A tale of two cities; office markets in Calgary, Ottawa
Two reports this week show the different states of commercial real estate markets in Calgary
. Office vacancy rates in Calgary
increased from 6.3 per cent in the first quarter of 2014 to 8.5 per cent in the same period this year while leasing activity fell by two per cent, according to a report by Cushman & Wakefield. Its outlook for the year is for negative absorption to continue this year with net rates dropping in the CBD and a lesser impact in the suburbs. On building intentions, the reports says: “In this economy it is unlikely any developer will commence construction on firmly proposed projects, due to difficulty in finding anchor tenants.” It expects that once oil prices strengthen there will be an uptick in activity. Meanwhile in Ottawa
the vacancy rate currently stands at 11.2 per cent, down from 11.3 per cent a year ago; in the downtown area it is 10 per cent, down from 10.2 a year ago. The latest market report from Colliers International suggests that now is a good time for tenants to relocate to/within Ottawa
as “the current low net effective leasing rates will likely shrink over the next 12-24 months, as the market continues to recover and vacancies drop.” Class A space is most in demand in the Ottawa
Consumer confidence still edging higher
Job security and real estate prices are two key elements of consumer confidence that are trending higher, according to weekly figures from Bloomberg/Nanos Research. The Canadian Confidence Index continued its upward trajectory in the week ended April 10th, increasing to 55.37 from 55.04 a week earlier; the 2015 average is 55.12 while the year’s high so far was 56.82 in the week following the cut in interest rates. Although confidence in the overall economy dipped slightly, the sub indexes on job security and personal finances grew. Confidence in real estate is also up, rising to 36.85 from 35.64 and well above the year’s average so far of 33 per cent. Asked where they believe house prices will be in six months, 36.85 per cent said higher, 18.48 per cent said lower and 41.25 per cent said they would be the same.
Mortgage lenders are not to blame for household debt
Whenever mortgage rates are cut there are negative reports that claim that lower rates leads and irresponsible lending are creating a household debt ‘time bomb.’ However, writing in the Globe and Mail
, Rob Carrick defended the lower rates offered by mortgage lenders and banks, saying that consumers should welcome them battling it out over lower rates. While critical of the loose lending policies of some he pointed out that no one criticizes retailers when they cut their prices and home loan providers should be treated the same way. Further defending the industry, this time on interest rates, Carrick said that while lower interest rates have fuelled the housing market and helped increase prices, which is not the fault of mortgage lenders.
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