Office vacancy rate in Calgary’s core expected to drop one percentage point in 2025

Calgary’s downtown office vacancy rate is projected to decline slightly in 2025, according to a report by commercial real estate firm CBRE.

The vacancy rate, which stood at 29.5 per cent last year, is expected to decrease by approximately one percentage point.

Greg Kwong, CBRE’s executive chair for Alberta, says it’s a modest reduction, but it’s moving in the right direction.

“It just shows that the optimism that Calgary has shown over the last few years is starting to pay off,” he said.

“But we are still not out of the woods yet as it relates to our downtown vacancy.

“What we’re not doing is trending toward 40 per cent anymore. We’re heading down, but it’s baby steps. It’s going to take a number of years before we get to any type of equilibrium in the market.”

Kwong says an optimal vacancy rate is eight per cent.

“That’s where there’s a good mix of vacant space that tenants can move to, and then also landlords can negotiate fairly with any tenants looking,” he said.

Local businesses, such as Volio’s Confections, are hopeful a decrease in vacancy rates will lead to increased foot traffic.

Sarah Sullivan, owner of the candy store that opened in 2019, says her business took a hit during the pandemic when office towers emptied, and they haven’t fully refilled.

“We had to completely pivot how we run the business to account for not having a lot of walk-in traffic,” Sullivan said.

“It would definitely be nice to have that increase in walk-ins.”

Several factors contribute to the anticipated decline in vacancy rates.

Some office spaces are being converted into residential apartments and hotels.

Other businesses are relocating to the downtown core to take advantage of upgraded facilities.

Mark Garner, executive director of the Calgary Downtown Association, says companies are trying to make workplaces desirable for employees to entice back employees working from home.

“You’re seeing gym space, you’re seeing golf simulators, you’re seeing pickleball courts, basketball courts, put into these employment clusters,” he said.

“We’re going to start seeing more investments if you want to remain competitive in the commercial leasing.”

However, economic challenges loom.

Ruhee Ismail-Teja with the Calgary Chamber of Commerce warns a possible trade war with the United States could impact companies operating on both sides of the border.

“We know that Calgary is disproportionately trade exposed. We’ve got lots of energy companies. We’ve got airlines, transportation, a lot of companies that are looking at what’s going on south of the border, and in Calgary in particular, we’ve got lots of companies that operate on both sides of the border,” Ismail-Teja said.

“They will be in really unique positions in terms of thinking about how they allocate capital, whether it makes sense to keep offices in both Calgary and in the U.S., and that could have an impact on our vacancy rates.”

The CBRE report also notes the current lack of new office tower construction contributing to the lower vacancy rates.

Kwong warns this trend helps reduce vacancies in the short term, but it could lead to office shortages as existing spaces become fully occupied over time.