The HUMAN cost of empty office buildings in Calgary should NOT be ignored.
The reality behind the real estate headlines is often forgotten. Many of these front page stories focus solely on the property market and the stats behind it. However, what we must all remember is that behind those obvious numbers is a human story. A story that is not as easily dismissed or debated. We see this here again in the story of the major office vacancies in Calgary. Let’s take a look at it:
Emptying Office Buildings in Downtown Calgary
There is a scramble to fill skyscrapers dotting #Calgary skyline. It may look like a real estate story but frankly it is not. It is a story much sadder than that – it is really a story of unemployment and family struggles combined with a new regulatory/government environment that will make it even more difficult to bring these jobs back. Each empty office means one job fewer, one more struggling family. We must never dehumanize the real estate market or it just becomes a ‘sport’ where people choose sides of the debate, argue about ‘solutions’ and look for blame.
Struggling, hurting and stressed families who feel abandoned is NOT what has made Alberta great in the past. With current policies in place, the government is actually INCREASING the gap between the ‘haves’ and ‘have-nots.’ The haves are those in protected jobs and the have-nots are the rest of Albertans with jobs in retail, service, resources, transportation etc.
Watch how this plays out in the coming years, GIANT happy smiles on those who are enjoying the largese under the government umbrella and sad stories from every other sector. In the meantime, this situation is already impacting Albertans, their livelihoods and their real estate.
Let’s now take a look at what the vacancy of Calgary office towers will lead to from a real estate and economic view (without ever forgetting the human story behind it all):
The Shift To Newer Office Space
So how will this strong increase in office vacancy play out on real estate side? Historically, in economic downturns residential markets witness supply exceeding demand. As this occurs competition heats up for sales, driving prices lower and incentives upwards. This residential reality leads to the buyers/renters moving towards newer properties – which they can now get at the same price that older properties used to sell for. Strategic buyers/renters use the opportunity to upgrade.
This is exactly what will begin occurring in this Downtown Calgary Office Tower market – a migration of companies from older buildings to newer towers. The ripple of this inevitability is: it will put pressure on those who own older buildings to spend money on renovations while reducing their rents, which in turn will put them in a difficult place for future or current financing, which in turn will lead to some older buildings NOT getting upgraded/repositioned and thus losing further tenants.
The Ripple Is Felt At Street Level
A second negative economic ripple will be felt in retail, coffee shops, restaurants, parking garages and all of the supporting small businesses in the downtown core. As these small businesses struggle from lack of customers, we will then witness many of them closing. The strong will survive, but most will be a shadow of their boom-time selves. Now, this is where the human story re-enters the equation – closing shops equals further layoffs and more store-front vacancies making the downtown core even less desirable.
Until we witness large-scale job creation return to downtown Calgary, this negative ripple in the core will sadly continue. People will continue to debate interest rates, zoning, planning et al but please remember, this is not just a real estate story it is a human story and until those who can help through regulatory relief or incentives wake up to this fact, an increasing number of families will suffer
Here’s my discussion on Newstalk 77 Calgary radio about this important subject: http://omnyapp.com/shows/the-morning-news-with-bruce-kenyon/downtown-acre-club
Please feel free to share this post – especially with your politicians and others who can have a positive impact.