Despite the fact that oil prices have increased to their highest in three and a half years, empty offices in Calgary—the heart of Canada’s oil industry—are at their highest since at least 2008.
Calgary’s office vacancy rate increased to 23 percent in the first quarter of 2018, from 20 percent for Q1 2017, a report by real estate consultancy Altus Group says, as carried by Bloomberg.
The annual rise in office vacancies was partly due to the completion of 2.5 million sq ft of new office space in the city, according to Altus.
Downtown Calgary has been seeing record high office vacancy rates this year. According to CBRE Alberta, the regional unit of commercial real estate services and investment firm CBRE, downtown office vacancy rates in Calgary will stay flat at 27.9 percent in 2018, after two years of surging office vacancy rates.
The energy sector recession has had a lot to do with the rise in vacancy rates in downtown Calgary since 2014, according to interactive maps by Altus Group and CBC News. At the end of 2014, the office vacancy rate in downtown Calgary was 9.8 percent. It surged to around 20 percent by mid-2016, and hit 27.7 percent by March 2018.
Canada’s oil industry, mostly concentrated in Alberta, has suffered from the low oil prices. Even as international oil benchmark prices increased this year, worsening transportation bottlenecks led to a wider discount of Canadian crude oil prices, stifling the production and earnings of some of the big oil sands producers in the first quarter.
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The recession in Alberta is now officially over, the Conference Board of Canada said last month, expecting the provincial economy “to fully recover the ground it lost during 2014-2016 recession.”
“It is a difficult road for the energy sector as major companies are holding back on investment until there is more certainty about pipeline capacity; this is hurting Alberta’s outlook. But oil prices have been rising, presenting upside risks to the outlook,” the Conference Board of Canada said in its provincial outlook for the spring of 2018.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.