An ongoing flight to quality is presenting an opportunity to convert older Calgary office buildings to other uses, says Avison Young.

The full-service commercial real estate company has released data showing that most (65%) of the market’s office properties were constructed before the 1990s. Buildings constructed in earlier decades have recorded 2.2 million square feet of negative absorption.

On the other hand, buildings constructed since 2020 have posted 239,270 sf of positive absorption in an office market that has been ravaged by high vacancy due to the effects of the COVID-19 pandemic, changing work patterns and a global energy market downturn. (The Calgary office sector is highly influenced by oil and gas companies that dominate the market.)

Avison Young said it expects the flight to quality to continue and provide older buildings’ landlords with more opportunities for non-office uses, such as multi-family rental projects.

The company’s quarterly office report states that prime class AA downtown assets are approaching single-digit vacancy. But the report also shows that downtown B class vacancy has hovered between 35% and 40% since the third quarter of 2020. Meanwhile, C class vacancy stands at 25% after rising as high as 35% in recent years.

To reduce vacancy, the City of Calgary introduced a highly popular downtown office-to-residential conversion incentive program. But that program has been put on hiatus because its budget was used up.

Pictured: Telus Sky building in downtown Calgary, an example of newer office product that has reduced demand for older assets