Downtown Calgary office vacancy continued to move downward in the fourth quarter of 2023, says a new Avison Young report.

Downtown vacancy declined 30 basis points quarter-over-quarter to 26.9%, marking the second straight quarter of positive absorption. The downtown submarket recorded a total of 119,933 square feet of positive absorption in the fourth quarter of 2023.

The positive absorption was accompanied by a slow by steady trend of declining vacancy.,

“Vacancy in the class AA space remains relatively low, as the flight to quality continues to gain momentum,” states the report.

Future absorption swings are likely as energy companies’ leases expire, the report adds.

The Calgary office market has been ravaged by high vacancy stemming from the COVID-19 pandemic, a global energy market downturn, hybrid work patterns and a supply glut due to new product deliveries planned years beforehand. To reduce vacancy, the City of Calgary introduce a highly popular downtown office-to-residential conversion incentive program that has been put on hiatus because its budget was exhausted.

In the fourth quarter of 2023, office investment activity increased as investors traded assets with more office than residential upside. Avison Young indicated that the office-conversion program’s suspension factored into the investment increase.