Calgary's Q3 2023 Office Market Experiences Broad Positivity - Tenants Likely to Renew in 2024

Decreased Vacancy Rates Across All Calgary Office Markets:

Calgary experienced broad decreasing office vacancy rates, with downtown rates slightly dropping to 27.2%. This suggests a recovering market, likely due to increased business confidence and a return to in-person work. The suburban vacancy rate also shows a decrease to 16.0%, hinting at a growing demand for office spaces outside the central business district. I expect this trend to continue into 2024 as the market adjusts to post-pandemic norms and businesses actualize their hybrid work structures.

Suburban Office Leads Demand:

There's a clear uptick in Calgary’s suburban office market, with a notable 240,459 square feet of positive absorption. This can be attributed to the changing nature of work, where businesses and employees are valuing ample parking, ease of staff accessibility, and lower property operating costs. The suburban areas offer these qualities, and with the ongoing integration of remote working, the appeal of suburban offices is likely to continue to rise.

Diversifying Tenant Base:

Calgary is experiencing a nearly unprecedented diversifying tenant base, with the province experiencing a net migration of 184,400 people in 2023 – Population growth at 40-year high. This leading indicator is not only beneficial for the energy sector but also for emerging sectors like technology, professional services, engineering, and clean energy. As these industries grow, they will hire and naturally contribute to occupying Calgary office space, with different types of businesses seeking space and contributing to the economic fabric of Calgary.

Rising Construction Costs and Lower Availability of Class-A Office Space:

Historically rising construction costs, as seen below, are now prohibiting tenant relocations to office spaces that demand full buildouts. This economic pressure, coupled with the lower availability of move-in ready Class-A office space, suggests that many businesses may opt for cost effective lease renewals instead of bearing the increased costs of moving to new spaces, and increased rents for Class-A office space.

Opinion Wrap-Up:

The Calgary office market showed broad signs of vitality and growth - Decreased vacancy rates, increased suburban office demand, a diversifying tenant base, and the impact of construction costs on leasing decisions. I anticipate Calgary’s office users will trend towards more lease renewals to secure office space for their new hires in an evermore competitive Calgary office market.

Sean Clark

Associate Vice President

Top Emerging Leader - 2021 & 2022 (Calgary)

Rookie of the Year - 2022 (Canada)

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