Are return-to-office efforts gathering pace in Calgary?

The Calgary office property market demonstrated resilience in the fourth quarter of 2024, with vacancy rates falling to their lowest level since 2019, according to Avison Young’s latest market report. Driven by strong demand for high-quality office space and ongoing office-to-residential conversion projects, the city’s overall office vacancy rate decreased to 21.7%, indicating signs of recovery.

Downtown market stability

Downtown Calgary’s office vacancy rate ticked up slightly by 0.1% to 24.6% this quarter, primarily due to nearly 270,000 sq ft of negative absorption. This increase was attributed to leases ending and additional space entering the market from properties such as Suncor Energy Centre and First Canadian Centre. Despite these short-term fluctuations, annual absorption in the downtown market surged to 403,243 sq ft, significantly higher than 160,884 sq ft in 2023.

Premium office spaces, particularly trophy and AA-class buildings, continued to outperform, maintaining low vacancy rates due to sustained tenant interest in top-tier accommodations. However, limited supply is expected to push tenants toward lower-class office spaces in the coming year, as high demand for premium options remains unmet.

Beltline and suburban trends

The Beltline area saw a notable decline in vacancy rates, dropping by 2% to 17.6%. A key driver was the removal of Beltline Block from the market due to its demolition for a planned 36-floor mixed-use residential tower.

In the suburbs, vacancy rates remained stable, with a slight increase of 0.7% in Q4. North Calgary remains a preferred destination for tenants, with a lower vacancy rate of 16.2% compared to the southern suburban areas. Class A buildings, particularly newer developments such as Quarry Park, continued to attract tenants seeking modern facilities.

Shifts in ownership and investment

Private ownership of office properties in Calgary is on the rise, fuelled by interest from out-of-province investors. This trend is reshaping the market, as private landlords are investing in upgrades to enhance tenant appeal. Renovations in properties such as Watermark Tower and The Ampersand focus on amenities like modern fixtures, natural light, and enhanced lobbies, primarily in A-class buildings.

Outlook

Calgary is taking steps to meet the rising housing demand spurred by its growing population by repurposing office spaces into residential units. Analysts noted that a total of 14 buildings have been earmarked for conversion, with two already completed and more expected to finish this year. This initiative aims to utilize underused office space and may create opportunities for the development of new office towers in the future.

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