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The opportunity in Calgary’s suburban & beltline office markets

Ask The Experts: Callum McLaughlin, Associate Vice President, and Jash Sandhu, Associate Vice President, Colliers Calgary Brokerage

Colliers' Jash Sandhu and Callum McLaughlin, along with Peter Mayerchak, Justin Mayerchak and Bryson Mayerchak have represented over 60,000 square feet of tenant representation transactions in the Uxborough medical development. Photo provided by Colliers Canada.

What are the dominant trends in Calgary’s Suburban and Beltline office markets? 

We are seeing a reduction in office footprints as organizations implement new workplace strategies. Yet in the aftermath of the pandemic, Calgary’s Suburban office market has boasted a strong return. Occupancy levels are higher than in other Canadian cities, with positive absorption in five out of the previous nine quarters.

The Beltline is a sub-market located south of Calgary’s downtown core. The area is predominately residential and multifamily. Office space in the Beltline market comprises seven million square feet, providing a convenient option for tenants who value proximity and amenities. This is a favourable compromise to Calgary’s 42-million-square-foot downtown core. Absorption in the Beltline is similar to the Suburban office market, which has been positive for six of the past nine quarters. The momentum is expected to continue through 2024. 

Over the next five years, Calgary’s population and economic growth are anticipated to outpace the national average. Interprovincial and international migration are driving these increases. Compared to Toronto, Vancouver, and Montreal, Calgary has the highest median after-tax household income, along with more affordable living costs. These two factors contribute to an expanding tenant pool and aid in the economic growth and recruitment efforts of organizations. 

What challenges do you face when representing tenants in this market?

Calgary vacancy rates of approximately 21 per cent in the Suburban office market and 25 percent in the Beltline are commonly misunderstood as an unlimited array of options for tenants. However, only some spaces are suitable for select tenants when we factor in their requirements for geographic location, access to public transit, office quality, and location relative to vendors. 

Quarry Park is a large Class A suburban business park that accounts for 23 per cent of the 4.07 million square feet of vacancy in the Suburban office market. Its large floorplates average roughly 25,000 square feet and were purposely built for the engineering sector, limiting the pool of potential tenants. The average Suburban office tenant requires approximately 4,000 to 8,000 square feet, making these floors difficult and expensive to demise.

Our main challenge in both the Suburban and Beltline markets is identifying high-quality opportunities that offer “move-in ready” spaces. As return-to-office initiatives continue and construction prices rise, amenity-rich and well-located spaces are top priority when signing office leases in these markets. Tenants are competing for move-in ready spaces and entertaining seven-year-plus terms to make construction costs economically palatable.

What major economic shifts are influencing trends in Calgary office space and work environments?

Alberta has experienced significant immigration over the past 24 months, with a net increase of 20.1 per cent year-over-year. In 2023, interprovincial migration alone accounted for 55,107 new residents in Alberta, with a significant portion migrating to Calgary. International immigration increased by 38.3 per cent from Q3 2022 to Q3 2023. According to the Provincial Registry, interprovincial migration gains amounted to at least 10,000 residents for five consecutive quarters, which is the greatest rate of change since 1971. 

Migration to Calgary has led to significant growth in industries with a presence in our Suburban and Beltline office markets. Home-building and healthcare are two notable industries experiencing this exponential growth. Major population growth comes from increases in the overall economy and we continue to see positive hiring trends in all professional service industries. 

What differentiates Calgary’s downtown core tenants from those who lease Suburban and Beltline offices?

While our team primarily focuses our efforts outside the downtown core, we pay close attention to this market. Calgary’s downtown represents the heart of Canada’s energy sector, hosting many of the nation’s largest publicly traded resource companies.

While the downtown market is heavily concentrated with energy and resource companies, Calgary’s suburban market boasts a more diverse occupier mix including healthcare, professional services, technology, and construction groups. Our team has performed a significant share of the work, relocating tenants from these industries, with 340,000 square feet of space leased within the healthcare sector alone since Q1 2022.

Suburban tenants often face more challenges with building amenities like retail and food options compared to tenants in the downtown core, prompting them to search for areas that offer these amenities locally. Furthermore, tenants in the suburban market benefit from parking availability and affordability, as well as proximity to major highways, which they value above all else. These advantages have led to a flight-to-quality trend, with many suburban tenants evaluating the Beltline market with its access to walkable amenities and offering more affordable parking compared to the downtown core.

Is the Calgary office-conversion program impacting the Suburban and Beltline office markets? Are there any projects in the Suburban or Beltline markets undergoing conversion?

Sentiment of the downtown core during the peak vacancy period that began in 2016 was a need to right-size the market. This led to a great deal of creativity in addressing what to do with older Class C properties. Given the high inventory of Class C assets located within the west end of the downtown core, Calgary offers one of the most viable markets for office conversions with available subsidies. These relatively large assets are better suited for conversion projects than many other office properties. 

The Suburban office market does not face the same challenges and has not seen office conversions to date. However, discussions have taken place regarding niche use of select assets where permissions may be adjusted to allow for conversion to hotels or seniors living. We have not seen this occur yet, but it is something we are paying close attention to. 

The Beltline is a more suitable option than the Suburban market for alternative conversions, given its inner-city location and population density. Despite these attributes, we have yet to see the same momentum for these office conversions, keeping the Beltline a highly desirable office market.

What opportunities are available to your clients when they leverage your expertise?

Even though we focus on the Suburban and Beltline office markets, we collaborate with our industrial and downtown office teams to advise clients across several markets in Alberta and North America. The diverse nature of our tenant base provides clients unique real estate opportunities and expertise. 

We take pride in offering single source solutions for our clients and partner with our subject matter experts in the industrial, retail, and downtown markets in Calgary. Our clients also have the option to engage Colliers’ suite of services to help them achieve their real estate goals, including Workplace Advisory for their return-to-office planning or Project Leaders for their office builds. Colliers’ breadth allows us to tap into the best resources and partner with top-tier teams in each respective market and asset class, to offer the highest quality of service. 

Our team brings 70 years of combined experience in exclusively representing tenants within the Suburban and Beltline markets of Calgary. We are one of few teams in these markets that service clients, represent their interests, and are backed by the resources of one of the largest global real estate firms in the world.

Colliers Canada Brokerage

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