Calgary continues to have the highest downtown office vacancy rate in North America, but a new report shows there are reasons for optimism.
According to Avison Young’s latest report on the city’s commercial real estate market, the downtown sat at a 29.9 per cent office vacancy in the third quarter of the year, up from 29.2 per cent in the previous quarter. Overall, the vacancy rate across the city came in at 26.1 per cent.
The report also showed a total of 19 buildings sitting empty — five of them in the downtown.
“Calgary obviously came into the pandemic in a challenging position,” Avison’s research manager Susan Thompson told Global News.
“But there really is a case for optimism in Calgary’s office market,” she added.
Thompson said many signs point to better times ahead, including the fact that while the vacancy rate was higher, it was the smallest quarterly increase over the course of the pandemic. Another sign, she said, was the decrease in the subleasing of prime, or high-class office space, by major companies.
“Companies are starting to gravitate to that premium space, so that’s telling us there’s activity out there,” Thompson said.
There was also increased activity in foot traffic and the return to the workplace in the city, although it is still well below pre-pandemic numbers, according to Avison. Still, Thompson said that is encouraging.
“Calgary really is returning to the office.”
Local businesses can hardly wait for that return. Marcello’s Market & Deli hasn’t seen a lunch “rush” in 20 months.
“In 2019, we would see 1,000 people come in between 11 a.m. and 1 p.m.,” owner Brian Baisi said. “We’re probably seeing closer to 100 — maybe 80 now.”
Baisi said his business was just starting to bounce back from Calgary’s economic downturn when the pandemic hit.
Now, it’s barely treading water.
“We’re consistently down 70 per cent — if not worse — depending on what state we’re in,” he added. “With the work-from-home order, we’re down 74 per cent.”
Still, he said he is prepared to wait it out.
“It will be lean, but I think if we’ve survived the last 20 months we’re for sure going to survive the next two to three years,” Baisi said.
“It will be an uphill battle but we’ll make it.”
When will Calgary get back to business?
Thompson told Global News that real estate decisions take a long time to play out and Calgary will likely see further softness in the office market for another year or two.
Still, she reiterated signs are promising and she expected to return to pre-pandemic levels in about two to three years.