Economic uncertainty, the noise and frazzle about tariffs and trade wars, strategizing about ROI on investment, volatility in commodity prices, the spiking costs of construction, the trend of redefined workplaces, the changing wants and needs of tenants, and ROI are driving Calgary’s commercial real estate market.
Flux has always been, and continues to be, a Calgary normal. Loose comparisons to two or three years ago may be interesting, but do not necessarily explain 2025 or forecast what 2026 will be.
Calgary’s office market is divided into Downtown and Suburban/Beltline. Downtown occupancy has stabilized around 80 per cent. Suburban/Beltline occupancy is over 85 per cent.
“Over the past three years, vacancy has been trending downward – both headlease and sublease – thanks to conversions and stable demand,” explains Kimberly Stringile, associate with Colliers Calgary. “While quarter-to-quarter volatility continues, the overall trajectory is positive, preventing a return to the record highs of 2020 to 2022. Rightsizing and M&A are factors. Portfolio consolidation continues to push blocks of sublease space back to market.
“The RBC-HSBC close last March and the National Bank-CWB merger are early examples. More is expected as integrations such as Veron-Whitecap, Parkland-Sunoco LP and MEG-Cenovus finalize. There is also a cost reality check because elevated construction and fit-out costs are keeping many occupiers in renewal rather than relocation mode. Even when space needs shift, tenants often stay put, and when they do move, we are seeing longer terms to justify the higher capital costs.”
She cites the Colliers Summer 2025 Snapshot which tracked that downtown vacancy averaged 27 per cent in Q2 2025, down from roughly 32 per cent. “The improvement is largely driven by office-to-residential conversions removing inventory and steady leasing activity gradually chipping away at excess space.”
The Colliers summary cited that Q2 posted negative net absorption and leasing stayed active, while a surge of new sublease listings tipped the quarter into the red. Sublease vacancy now sits at 4.7 per cent, representing 17 per cent of all vacant space, both up on the quarter.
John Engbloom, principal with Calgary’s Avison Young also points out that, “Compared to two to three years ago, Calgary downtown vacancy is stable. A notable change is in the composition of vacancy as we are seeing fewer options for well-built out, high quality space that can be occupied with relatively few improvements.
While the economy, uncertainty and vacancy and absorption trends are key factors, intangibles are also important. “Tenants are re-thinking their needs and expectations,” he explains. “Many tenants are closely examining their go forward business plans to ensure the optimal real estate footprint.
“Gone are the days of occupiers leasing more space than needed with the expectation they will grow into it. Generally, occupiers today are making things go around with less employees than in the past, and this directly correlates into a smaller office space requirements.”
Landlords are adjusting lease strategies. Terms. Deals. Amenities. “The upward trajectory of rental rates has plateaued and, depending on what happens with sublease space in the coming quarters, there could even be downward pressure on rates and increases in leasing incentives.
Amenities such as a fitness centre, conference centre and tenant lounge are becoming standard items for all but a handful of buildings. Any Class B or higher product that is competing for tenants either has the amenities in place or is planning on creating them.”
Lease deals and what is sometimes called ‘bells and whistles’ are also being transformed.
Like fewer and better square feet. Rightsizing is ongoing, but tenants are increasingly choosing newer AA/A towers and turnkey spec suites with environmental, social and governance (ESG) and wellness features.
This demand is spilling into the best-managed B-class properties, like 444 5th, 639 5th, Altius Centre and Canada Place that are seeing improved activity.
Stringile cites the growing trend of buildings being repositioned as destinations, with conference centres, fitness facilities, lounges, retail refreshes and upgraded end-of-trip amenities. One Calgary example is Brookfield Properties’ $90M redevelopment of the Suncor Energy Centre.
The experts agree. Calgary’s commercial real estate has speedbumps but also momentum into 2026.
“Now that elections are over, tariffs have stabilized (maybe not to our liking) and we see growing activity in Calgary’s commercial activity,” says the plugged-in David Wallach, owner and broker of Barclay Street Real Estate, the respected, full-service commercial real estate brokerage and property management firm which has been serving businesses throughout western Canada for over 40 years.
“Deals take longer to complete as both tenants and landlords as well as buyers and sellers move forward with caution. It is important for our city’s administration to help by reducing red tape and expediting the development permit and building permit approval to help Calgary’s economy more forward.”
Avison Young’s John Engbloom cautions that the wild card in the Calgary office market will be what happens with commodity prices and sector consolidation. If commodity prices weaken and continued M&A activity happens, there will likely be some large block sublease spaces, which historically has driven down economics in the head lease market.
“Companies are far leaner than in previous cycles and we should not see the glut of sublease space that defined the 2015 to 2021 period.”
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The ROI of Commercial Real Estate
As in most businesses, crunching the numbers is a critical aspect of Calgary’s commercial real estate. The costs and the ROI are vital factors.
Economic uncertainty and other market issues are making investing in the Calgary commercial market tricky strategy.
“Current market rental rates do not justify construction of new office product in downtown Calgary,” Avison Young’s John Engbloom says with a reality check. “Based off our understanding of what a new office building would cost to build, rental rates would need to be significantly higher than current rates to see a new building start. The exception to this would be a very large company who was prepared to pay the rates required to have a new building.
“That’s not very likely, as many candidates for this type of deal have recently extended their leases in existing buildings.”
The Colliers facts and trending shows a cost reality check because elevated construction and fit-out costs are keeping many occupiers in renewal rather than relocation mode. Even when space needs shift, tenants often stay put, and when they do move, the market is seeing longer terms to justify the higher capital costs.
Office-to-residential conversions is also a factor for investment, as Calgary’s conversion program continues to reshape the market. “Ten new projects – totaling 1,100+ units – were approved in June 2025, including a headline $11M grant for 606 Fourth. These removals support a structural step-down in vacancy heading into the late 2020s,” Stringile says.
Colliers Calgary investment associate Carson O’Sullivan crunches the numbers and says, “Traditional office development is not currently viable. Elevated vacancy, choppy absorption, high costs and limited incentive support make new builds unattractive. Value-add repositioning or office-to-residential conversions may work on a case-by-case basis, but economics are less compelling than they were a year ago.”
Barclay Street’s David Wallach notes the first part of 2025 saw investment sale lower by four per cent from same period in 2024. The cap rate gap between buyers and sellers has increased as result of interest rates hike couple of years ago, but we started seeing the gap narrow down to levels prior to interest rates hikes in 2024.
“Based on those trends, we anticipate growing investment sales activity from now, through December and into early 2026.”
