As Calgarians head to the polls in October, the city’s mayor hopes the downtown core won’t be an afterthought.
There are currently five buildings in the city’s core that are sitting empty, including the former Nexen building on 7 Avenue S.W., which adds 600,000 square feet to the city’s downtown office vacancy issue.
According to Avison Young, the city’s downtown office vacancy rate has risen from six per cent to close to 30 per cent following the oil price collapse seven years ago.
Susan Thompson, Alberta insight manager with Avison Young, said there is currently 14 million square feet of office space sitting empty in the downtown core.
“Average occupancy for an office space is 150 to 250 square feet per person,” Thompson said. “So 14 million square feet is a lot of jobs that no longer exist in downtown Calgary.”
Downtown impact on taxes
The exodus from Calgary’s downtown has had ripple effects on the city’s finances as well.
The reduction in property values in the core has forced city council to find that tax revenue elsewhere, which has contributed to higher property taxes for businesses across the city.
“What (city council) have done in response over the past many years has been to really aim to raise the same number of dollars from businesses,” University of Calgary associate professor of economics Trevor Tombe said. “But with fewer dollars coming from downtown, non-residential properties, it’s meant large tax increases on businesses elsewhere.”
To deal with the issue of dramatic property tax hikes for businesses outside the downtown core, city council began working on a tax shift in 2019. That led to millions of dollars in cuts to city services, as council attempted to bring the property tax rates for businesses and homeowners more in line.
“So right now they raise about 48 per cent of the city revenues from businesses, that’s down from about 56 per cent back in 2014,” Tombe said. “A better approach for the city would not be to target that number of dollars that it raises from businesses versus homeowners, but to ensure that tax rates between businesses and homeowners remains stable relative to each other.”
Tombe said he believes city council should have acted quicker in response to the burden falling downtown property taxes had on revenues.
“One can only assume that they, like the provincial government, were just hoping for a rebound in the energy sector and therefore an increase in activity that would spare them the tough decisions,” Tombe said.
However, with no clear sign oil prices would rebound to boom time levels, city council has shifted its focus to tackle the issue in the downtown core.
The future of the downtown core
Earlier this year, city council passed the Greater Downtown Plan, along with $200 million in initial funding to kickstart the strategy to revitalize the city’s downtown core.
Included in that funding are incentives for redeveloping vacant office spaces into residential, and incentives for Plus 15 connections to residential developments.
$80 million of the funding will also be allocated to the Arts Commons transformation project.
According to the city, the downtown strategy will focus on lowering office vacancy, improving downtown vibrancy, and supporting the development of areas that attract residents, visitors, and businesses.
“Our job is to change our downtown from being what was really a place of work into a place to live and a place to do stuff – an active tourist destination,” the city’s downtown strategy program lead Thom Mahler said. “That will attract the talent to help fill up those office towers.”
However, its estimated $1 billion in public and private investment will be needed over the next 10 years to fully execute the downtown strategy.
According to Mahler, the city’s success is linked to the success of the downtown core, and hinges on private investment in the local economy.
“We can build all the infrastructure we want, but if we don’t see the investment in the real estate and we don’t see businesses and companies locating here, it’s not going to do that property value lift that we’re also targeting,” Mahler said.
According to the city’s website, the downtown core won’t be the same as it was prior to the pandemic, or as it was 15 years ago due to work-from-home orders and the shifting in the energy industry.
Those changes in the market have also been observed by Avison Young, which noted a change in more recent lease agreements for office space from tech companies and the agri-food industry.
“We used to deal with tenants that occupied multiple floors and buildings, sometimes even whole buildings, whereas today the average deal we do is under 10,000 square feet,” Thompson said. “It’s been quite active because there’s a lot of businesses that are forming as a result of the changes that have taken place in the market.”
Outgoing mayor Naheed Nenshi said he’s hoping to see candidates running in the upcoming election questioned on their views regarding downtown revitalization, and their visions for the future of the core.
“I think it would be a very fair question to ask the candidates what’s your plan for downtown, how is it different than the city’s plan, and if it is, why?” Nenshi said. “If it is not, how are you going to get the rest of the money to fund the existing plan?”
Calgarians head to the polls on October 18.
–With files from Global News’ Adam Toy