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Oct 31, 2019

Tech replacing energy industry in Calgary's office market: Allied CEO

Significant demand for office space is driving earnings: Allied Properties REIT CEO


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Halloween morning brought another troubling sign for Calgary’s sagging office market after oil-and-gas giant Encana Corp. announced plans to re-domicile to the U.S.  

When Encana announced plans for a new headquarters in Calgary in 2006, the Bow Tower stood out in the city’s skyline as one of the tallest buildings in the city. It’s a much different story today as a declining energy sector has seen about one-third of the city’s office space become vacant.

However, there are some signs of hope, and it’s not coming from industries that traditionally drove Calgary’s economy, according to Allied Property REIT chief executive officer Michael Emory.

“We’re beginning to see more demand emanating from tech, advertising, media and information,” Emory said in an interview with BNN Bloomberg.

Allied remains a significant real estate player in Calgary with around one million square feet of office space in their portfolio, but the city continues to be the weakest of the four major Canadian markets the firm operates in, Emory said.

But after five years of steady decline in commercial real estate demand from resources companies, growth from local tech firms had been promising. “We’re seeing early signs of that and if it continues to evolve, I think it will enable Calgary to diversity its economy in a meaningful way,” Emory noted.

One of the most visible signs of a shift from energy to tech in the Alberta city is the construction of the Telus Sky building in Calgary’s downtown core. The tower, which Allied partnered with Telus Corp. and Westbank Corp. to build, will be the third-tallest in Calgary when completed, overtaking Suncor Energy Centre’s west tower.

According to Emory, nearly two-thirds of the office space earmarked at Telus Sky is leased – entirely to tech-oriented firms.

“This is very encouraging to us as a signal of where the market might be evolving,” said Emory, adding he expects the trend to likely continue over the next five years.

“The city can’t continue to rely exclusively on energy sector to fuel its growth,” Emory said.