Calgary’s office vacancy rate has reached its lowest level since 2016, according to a new Avison Young report.

The troubled local sector’s overall vacancy rate dropped to 21.7% in the fourth quarter of 2024, mainly due to an ongoing flight to quality and conversions of B and C class office spaces to other uses, said the full-service commercial real estate firm.

“Calgary leads Canada as the fastest-growing city, presenting abundant opportunities for businesses,” said Brennan Yadlowski, an Avison Young principal and managing director of the firm’s Calgary business. “As recovery stabilizes, 2025 is set to be a year marked by competition and transition in the commercial real estate market.”

The city’s office vacancy rate ranks as the highest among Canada’s major markets. Calgary has grappled with the effects of the COVID-19 pandemic, a global energy industry and other market conditions and factors. The sector has been struggling with a glut of vacant new space delivered in recent years.

The new product was in the development pipeline before the pandemic and other factors hit the market hard.

Net absorption for 2024 totalled 67,000 square feet (sf), signalling sustained demand for high-quality office spaces, Avison Young reported.

While the citywide vacancy rate declined, the downtown remained relatively stable, with a minor 0.1% increase in vacancy to 24.6%.

The quarter saw negative absorption of nearly 270,000 sf, largely due to new vacancies at the Suncor Energy Centre, First Canadian Centre, and Bow Valley Square. However, annual positive absorption rose significantly to 403,243 sf, up from 160,884 sf in 2023, as businesses gravitated toward premium spaces.

As trophy and AA class availability becomes limited amid the remaining high demand, tenants may face extended wait times or need to consider relocating to lower classes, said Avison Young.

The Beltline submarket experienced a notable decline in vacancy, dropping 2% to 17.6%. This decrease was primarily driven by the demolition and redevelopment of Beltline Block, which effectively removed nearly 300,000 sf from the market.

Despite posting negative absorption during the fourth quarter of 2024, the Beltline showed a steady demand for office space throughout the year, with close to 70,000 sf of positive absorption recorded for all of 2024.

In contrast, Calgary’s suburban office market remained stable, with a slight (0.7%) increase in vacancy. The flight-to-quality trend continued, pushing tenants toward newer developments like Quarry Park. As the city’s population and business presence expand, Avison Young anticipates potential repurposing or upgrading of suburban office buildings to meet rising demand for high-quality spaces.

Looking ahead to 2025, the Calgary office market is expected to face both challenges and opportunities, said Avison Young. The continued demand for high-end office space may lead to increased competition among tenants, while ongoing conversion projects could further reshape the market landscape.

Despite economic uncertainties, the city remains well-positioned for growth, said Avison Young while forecasting a year marked by transition and resilience.

Pictured: Downtown Calgary office buildings and the Calgary Tower.

Photo: Colliers