Calgary's downtown office vacancy rate hits nearly 30%

Calgary's downtown office vacancy rate has crept up to a new high of nearly 30 per cent.

According toreal estate brokerage company CBRE, downtown officevacancyrose 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, saidit's not how high the vacancy rate has climbedbut 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."

Thevacancyrate in Calgary's core has nowrisen from about 10 per cent at the end of 2014 tonearly 30per 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 saidas 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.

Tax implications

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 fellby more than $12 billion inthree years,sinking city tax revenues by $300 million.

Big dropsin property assessments mean fewer tax dollars flowing fromdowntown officetowers, but the city still has the same revenue demands.

That shortfallneeds to be made up andthat'sputting political heatonlocal councillors andcreating concern for businesses outside the corenow facedwithpicking up the slack.