Downtown Calgary office vacancies hit new high but it's not all bad news

More than a third of office spaceswere vacant in downtown Calgary in the second quarter of this year, which is a record high, according to a new report from commercial realty firm CBRE.

It was also the highest vacancy rate in all of Canada, said the firm's regional managing director Greg Kwong.

Kwong said the problem dates back to 2015 when the price of oil crashed and companies were forced to lay off staff, andin some casesshut their doors entirely.

The city has also added office spacein recent years as construction projects came online. Meanwhile, the reboundingprice of oil hasn't yet translated into more office jobs, he said.

"It's a reflection of theenergy sector still kind of trying to right their shipand calibrate for the next 20 to 30 years,whether it be capital spending, employee deployment and mergers and acquisitions that are coming up," he said.

The report says "energy sector consolidation" of office space continues to influence office vacancy in the downtown core.

Hybrid work strategies with more office workers staying home for part of the week has also reduced demand on office space downtown, the report says.

With the vacancy rate hitting 33.7 per cent, Alex Whalley, an associate professor of business and economics at the University of Calgary, says future growth is more likely to come from outside the oil and gas sector.

"The tech sector in Calgary is starting to grow, but it's still much smaller than energy," he says."So that'll be something to kind of keep our eye on to see how that sector does over time."

Landlords that have invested in upgrades and facelifts to older buildings and amenities are reapingthe benefits, with those properties outperforming the properties of landlords that haven't, according to the report.

The city is also making a push to convert empty office buildings into residential spaces, announcing last week that two more downtown office buildings will be converted into condos.

In all, city council has committed $100 million to the Downtown Calgary Development Incentive Program, which is focused on the elimination of excess office space through conversions.

Mark Garner, executive director of the Calgary Downtown Association, thinks things are turning around but that improvement takes time.

"We've got to make sure that it's sort of balanced economics with the employment cluster, as well as that tourist destinationand get the community back downtown again," he said.