Calgary’s downtown office vacancy rate has crept up to a new high of nearly 30 per cent.
According to real estate brokerage company CBRE, downtown office vacancy rose from 27 per cent in the second quarter of this year to 28.7 per cent in the third.
Greg Kwong, the company’s managing director in Calgary, said it’s not how high the vacancy rate has climbed but the length of time it has been so high that is noteworthy.
“Typically, if we look at the last three or four recessions, whether they be oil based or the global financial crisis, those typically lasted anywhere from 18 months to three years,” he said. “We are just finishing off our sixth year of high vacancy rates in Calgary.”
The vacancy rate in Calgary’s core has now risen from about 10 per cent at the end of 2014 to nearly 30 per cent today.
Kwong said there is no “one industry” that will be able to fill the towers emptied by the retraction in the oil and gas, and now COVID-19.
“In this type of environment, Alberta, specifically Calgary, has to be pulling on all the levers,” he said. “And that’s promoting the tech sector, converting office buildings, quite frankly demolishing some office buildings that are perhaps at the end of their useful life.”
On the flip side, Kwong said, Calgary’s industrial market is faring better.
He said as more people shop online, demand for more warehouse space continues to grow.
Kwong also expects to see more office space come onto the market as oil and gas companies begin to evaluate the prospects of potential mergers and acquisitions.
The downturn in the downtown affects Calgary’s bottom line and creates a shortfall in municipal tax revenue.
The value of the core’s non-residential properties fell by more than $12 billion in three years, sinking city tax revenues by $300 million.
Big drops in property assessments mean fewer tax dollars flowing from downtown office towers, but the city still has the same revenue demands.
That shortfall needs to be made up — and that’s putting political heat on local councillors and creating concern for businesses outside the core now faced with picking up the slack.
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