Plunging Calgary office values linked to high oil and gas unemployment rate

CALGARY — A 32 per cent decline in Calgary’s downtown office building property assessment this year will likely translate into lower costs for some tenants, but don’t expect much improvement in the vacancy rate, according to a commercial realtor.

Lower property taxes will bring rents down and could attract more tenants to the downtown area, said Greg Kwong, Alberta managing director for realtor CBRE.

But he added companies will have to start replacing the thousands of oil and gas industry workers laid off following the oil price crash of late 2014 before the city’s downtown vacancy rate will substantially recover from its year-end 2018 level of 26.4 per cent.

“The disease is unemployment, it’s not property values,” he said on Friday, adding the vacancy rate could improve to about 25 per cent this year.

“It’s not going to change dramatically until we get people back to work.”

The total assessed value of downtown office properties fell by $5 billion over the past year, the city said Thursday, adding those towers now make up only 18 per cent of its total non-residential base, down from about 32 per cent in 2015.

The crescent-shaped Bow Tower, for example, home to oil companies Cenovus Energy Inc. and Encana Corp., lost 18.6 per cent of its value in 2018, falling to about $779 million. In 2015, it was valued at $1.43 billion.

The assessment changes mirror the lower values reflected in recent property sales and could make it difficult for property owners to obtain or renew their mortgages, Kwong said.

Continuing reductions in property values in the downtown area mean property taxes are likely going to have to rise for businesses throughout the city to make up the difference, pointed out Mark Cooper, spokesman for the Calgary Chamber of Commerce.

The chamber wants the city to continue with a program that capped non-residential property tax increases at five per cent over the past two years.

“We’ve seen the vibrancy stripped from the downtown core due to the rising vacancy rates because of the downturn and now we risk losing businesses outside of the core that are being weighed down by these unsustainable tax increases and other regulatory burdens,” Cooper said.

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