A virtually vacant downtown Calgary office tower, owned by oil giant Chevron, is for sale in the heart of the city.

JLL Calgary Capital Markets has listed the property, 500 Fifth, at the intersection of 5th Ave. SW and 4th St. SW, which it says offers a unique value-add or redevelopment opportunity in the downtown core. The property is being offered to the market on an unpriced basis. 

Casey Stuart, executive vice-president, capital markets, said Chevron Canada built the tower for its own use in 1982.

“It is largely vacant. There’s a couple of floors occupied by Chevron staff. They are in the process of moving out. So the property is going to be sold 100 per cent vacant,” he explained.

The building is 261,500 square feet over 25 storeys.

Ryan Murphy, vice-president, capital markets, said the property includes a well-maintained centre core office asset. It has a gym floor with unobstructed views of the downtown skyline. It also includes amenity space on the seventh floor which was built out during the COVID period with a modern kitchen, an open plan, televisions and seating. 

Two potential types of buyer

The property, which is considered a class-B building, is also connected to the city's +15 downtown indoor pedestrian network, with a conference centre on the mezzanine level.

“What makes this property unique to a buying profile is it attracts two different types of buyers. One profile would be called value-add investors for office. As the downtown market is starting to tighten up and vacancy is decreasing, there’s a need for additional space in the market and because of the centre core location this could attract what we would describe as surplus space, to attract larger tenants or multiple tenants,” Murphy noted.

“Or alternatively it is attractive to converters and that could be conversion for residential or for a potential hotel use or other various conversion ideas.”

The property was officially listed for sale in late February.

“Interest levels are quite strong and we’re expecting to receive offers (in the near future),” Murphy said.

Shift in downtown Calgary office leasing

Stuart said JLL’s downtown office leasing team has seen a big change in velocity over the past 12 months.

“There’s been a lot of movement from a lot of larger tenants both renewing or moving to new spaces, expanding and contracting,” he said. “Rental rates are facing upward pressure in certain segments of the market, notably the A-class segment.

"We are seeing tenants from all around the city looking at the core as potential options for occupancy when reviewing their office strategy.”

JLL said Calgary downtown office availability has stabilized at 25 per cent, its lowest since 2019, with leasing demand shifting toward B-class assets like 500 Fifth as top-tier office space reaches stabilization.

Murphy said transaction activity has been “quite significant” in Calgary’s downtown core for office assets.

“We’ve seen quite a bit more liquidity in our office sectors as compared to other major Canadian markets. There’s been a notable shift in ownership from institutional owners to private and we see that trend continuing,” he said.

Office prices attracting private buyers

Murphy said there are a number of factors fuelling the interest in office properties in downtown Calgary. Pricing is one of them.

“You’re able to acquire these assets for well below replacement costs and even on a per-square-foot basis, much cheaper than other comparable major Canadian markets. The rental rate growth in our downtown core in the office sector is driving investment demand. So investors want to capture the rental rate growth story,” he said.

“And of course from a conversion perspective just demand for residential and city incentives have driven liquidity as well.”

Calgary’s Office to Residential Conversion Incentive Program provides grants of up to $75 per square foot for qualified projects. 

According to the City of Calgary, the goal is to remove six million square feet of vacant office space by 2031 under the program. The current pipeline includes 11 conversion projects, 1,498 residential units and 1.57 million square feet of vacant office space.

In the past year or so, Armco Capital, founded in 1982 by members of the Armoyan family, purchased the 1.4-million-square-foot Bow Valley Square complex in downtown Calgary as well as the Altius Centre which is about 330,000 square feet. It is just one investor that has been acquiring Calgary office properties.

Bow Valley Square was acquired from Oxford Properties while the Altius Centre was purchased from Canadian Property Holdings (Alberta) Inc.

No financial details were disclosed.