The story about Calgary’s economy and office market has been subtly changing over the past 12 months and it’s time for the rest of the country take a closer look at the market.
Sure, the overall vacancy rate in Calgary sits at around 28.41% according to Colliers’ data, but availability is considerably lower in well-amenitized, higher-classed buildings. It’s also clear that we’re not into the third year of a pandemic-caused office downturn, but actually finding our way through the sixth or seventh of economic lethargy linked to the struggling energy sector. Energy and related companies once occupied about 75% of the downtown office market, and ancillary service providers like environmental and engineering firms were the largest occupiers of space outside the core. Today that number is closer to 55% downtown and the engineering sector, which one time occupied about 9M square feet in the suburbs, occupies about 2M.
But renewed leasing activity, efforts to diversify the local economy, and strategies to reduce or convert the aging office inventory are providing cause for optimism and giving rise to new opportunities in Calgary.
Calgary’s office market is getting busier
Leasing inquiries and activity in Calgary have increased significantly since the fall, reaching levels not experienced for several years. Fourth-quarter office leasing in both the downtown core and suburban market experienced growth for the first time since 2019, according to our 2021 Q4 Calgary Downtown Office Market Report and 2021 Q4 Calgary Suburban Office Market Report. The beltline did report some negative absorption, although that market tends to lag the downtown by six to twelve months.
Since November, the office market has been increasingly active, with new entrants to the market and companies getting out in front of their expiring leases looking for newer, higher-quality space to meet their needs and to attract employees back to the office. Decision-makers are clearly thinking: “If we’re going to bring our people back to the office, it has to be a place that offers something working from home cannot.”
Meanwhile, the general feeling is that we’re starting to see the light at the end of the pandemic tunnel. Energy prices are strong, a number of new industries have had the opportunity to develop, and companies are in the process of implementing return-to-office plans that lean into the hybrid model, but also rethink and reconfigure offices to make them serve specific purposes and reflect the future of work.
More tech is coming
Calgary’s technology sector experienced record growth last year as the city’s tech startups broke a new record for venture funding in 2021, with deal volumes increasing 61%.
Tech giants are also recognizing Calgary as a hub to grow their businesses, with Amazon Web Services recently announcing plans to open its second Canadian infrastructure region in Calgary, bringing over 950 jobs to the region. India-based tech giant Infosys took 45,000 square feet downtown to create its Western Hub and we’re continuously seeing interest from other tech firms that are clearly paying attention to what’s happening in Alberta. The influx of tech interest has led to a revitalization of many inner-city properties, creating mini tech clusters throughout the core and beltline. At Colliers, we’ve seen interest from tech companies grow exponentially in the last five years, and only expect that trend to continue.
And tech isn’t the only industry that is booming. The energy sector has stabilized and is healthy after several years of downturn — the pivot and additional investment in renewable and clean energy technologies is also having a positive impact.
Calgary’s film industry is also thriving. The city was recently named the 10th best place to live and work within the North American film industry.
The push and pull of jobs and housing prices
Calgary is likewise experiencing population growth as Canadians in overheated markets such as Toronto and Vancouver look to Calgary for more affordable housing options while seeking to maintain a high quality of life. Beyond its housing market, Calgary’s job market is also becoming more of a draw. For instance, Ernst & Young and RBC both recently announced plans to create finance and innovation hubs in Calgary, bringing hundreds of new jobs to the region.
Behind-the-scenes work continues
We can’t ignore the fact that the pandemic has changed the way we work, presenting new challenges for both recruiting and retaining talent and reducing Calgary’s office vacancy rate.
Businesses looking for office space in Calgary’s inner city office market are in many cases not seeking the same amount of space they would have had pre-pandemic, as hybrid work is here to stay, creating uncertainty around how many employees will want to return to the office. Remote work is also increasing the competition for local tech talent as workers don’t have to physically live in the city their employers are based out of.
However, there is a lot of work being done behind the scenes to address these issues and put Calgary on a path to growth. The private sector has been working to make Calgary a place where innovation can thrive and people can come together and share ideas through initiatives such as the Platform Innovation Centre.
Government is also getting involved. Alberta’s immigration minister recently announced the Accelerated Tech Pathway, a new program that fast-tracks immigration for foreign tech workers. In addition, the City of Calgary is offering incentives for office building owners to convert buildings to residential, which will create housing in the downtown core for incoming workers while eliminating approximately 1.2 million square feet of excess, aging office space.
Calgary maintains its entrepreneurial spirit
Calgary is, and always will be, an entrepreneurial city. Despite the challenges the energy sector has faced over the years, this industry is constantly reinventing itself. The energy sector is working towards reducing emissions and transitioning to renewable energy sources, and has received federal support towards initiatives such as the recently announced Energy Transition Hub, which hopes to use Calgary’s downtown office inventory to create a space where clean energy and oil and gas can innovate together.
With the public and private sectors combining efforts, the Calgary office market is gaining momentum, making it one to watch as we begin to see the downstream effects of Calgary’s shifting economy and growing population.
Aly Lalani is an Executive Vice President and Partner at Colliers and Justin Mayerchak is an Executive Vice President and Partner at Colliers both in Calgary.
Read more on Technology and Commercial Real Estate