The state of Calgary's downtown office vacancy rate appears to be getting more grim by the day, pushing towards 25 per cent, a level not seen since the economic downturn in the 1980s, according to a new report from a company that represents office tenants.
There are currently eight million square feet of vacant office space available in downtown Calgary, which translates into a 15-year supply, according to the first-quarter report by Cresa.
Add to that three million more square feet currently under construction and that puts the vacancy rate near 20 per cent.
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But an additional two million square feet of "ghost vacancies" — unoccupied offices still being leased by companies — and the vacancy rate gets pushed to near 25 per cent.
"A lot of those companies are stronger integrated energy companies or companies that are not bleeding quite as bad as some out there, so they can afford to sit on their space," said Adam Hayes, a principal and broker with Cresa and author of the report.
In the first three months of 2016 alone, nearly 800,000 square feet of office space was vacated, Hayes said.
"Just the pure amount of available space given the inventory has grown so dramatically over the last decade," said Hayes.
"It's not concentrated. I would say no particular landlord or sub-landlord is immune to vacancy in their complex."
Hayes singled out Bow Valley Square as one complex particularly hard hit, where many larger tenants moved out over the past couple of years.
"Vacancy, anything more than 30 per cent in a particular portfolio or asset is becoming a reasonably large concern," he said.
"We just ran some numbers this morning. There's actually 18 buildings in downtown Calgary with vacancy over 30 per cent as it stands today."
Upsides to all that empty space
Amid the startling numbers, Hayes says there are a couple of upsides.
In his career, he's never seen a better opportunity for new tenants to negotiate a lease. As well, non-profits and charities could also benefit from the vacant spaces.
"Some of our clients and some companies downtown are looking at potentially donating office space to non-profits and charities," said Hayes.
"Whether or not there are tax benefits to doing that, I think it's more important for these companies to create that PR and goodwill and help out companies that couldn't previously get into the downtown market because prices were just too high."
As for a prediction about when things might improve, Hayes says it might get worse before it gets better and it's going to take another couple of years to get back to normal.
"If you look at the market like a clock and you say six o'clock is the absolute rock bottom, I would say right now we're probably between four and six o'clock on the downturn right now."
"It's going to take a long time to get back to really low vacancies that Calgary has seen traditionally," said Hayes.