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EPFC Corp. chief operating officer Jeff Schoenhals and his colleagues moved into Calgary's Gulf Canada Square this year, gaining about 15,000 square feet compared to its previous location in the city's Beltline area, at about the same cost.Jeff McIntosh/The Globe and Mail

For engineering and construction firm EPFC Corp., the move to Calgary’s downtown core was a win both financially and in terms of convenience.

The firm moved this year into 48,000 square feet of Gulf Canada Square, a Class A tower in the heart of downtown, from a building in Calgary’s Beltline, south of the core. The company was growing and the sublease in the core offered plenty of space all on one floor, says Jeff Schoenhals, EPFC’s chief operating officer.

“We have accessibility to our clients. We’re Plus-15 [a skywalk] connected. We have a number of different clients and they’re all downtown. Having the ability to stay indoors and get to our building a lot easier is a selling feature for our staff. Options for lunches, day care … are a little bit easier. The CTrain is two blocks from our office,” says Mr. Schoenhals, rhyming off the advantages.

Favourable lease rates, plenty of available premium space and the prestige of big glass connected towers are tempting Calgary’s suburban and Beltline office tenants to the central downtown. Real estate firm Colliers credits the trend with positive absorption in the market downtown – that is, tenants are taking over more space than vacating.

Third-quarter figures from Colliers show there is still 26.8-per-cent vacancy in Calgary’s central business district. The 2015-16 recession in the Alberta economy took one of its biggest tolls on the city’s office market, which despite the upswing under way now, has a long way to go to healthy occupancies. The steady slow absorption rate of the last couple of quarters is being offset by the coming to market in early 2019 of another 285,000 square feet of vacant Class AA space in the new Telus Sky tower.

Aly Lalani, executive vice-president in Calgary’s Colliers office, says it’s been a very positive year, with 300,000 square feet of positive absorption in the first two quarters and another 250,000 to 300,000 square feet in the third quarter. A lot of the absorption is from tenants moving into the downtown from elsewhere in the city, he says. He adds that now some existing downtown tenants are showing growth as well, after the 2014-15 precipitous shrinkage.

“But that being said: What’s the difference between a vacancy rate of 26 per cent versus 20 per cent? It’s still a tenants' market. I think the general consensus is that we’re in this for the near term for sure. Is it going to be five, 15 or 20 years? … The general consensus is we’re in this kind of environment for the next five years,” Mr. Lalani says.

EPFC’s move in that environment made perfect financial sense to the company, Mr. Schoenhals says.

“The deal was great,” he says. “It was almost lateral in overall costs for the deal we structured. We had an extra 13,000 or 15,000 square feet for the same price as we were paying before.”

And the proximity to clients is key, he says.

Mr. Schoenhals says EPFC is working on a major project for a client that has offices in Gulf Canada Square. He calculates that being in the same building saves valuable time and money on the project, as staff don’t need to travel. On the one project alone, he figures EPFC has saved $100,000.

Even if the market swings back up and prices EPFC out of downtown space in six years when the lease is up, Mr. Schoenhals figures the move will have been worth it.

That boom-and-bust curve is familiar to long-time business tenants in Calgary.

Back in 2006 and 2007, a number of companies found themselves pushed out of the core because the lease price was climbing and the vacancy rate was low, says Justin Mayerchak, a vice-president of Colliers with expertise in the suburban market.

“What we’re seeing in the last couple of years is a lot of these engineering firms have cut staff significantly. Some have halved in terms of their occupancy and their staff in Calgary, and as a result they’ve said, ‘What is the best opportunity for me financially?’ And a lot of the time it is back downtown,” Mr. Mayerchak says.

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Another advantage to EPFC's relocation to Gulf Canada Square is access to the Plus-15 skywalk system. Travelling between buildings to meet nearby clients is quicker, and warmer in winter.Jeff McIntosh/The Globe and Mail

“You’re seeing it more and more from the engineering sector because they’re more mobile and have to be close to the oil and gas sector, which is all focused downtown.”

Larry Bannerman, president of Trigger Communications, says in 2006 his firm couldn’t even look at downtown space because of the scant vacancy and high prices. Now the firm has been able to move from the SunAlta area of the Beltline to a 3rd Avenue building in the core.

The No. 1 issue was for employees to have the amenities available in the downtown, Mr. Bannerman says. “No. 2 was to have a home for the business that was closer to the image we are trying to portray.”

He added that his company has been able to take advantage of the slide in the office market to get the type of office it wants with its sublease – all window offices and extremely well appointed.

“The ugly side is for the tenants who are the head lease [original leaser] in the space – they’ve gone through dramatic changes in their business.”

Trigger needed about 8,200 square feet of space in its new location.

Those smaller deals are another trend in the downtown, says Lloyd Suchet, chief executive officer of BOMA Calgary, the building and owners association.

“There were a lot of years when the deals were on full floors. You could lease out a floor at a time. But it isn’t the case [now],” Mr. Suchet says.

“Perhaps we’re into a new normal and perhaps those days aren’t coming back. There are deals to be had but they are smaller deals. You can still fill up a building that way.”

So is the move inward just shuffling the vacancy grief around the city?

Mr. Mayerchak says there are still plenty of firms staying in the suburbs for the space and parking.

“We’ve done a lot of work over the last four or five years with some really cool large local tech companies that won’t look downtown and will never look downtown because it’s just not the culture of their companies,” Mr. Mayerchak says.

“Every client asks me about the core but downtown has less efficient floor plates typically and operating costs generally are higher. That’s property-tax-rates driven. Parking is always more expensive. You’re still paying $500 a month for a stall downtown which is not reasonable for most tenants.”

He adds that some landlords are repositioning their assets. For instance some offices are looking now to attract medical tenants. And developers working in suburban Calgary are also looking at medical as their flavour of choice for new buildings.

“We’re still underserviced from a medical building perspective in Calgary,” Mr. Mayerchak says.

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Gulf Canada Square, where EPFC has its offices in Calgary. With vacancy rates of more than 25 per cent in Calgary’s central business district, space in Class A buildings like Gulf Canada Square are available and affordable.Jeff McIntosh/The Globe and Mail

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