After several very difficult years, Calgary’s downtown, which technically consists of the Beltline and the downtown core, is slowly starting to fill up again. A February report from Avison Young says the downtown office vacancy rate now sits at 27.2 %, down 2.5 % since the last quarter of 2021.
Representatives from the Calgary Downtown Association explain that businesses are looking to move into better spaces in order to keep their current employees and attract new ones and more and more people are back in the office, or at least in hybrid working arrangements. While the downtown is starting to come back to life, different classes of buildings are showing very different vacancy results.
Downtown office vacancy rates are highly dependent upon the type of building. Class AA buildings now have a vacancy rate of 14.8 %, down 2.9 % since the last quarter of 2021.
Class AA buildings are generally brand-new, very new, or extensively redeveloped, plus in great locations, which makes them very attractive for those in the market for a commercial property. Class B buildings may not be built up as high-quality materials, may not have as many amenities, and may be located further away from transit and parking, but their upside is lower rental rates and plenty of desirability.
Commercial property insurance can be declared void if there is a vacancy
When a commercial property is vacant, it is at very high risk. Since there is nobody there to keep an eye on things, an incident as small as a leaky faucet can turn into a very big (and bad) deal. Additional risks include theft, vandalism, fire, and more.
Be sure to speak with your insurance broker or provider if you have a vacant commercial property to fully understand your options and your coverage. As an owner of commercial property you must show due diligence at all times. Failure to perform due diligence can result in the rejection of insurance claims.
A commercial property insurance policy can be declared void after just a few days of vacancy, depending on your policy. All commercial property insurance plans will come with the stipulation that properties must be occupied, and if they are not then the property owner must inform their insurance company and they must have some form of vacant (or unoccupied) commercial property insurance.
Generally speaking, there are three different types of vacant commercial property insurance available:
- Vacancy management insurance covers for costs associated with securing and maintaining a vacant building until it can be sold or leased again. These can include expenses for security guards, additional security alarms, and the expertise of those knowledgeable in what it takes to keep a vacant commercial property fully secure. Vacancy management insurance may also fall under the umbrella of a security policy.
- Ground lease holdback coverage protects the holder against any unpaid rent due when tenants abandon their spaces and stop paying their rent or lease obligations.
- Construction defect coverage is for brand-new buildings that have yet to be inhabited and insures against faulty construction issues such as water damage or fire damage due to improper wiring or improper equipment in newly constructed buildings.
When a building is occupied, commercial property insurance protects against unforeseen events such as a fire or a break-in. Coverage protects the value of the building that houses your business from damage or loss, and goes further to protect the contents inside. This can include any equipment, machinery, furniture or even inventory that may be in the building when disaster strikes.
Of course, once a building is occupied, commercial property owners must carry rental property insurance for their business clients.
What’s next for Calgary’s downtown
Although the vacancy rates do sound dire, it’s worth it to note that even though Calgary has among the highest rate of downtown office supply available, it also boasts the highest occupied downtown office space per capita when compared with other North American cities of equal size. As of January 2020, Calgary had 42 square feet of office space, per capita, more than double the amount of Toronto (21 square feet per capita), the next highest of any comparable North American city. In the same year, Calgary had 31 square feet of occupied office space per capita, more than one and half times the amount of occupied downtown office space in Toronto (20 square feet), and more than double that of Denver (13 square feet), a city that Calgary is often benchmarked against.
Calgary’s Downtown Strategy team is working to respond to prolonged economic challenges and find opportunities that will drive recovery. The result will be the revitalization and the transformation of the downtown. Details can be found in Calgary’s Greater Downtown Plan, which sets forth a “vision, roadmap and commitment to build a thriving, future-focused downtown.”
The Plan focuses on a downtown that is where Calgary’s commercial heart will beat and where people will want to live and be 24 hours of the day. A balanced mix of residential, office, retail, entertainment, tourism and culture will support the continued growth and development of downtown. A $200 million initial investment has already focused on lowering office vacancy, improving downtown vibrancy, and supporting the development of thriving neighbourhoods to attract residents, visitors, and talent for downtown’s businesses.
Different types of business insurance for different types of companies and workers
Commercial property insurance is only one type of business insurance coverage. The experienced insurance brokers at Lane’s are experts in matching up the right kind of business coverage with your specific type of business. For example, all vehicles that are used for commercial purposes in Calgary and Alberta must be covered through commercial auto insurance.
Other options include surety bonds, which insure you against financial losses resulting from a party failing to complete contractual obligations, which then disrupts your business. Contractors insurance prevents unqualified individuals from undercutting properly trained and licensed professionals and ensures the performance of stated obligations. Fidelity coverage covers cash, valuables, equipment, securities and other negotiables that might be stolen or misappropriated by unscrupulous employees. And there are more coverages available for every type of business circumstance.
If you are looking to compare your current commercial property insurance with other policies available on the market for a chance to save on even better coverage, we at Lane’s are the ones to call. Contact us at our Calgary, Banff, Edmonton and greater Alberta offices to get a fast, free quote for all your insurance needs.
