Toronto’s fell from 5 per cent in the first quarter to 4.8 per cent in the second, and was 5.3 per cent a year ago.
The vacancy rate for high-end class A office space in Calgary sunk to 2.7 per cent in the second quarter from 6.1 per cent a year ago, while Toronto’s was nudged down to 7 per cent from 7.3 per cent. The percentage of class A space available in downtown Calgary in the third quarter sat below 1 per cent.
“Calgary’s market is extremely strong,” said Jan Sucharda, chief executive officer of Brookfield Office Properties’ Canadian commercial operations.
The demand for premium space has pushed up rents. Last week, real estate firm Jones Lang LaSalle released its annual listing of the most expensive streets for office space in Canada, which showed Calgary’s 8th Avenue SW quickly closing in on Toronto’s storied Bay Street. While Bay Street maintained its position in the top spot, 8th Avenue SW made its debut on the list at No. 2.
To compile the ranking, Jones Lang LaSalle determines the most expensive street in each of Toronto, Calgary, Vancouver, Ottawa, Edmonton, Montreal and Halifax, and then ranks those streets.
The steep cost of downtown space caused Canadian Pacific Railway Ltd. to tell union representatives last month that it will be moving some of its head office to property it owns in the city’s Ogden rail yards. In September, Imperial Oil said it would be relocating its downtown offices to a complex in the southeast end of the city, which will mean vacating space in Fifth Avenue Place, another Brookfield property.
Mr. Sucharda said he doesn’t believe the decisions by these two firms represent a trend, and that Brookfield is confident it will have a new tenant lined up long before Imperial goes.
Brookfield bought the eastern half of its new development site about five years ago, and had been considering a smaller office project at that location. This year it was able to acquire the western half of the property, and began ramping up its plans.