Calgary’s office sector has a long road of recovery ahead of it, with perennial vacancy and COVID-19’s economic damage placing the market’s short- and medium-term prospects in doubt.
An aggravating factor is the dramatic oil price decline of more than 80% since the start of this year, ending up at its lowest level since 1986.
“It is the ultimate double-whammy,” said Roelof van Dijk, CoStar Canada director of market analytics. “Oil is being stockpiled around the world.”
But with near-zero demand due to global travel restrictions, multiple commentators have raised the possibility of oil ending up at “negative prices” – practically a death knell for petro-economies such as Alberta, and a harbinger of even more troubled times for the market’s beleaguered office landlords.
The ever-growing volume of unused space will exact a heavy toll, as well. CoStar found that Calgary has 11 million square feet of vacant space in the downtown area, with roughly 8.7 million sq. ft. managed by landlords and 2.3 million sq. ft. of sublet space.
Earlier projections by CoStar placed the city’s vacancy’s rate moderating from the current 21% to below 19% by 2024. The coronavirus outbreak has forced the predictions up to a blistering 25% by Q3 2020, Western Investor reported.
“The prospect of a reprieve has been replaced with the knowledge that additional pain for Calgary, Alberta and Canada is now on its way,” van Dijk said.