Calgary’s downtown office towers have experienced a notable shift in value, marking the first time in eight years that assessed property values have increased in the city’s core. This turnaround signals a potential revitalization of the downtown market, although challenges remain.
The total assessed value of Calgary’s downtown skyscrapers has risen nearly four per cent to $8.2 billion from the previous year, driven largely by the improving values of several prominent commercial real estate holdings. City assessor Eddie Lee noted this improvement as “a really great signal,” reflecting a return of vibrancy to the downtown market. The overall volume of city tax revenue from these properties has also climbed to approximately $145 million, up from $271 million in 2015 when downtown assessments peaked at $25 billion – a period characterized by significant decline.
Residential property values have also increased substantially, with typical homes seeing a 12 per cent rise in value. This growth is connected to broader economic trends, including rising commodity prices and increased employment levels. Industrial properties have seen an increase of five per cent, driven by rising demand for warehousing space, while retail buildings have edged up by four per cent. However, some older Class B and C office buildings continue to face pressure due to limited demand and suburban office spaces grapple with elevated vacancy rates.
Several factors contributed to this positive trend. The return of higher commodity prices, combined with increased employment and the ongoing diversification of the Calgary economy, have played a key role. The city’s $100-million program intends to convert older office buildings into residential spaces, which is anticipated to positively impact the value of these structures as occupancy levels grow. Furthermore, the broader real estate market is experiencing expansion, with industrial properties booming and retail environments showing promise – factors that have influenced Calgary’s overall property assessment. Business operators outside the core, who have previously shouldered a greater tax burden to offset downtown decline, are also benefiting from this improved revenue stream.
The market remains far from fully recovered. At the end of the fourth quarter, the downtown vacancy rate stood at 32.6 per cent, a significant figure that reflects the ongoing challenges posed by remote working trends and the substantial amount of unused office space. Property Tax Canada’s Kyle Fletcher emphasized that “not all boats are rising in the downtown” – the premium, newer buildings are performing better, while the older structures continue to struggle. The success of the city’s transformation program—converting office space to housing—will be vital to improving occupancy levels and ultimately, driving values. Greg Kwong, managing director for CBRE, stated that while the recovery is welcome, “we’re not in the Promised Land yet,” highlighting the considerable work still needed before the downtown core fully fulfills its economic role. The city’s efforts to balance tax revenue across residential and commercial sectors will also be crucial for ensuring Calgary’s competitiveness in the long term. The shift away from a reliance on downtown office values is a key inflection point for the city’s economic future.