November 2020 Calgary Market Report

 In News

Current Situation

October proved to be a busy month for Alberta’s oil and gas sector as several major announcements sent shockwaves throughout the province. Cenovus Energy led the way by announcing that the firm would purchase Husky Energy for $3.8 billion in a share sale, creating the third largest oil and natural gas producer in the country. The merger of these two oil giants will allow the new entity to become leaner and more resilient, especially in the face of volatile oil prices and will ultimately create $1.2 billion in cost savings. Unfortunately, this is expected to result in the firm cutting up to 25% of its workforce across the country, with over 2,000 jobs expected to be eliminated in Calgary alone.

On the flipside…
Just three weeks after Suncor Energy announced its plans to trim its workforce by 15% over the next year, the firm also announced that it plans to move the bulk of its 700 positions from its Petro Canada head office in Ontario to Calgary in 2021. With Western Canadian Select still struggling to break away from the $30/barrel mark, the consolidation of energy firms will likely become more prevalent in the future as firms will need to leverage cost cutting measures to give Alberta a fighting chance in a post-pandemic world.

Property Taxes & Assessments

The transition of Suncor’s operations to Calgary is also expected to see additional savings via reduced property taxes as office property reassessments in the downtown core are forecasted to plunge by 10% in 2021. As a result, property taxes for an average office property will likely fall by 5.3% according to a new report from the City of Calgary. Similarly, retail properties are expected to see property assessments decline by 4.5% while hotels will likely see a 9% drop in value. In contrast, Calgary’s industrial sector will bear much of the tax shift as large-format warehouses are expected to see a 14% increase in assessment values, translating to a tax bill jump of 25%. This reallocation of the tax burden will likely impact prospective industrial tenants and will encourage them to search for spaces in areas such as Rocky View County where property taxes could be substantially lower.


With the rapidly changing economic environment in Calgary, sales activity across all asset classes have continued to decline for three consecutive quarters, indicating that investors are holding off until there is greater clarity on a post-pandemic recovery. With that being said, Calgary’s industrial market continues to see positive absorption due to increased demand for distribution and logistics space. This was evident by the fact that Triovest was able to lease out 158,600 square feet of warehouse space at 5801 72nd Avenue SE at the end of October while there were six additional industrial leases being signed for space between 20,000 and 50,000 square feet. The same can’t be said about the office sector as the largest lease in October only involved 14,000 square feet within the Watermark Tower in the heart of Calgary’s retail district.


On the retail front, retail sales in Alberta have returned to pre-pandemic levels for the past three months. Overall, the retail sector has avoided massive amounts of space coming back onto the market since the onset of the pandemic. In fact, over 131,000 square feet was absorbed in the third quarter, leading to an overall retail vacancy rate of 3.6%. There are some signs of weakness appearing within the strip centre segment however, as vacancy in this segment has reached 6.2% and expected to increase by a further percentage point by the end of the year. Fortunately, the federal government has stepped up to introduce a revised rent subsidy program which will provide rent/mortgage support until June 2021 for qualifying organizations affected by COVID-19. The new program would support businesses with up to 65% of eligible expenses with a further top-up of 25% for organizations forced to shut down due to a public health order. The federal government hopes that this and the wage subsidy program will give those businesses battered by the pandemic a fighting chance to survive until a vaccine arrives.

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Image by Gordon Jaeger from Pixabay
Content Credit: CoStar

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