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The Bow River winds its way through downtown Calgary.

Chris Bolin/The Globe and Mail

Office-tower owners in Canada's energy hub are about to feel the full force of the oil-price crash.

Vacancy is already at a five-year high in Calgary and rents are the lowest since 2006 after thousands of office jobs were cut. Energy company tenants have now begun to ask for rental relief and are offering subleases for as little as half the going rate, according to real estate brokers including Jones Lang LaSalle Inc. and Avison Young Canada Inc.

That's before five new office towers with about 3.8 million square feet of space hit the market in the next three years.

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"It is a bloodbath," Alexi Olcheski, an office-leasing principal at Avison Young, said from his office in downtown Calgary. "We're at the highest point of fear and uncertainty now."

Caught in the downturn are tower owners including Dream Office REIT, Artis REIT and Morguard Corp., whose shares have dropped about 27 per cent, 14 per cent and 5.1 per cent respectively over the past 12 months. The Standard & Poor's/TSX Capped REIT Index is down 8.7 per cent over the same period compared with a 8.2-per-cent drop in the broad S&P/TSX Composite Index. U.S. crude has dropped more than half since its peak in June, 2014, to hover at about $45 a barrel.

In downtown Calgary, the vacancy rate jumped to 14 per cent in the third quarter, the highest since 2010 and compared with 5 per cent for downtown Toronto, according to CBRE Group Inc. Companies are subleasing a record 2.7 million square feet, the brokerage said. That doesn't include as much as two million square feet of so-called "shadow vacancy" or space leased but sitting empty, which would push vacancy to 16 per cent, the most since the mid-1980s.

Penn West Plaza, owned by developer Morguard, is among the buildings with empty floors. About 38 per cent of its 621,628 square feet of office space is on the market for sublease, according to leasing documents. The going rate for the penthouse of the West Tower is "negotiable" while occupancy is "immediate" for other floors, according to the ads. Morguard didn't return phone calls and e-mails seeking comment.

Employment at Penn West Petroleum Ltd. shrank to less than 800 workers this year from about 2,250 three years ago. Athabasca Oil Corp., which eliminated more than 25 per cent of its work force last month, has been subleasing from Penn West and is also trying to find tenants to take some space off its hands, according to listings.

Penn West declined to comment, while a spokesman for Athabasca didn't have an immediate comment when reached by e-mail.

Even Calgary's most iconic tower, completed just a few years ago, isn't immune. The 58-storey Bow, Canada's second-largest office building at two million square feet, is owned by H&R REIT and leased until 2038 to Encana Corp., the real estate firm's largest tenant by revenue. Encana subleases one million square feet to Cenovus Energy Inc., which in turn aims to vacate and sublease half of that, according to Reg Curren, a Cenovus spokesman. Together, the firms cut about 1,500 jobs this year, part of the 36,000 job losses at energy companies across Canada since the oil rout began.

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"We are in the best position to ride through this storm," Larry Froom, H&R REIT's chief financial officer, said in an e-mail. Most of the leases on the company's five offices in Calgary expire after 2021, he said. The only way for tenants to get out of a lease agreement is through bankruptcy, unlikely for the company's investment-grade tenants, he said.

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