Demand for office space returns as the economics for the oil and gas industry improve
- The Alberta Natural gas price (AECO) monthly index moved from $5.64 down to the $4.34 range over the quarter, still significantly higher than the $3.20 recorded at year-end 2013. Western Canada Select crude (WCS) differentials have narrowed by more than $20.00 since year end 2013 when compared to West Texas Intermediate (WTI). Better market access for WCS have had a narrowing effect on the differential in 2014. The lower Canadian dollar continues to help most Alberta energy producers.
- Due to strong global demand crude oil prices remained strong through the second quarter of 2014. West Texas Intermediate (WTI) averaged $102.98 during the Q2-14 a 9% annual increase. This is also significantly higher the US Energy Information Administration 2014 forecast average of $93.00, it was projecting at year-end 2013.
- During the quarter Headlease availability decreased by 70,700 square feet and Sublease availability decreased by 71,100 square feet, thereby netting a positive absorption quarter of 141,300 square feet. Year to date absorption is now 178,300 square feet. Absorption should get a further boost with the addition of Eighth Avenue Place- West later this year.
- Asking Net Rental Rates (ANRR), experienced a notable downward trend in the first half of 2014. The ANRR deflation was more a delayed reaction to the very weak 2013 demand year, than reflective of the improved market conditions in 2014.
- O & G Producers, primarily microcap and juniors, are having difficulty with the capital demands required for the Licence Liability Rating (LLR) orphan well implementation by the Alberta Energy Regulator (AER).
2014 Real Estate Office Market Report, Calgary - Q2