Inside Ground Zero Of Canada's Recession

In the past year, we have extensively profiled the collapse of ground zero of Canada’s oil industry as a result of the plunge in the price of oil, in posts such as the following:

“Canada Crude Contagion: Calgary Home Prices Drop Most In 2 Years”

“Canada’s Biggest Oil Casualty To Date: Calgary’s Nexen Shutters Oil Trading Desk”

“The Canadian Housing Bubble Has Begun To Burst”

“Canada’s Oil Patch Confidence Crashes”

“Canada Mauled by Oil Bust, Job Losses Pile Up – Housing Bubble, Banks at Risk”

“The Stage Is Set For A Massive Housing Market Correction in Canada’s Oilpatch”

Since then it has gotten far, far worse for Canada. In fact, as of September 1 it culminated with the first official recession in 7 years.

And it’s only downhill from there. As Mark Thornton of the Mises Institute points out, in a report from the Financial Post shows that Calgary in Alberta Canada now has 1.7 million square feet of empty office space, the most in North America with another 5.2 million under construction! After years of booming construction, the natural resource rich country is starting to feel the pinch. To wit:

The number of half-empty office buildings in Alberta is projected to spike, as Colliers International predicts an “ill-timed” building boom should push up vacancy rates in Calgary and Edmonton. In a report released Tuesday, the real-estate brokerage’s chief economist Andrew Nelson said, “the fall in oil prices has had a negative impact on the energy-reliant markets (in Western Canada),” which has contributed to rising vacancy rates and falling rental prices in Alberta’s two largest cities.

Vacancy rates jumped over the course of the second quarter. In Calgary’s case, Colliers reported the downtown vacancy rate rose to 13 per cent from 10 per cent, while Edmonton’s vacancy rate increased to 11.2 per cent from 10.6 per cent.

A glut of new buildings under construction in both cities could push those numbers up even higher. “Canada is also in the midst of an ill-timed supply surge that caused vacancy rates to rise even in markets with positive absorption in (the second quarter),” the report noted.

There are 5.2 million square feet of office space under construction in Calgary right now, which is the largest amount of new commercial space being built in any city in Canada and could further push up vacancy rates.

Edmonton, a city with a current total of 17 million square feet of office space, is in the middle of its own building boom with over 2 million square feet of space under construction.