Tech firms slowly moving into Calgary's hollowed out downtown core

In the nearly two years since the COVID-19 pandemic forced workers out of Calgary's downtown towers and into home offices, the city's core has changed.

Many of the changes are subtle. On Fourth Avenue S.W., the 1980s-era Sun Life Plaza building is now The Ampersand — revamped and modernized by commercial landlord Aspen Properties in an effort to attract startups and companies of the future.

In the revitalized East Village area, the massive $80-million parkade opened by the city last spring is home not just to car and bike stalls, but to Platform Calgary, a non-profit organization that will offer incubation space for startups and programming for entrepreneurs.

On First Street S.E., 79,000 square feet of space in First Tower is now occupied by local software company Symend, which shot to prominence in 2020 after receiving $73-million in a funding round.

But perhaps the most significant change Calgarians will notice if they return to the office in 2022 is the composition of the downtown workforce itself. For the first time in Calgary's history, a city core that was once almost solely the domain of the energy sector and the various companies that service it is home to a small but growing contingent of technology workers.

Ranks of technology workers growing

According to commercial real estate firm CBRE, Calgary has seen its ranks of technology workers grow by 17.9 per cent between 2015 and 2020 — an increase of 46,700 workers. Calgary also moved up six spots last year to number 28 on CBRE's 2021 Scoring Tech Talent report, which ranks 50 North American markets according to their ability to attract and grow tech talent.

"We used to have a few tech companies, but they occupied, I would suggest, less than 250,000 square feet of the downtown core. Which is a drop in the bucket," said Greg Kwong, Calgary-based regional managing director for CBRE.

"Now they represent anywhere from between five and eight per cent of the occupying space in the downtown core. That still pales in comparison to the oilpatch, which occupies about 80 per cent, but it's not bad."

Calgary has been working hard in recent years to diversify its oil-and-gas-based economy and boost its burgeoning tech sector. It's also been trying to tackle its downtown vacancy rate problem, which has served as a dramatic illustration of the city's economic fortunes in recent years.

Between the end of 2014 and the first quarter of 2020 — a period defined by low oil prices, corporate downsizing and economic stagnation — Calgary's downtown commercial vacancy rate increased from 9.8 per cent to 26.6 per cent.

That rate has since ticked higher due to the impact of COVID-19 and 2020's sharp downturn in the price of oil. (The price of crude has since recovered to seven-year highs, but energy companies remain far below their 2014 numbers in terms of employee head counts).

The city's downtown commercial vacancy rate sat at an eye-popping 32.9 per cent in the third quarter of 2021, according to CBRE. That amounts to 43 million square feet of space available to rent, and is by far the highest downtown vacancy rate of any major city in the country.

But as oil and gas tenants have moved out of downtown, it's created opportunities for tech startups to move in. Prime commercial real estate that was once leasing for $30 per square foot is now going for closer to $10.

"Among major markets, Calgary is now one of the lowest cost alternatives for tech companies," Kwong said. "Far lower than Vancouver, Toronto and Montreal. If you compare us to Kitchener-Waterloo, which is a hotbed of tech activity, it's kind of on par."

Bringing life back to downtown

Calgary-based financial technology company Neo Financial, which has swelled to 400 employees since its founding in 2019, is one of those placing its bet on a future in the downtown core. The company plans to formally announce in January that it has leased 60,000 square feet of office space (the exact location is yet to be disclosed).

Neo Financial co-founder Andrew Chau (who also co-founded Winnipeg-based food delivery giant Skip the Dishes), said being downtown makes it easier for talent-hungry tech companies to attract young workers who want to live in an urban environment and have access to transit and amenities.

At the same time, he said Calgary's tech sector wants to play a role in helping to bring life back to downtown and solving the city's economic challenges by creating jobs and filling vacant real estate.

"The more that we can get that critical mass of exciting, fast-growing startups and tech companies into downtown, the better," Chau said. "Because that's how we're going to sort of chip away at that 30 per cent vacancy rate. Obviously, we won't fix it overnight, but we can continue to sort of build up and gradually sort of get back to where we were before."

City officials have suggested it will take decades, not years, to solve Calgary's empty office tower crisis.

But Susan Thompson, insight manager for Alberta with commercial real estate firm Avison Young, said there are reasons to be optimistic — not the least of which is the City of Calgary's decision last year to approve $200-million in spending on downtown improvements.

Thompson also pointed out that the "trophy buildings" in downtown Calgary — the Class AA real estate which represent a third of the total office market, have a combined average vacancy rate of 7.7 per cent, proving that high-quality space in a downtown location remains attractive.

"We've seen a number of these buildings try to kind of reinvent themselves to attract a different type of tenant — particularly the tech sector versus the old school oil and gas sector," Thompson said. "As they (the tech sector) start to approach that critical mass, it's really going to start to grow faster."