Calgary’s office market is in an absolute freefall. And it’s about to get even worse

By early next year, a third of Calgary’s office space might be vacant.

It’s an incredible figure when you consider that Calgary already entered the economic slowdown brought on by coronavirus with a supply glut, and now more than 20 percent of office space in the capital of Canada’s energy industry is vacant, according to Bloomberg.

Developers delivered millions of square feet in the years following the 2008 financial crisis, but in 2014 the price of oil started dropping and vacancy started to rise, much as it did in Houston. Logistical issues getting oil to U.S. refineries also started to take a toll.

For example, developer Strategic Group — which put a portion of its portfolio into creditor protection last year — said that since oil prices started falling in mid-2014, the company lost 78 tenants occupying more than half a million square feet of space.

“There was the Calgary that everyone was used to: boom, bust, boom,” said Roelof Van Dijk, the director of market analytics for CoStar’s Canadian outfit.

CoStar predicts that 33.1 percent of office space could be available by the first quarter of 2021.

Net asking rents have already cratered to about $10.60 a foot, less than half of asking rents in Vancouver and Toronto. Four buildings are empty and Brookfield’s two-tower, three-year-old development is still absorbing tenants, so there are few scenarios in which vacancy rates improve.

The recent freefall in oil prices could impact real estate in other ways. Oil-rich nations are huge investors in U.S. real estate in particular. A pullback by the sovereign wealth funds of nations like Saudi Arabia, Norway and the United Arab Emirates could leave a lot of would-be sellers without suitors. [Bloomberg]  — Dennis Lynch