Calling it “fantastic news”, Avison Young reports that Calgary posted the first positive absorption in its office market in two years as occupancy increased by 173,000 square feet during the fourth quarter (Q4) of 2021.
This drove Calgary’s overall office vacancy rate down for the first time since the COVID-19 pandemic began, as it dropped to 26 per cent. The downtown vacancy also ticked down year-over-year from 29.9 per cent to 29.7 per cent – the first decline since Q4 2019, but still the highest in Canada.
“It is fantastic news to see Calgary record its first positive quarter in two years and see it’s vacancy finally move downwards, however small that change may be,” noted the Avison Young Calgary Office Report, released January 31.
The commercial agency said it may mark a turning point for Calgary’s office sector “as the case for optimism grows.”
Much of that optimism is due to rising oil prices.
On the day the office report was released, the crude oil futures price for benchmark Western Texas Intermediate traded above US$88 per barrel. This is close to levels not seen since 2014 and a 17 per cent gain month-over-month, the strongest since February 2021, amid robust demand, tight supply and falling inventories.
Avison Young notes that, in net terms, office tenants are planning to take more space than they give back, and that much of the demand is coming from the technology sector, logistics, life sciences and “the broader energy sectors, not just traditional oil and gas.”
Still, Calgary has a way to go to get back to a balanced office market.
As of the end of 2021, there were four vacant office towers downtown, representing just over 2 per cent of the total inventory, and two others that were more than 75 per cent empty.
However, there are also 36 fully leased office buildings of more than 20,000 square feet in downtown Calgary, 12 per cent of the overall inventory.
Because of the huge amount of office inventory in Calgary, even a 29 per cent vacancy rate means there is more office space leased in its downtown than in any other city in Western Canada.
