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Calgary’s downtown commercial office space vacancy rate has risen to 18.11 per cent, according to Colliers International. An expert expects the rate to peak in the first quarter of 2018.Chris Bolin/The Globe and Mail

Lucas Beck, who leases commercial office space for Colliers International, is leaning on a cabinet in a fully furnished floor in one of Calgary's premier office towers.

The floor's 24,000 square feet hosts about 100 workstations – roomy, bright and clean cubicles – ready for action. They come with chairs, filing systems, brackets for computer monitors, blue bins for recycling and garbage cans with black bags tied tight around the rims. Some of the cubicles are decorated with a gerbera daisy – orange and fake. There is a box of baking soda in the communal fridge, keeping the empty KitchenAid fresh.

But there's no one to sit at the desks or put lunch in the fridge. The space has been empty for about a year and the rent has been slashed, though Mr. Beck won't say by how much.

But he hasn't gone so far as to offer what some downtown office buildings have: free rent.

The vacancy rate in the city's downtown is the highest since at least 1995 and some tenants lacking employees because of layoffs are trying to sublease their empty offices. Incentives range from renting fully furnished spaces to free rent on the condition the subtenants cover the operating costs – the types of bills that keep the lights on.

"It is just a very competitive market," said Mr. Beck, an office-leasing associate. "Landlords and sub-landlords have to be creative."

Oil and gas companies have let go thousands of people because of slumping energy prices and a dreary economic forecast. The downturn has lasted about a year-and-a-half. This has pushed Calgary's downtown vacancy rate to 18.11 per cent, according to Colliers. The precise rate, however, is likely higher, Mr. Beck said. Some companies are reluctant to put their excess space on the market because they do not want to spook investors and remaining employees.

Others may be holding on so they have room when the price of oil climbs and they can fill their ergonomic office chairs again.

By way of comparison, the vacancy rate for the same category of real estate reached 15.22 per cent in June, 2010, reflecting the financial market meltdown in 2009, according to Colliers' statistics. Today's rate is the highest since the company began tracking data in 1995.

And the market for downtown office space is expected to further soften. Todd Throndson, the managing director at commercial real-estate services firm Avison Young in Calgary, said the city's downtown office vacancy was 16.3 per cent at the end of the of 2015 – a more optimistic figure than Colliers', although the two firms may classify properties differently.

Mr. Throndson expects downtown vacancy to peak in the first quarter of 2018, touching between 19.4 per cent and 21.7 per cent. By the fourth quarter of 2018, he figures the vacancy rate will hover between 20.5 per cent and 17.8 per cent.

Calgary's downtown towers contain about 44 million square feet of office space. Five developments will be completed between now and 2018, adding another 3.5 million square feet, Colliers calculates. Roughly one-third of that space is still available for lease, it said.

Empty offices put pressure on those renting out another once-hot slice of Calgary's real-estate market: parking spots.

Melissa Casey has a spot in a condo building near the core. It is underground, heated and secured. Calgary's average monthly downtown parking price was, at last count, second only to New York's. But now Ms. Casey, like others with parking spots, has cut her asking price while fishing for a tenant on Kijiji.

"I've had to lower it several times," she said. "I've been sitting on it for two [or] three months."

Ms. Casey advertised the spot for $265 per month, down 7 per cent from $285 last time it was on the market. She found a taker Thursday, but the lease lasts only until the end of month and she dropped the price another $35. Ms. Casey, however, lined up a renter to take over in February. She also dropped the rent for her condo tenant, hoping to keep him happy as the residential rental market slips.

The economic fallout in Calgary, however, is unfolding differently in the residential property market. The pace of sales has slowed, but prices remain healthy. Further, home prices in Edmonton rose in 2015 compared with 2014.

In Edmonton, whose prosperity is tied to oil and gas although not to the same degree as Calgary's, home prices climbed last year. The median price of a detached home in Alberta's capital was $410,000, compared with $404,500 a year prior, according to the Edmonton Real Estate Board. The average price of those homes was $447,025 in 2015, up from $439,837, the EREB said.

The median price for a residence in Calgary in 2015 was $424,000, down 0.3 per cent compared with $425,600 in 2014, according to the Calgary Real Estate Board. The volume of total sales was down 26 per cent, and new listings dropped 6 per cent. (These figures are based on sales for condos, detached homes and attached homes.)

The median price for a detached home in the city clocked in at $479,900 in 2015, down 1.5 per cent from $487,500 in 2014. Buyers paid an average of $536,992 for the same style of residence in 2015, down 3.6 per cent from $557,273 in 2014, CREB said.

"It is not a crash," Ann-Marie Lurie, CREB's chief economist, said. "It is just not."

Indeed, total residential prices in 2015 are comparable to 2013, she said. Ms. Lurie also argues inventory – the amount of property on the market – was tight in 2014, giving sellers more power.

Back in the empty office – one with a view of the Bow River and Nose Hill Park – Mr. Beck notes that while free office space is enticing, it comes with catches beyond paying realty taxes and the heating bill. Those leases tend to be short-term and in spaces where another company has already signed a leasing agreement that will kick in at the end of the existing deal.

"We are seeing some of those," Mr. Beck said.

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