National Post (National Edition)
Tech moves into oil and gas digs in Calgary
HOLLOWED-OUT DOWNTOWN CORE
Nicolas Beique, CEO of Calgary-based tech firm Helcim, used to dream of one day building a new headquarters for his company.
His vision was a Silicon Valley-like “campus” for his employees — a dedicated building somewhere in the suburbs with parking, on-site food offerings and fitness facilities that would make his payments-processing fintech company an attractive place to work.
But when Helcim officially outgrew its cramped office space in the Blackfoot Industrial Park last year (the company has gone from three staff five years ago to 68 employees now, and hopes to have 150 employees by the end of next year), Beique revised his vision. Instead of looking to the city's outskirts, he signed a lease for 20,000 square feet in Millennium Tower on 2nd Avenue S.W., in downtown Calgary.
“We realized, wait a second, you can actually create what we were looking for without having to build a whole campus. It's all downtown,” Beique said. “There's food and gyms and amenities and everything there already.”
Six years after oil prices crashed and sent shock waves through Calgary's economy, the gravity of this city's “downtown problem” is well known. Waves of layoffs at energy firms have hollowed out the shiny downtown towers that once bustled with activity, leaving a vacancy rate in the core of 27 per cent — the highest of any Canadian city by a significant margin, according to Calgary Economic Development.
The result has been a nightmare for Calgary's city council as it grapples with a giant crater in its tax assessment base due to declining property values in the core. The “tax shift” — the movement of the tax burden from the core to properties in other parts of the city — has left small-business owners reeling under the weight of consecutive years of doubledigit tax increases and also resulted in a property tax hike for homeowners this year.
And yet, there is movement happening. As the number of people employed in Calgary's oil and gas sector has fallen, employment in the city's burgeoning tech sector is growing. Calgary is home to 435 technology companies, three-quarters of which are startups. According to Calgary Economic Development, there are more than 2,000 open tech jobs in the city, and a record 44,500 Calgarians are working in tech right now.
As tech has grown, so has the number of tech companies that are moving into the downtown, in part thanks to the affordability of office space there. (Class A office space in Calgary's downtown leases for an average of $17.50 per square foot, according to CED, compared to $21.16 in Edmonton, $35.38 in Toronto and $44.62 in Vancouver).
As they take over space in the downtown that was once occupied by oil and gas companies, tech companies are unveiling new high-end offices that help to attract clients and employees alike.
“When oil was at an alltime high, things were just too hot and too expensive for us to dream of ever being in Calgary's downtown,” Beique said. “Now that things have cooled off pretty significantly it allows for other industries, including ours, to be able to take advantage of all the amazing things that are in the core.
“A lot of our clients are downtown so being here is a huge advantage, but 10 years ago the rents where we are would have been bigger than our entire budget,” said Rob Townsend, CEO of Camber, a nine-person tech startup working in the wealth management space that took up office space last year in Dome Tower on 7th Avenue S.W. — space formerly occupied by Enerplus.
“It is amazing when I talk to other firms that do what I do across Canada and across the world. When I talk to them about our leasing costs, it always, always shocks them.”
But it isn't just the leasing rates making the downtown newly attractive to tech firms. John Fisher, a Calgary-based senior vice-president with commercial real estate firm CBRE Ltd., said some downtown landlords are going out of their way to make their properties attractive to up-and-coming tech companies.
“The owners of these buildings are among the best in Canada, they're some of the country's largest pension funds,” Fisher said. “And even some of the private guys have got a really interesting perspective, as a result of being in a city that's really been living and dying on one industry. They know that when it doesn't go well in that industry, there's a lot of risk inherent in owning these buildings.
“Progressive and innovative landlords are looking for ways to lessen the exposure to the energy industry through their tenancies,” he added. “And one of the conclusions that a few landlords have come up with is, `can I appeal to technology companies?' ”
Fisher said a number of downtown towers — from the newly renovated and rebranded Edison building on 9th Avenue S.W. to the 60-storey Telus Sky on Centre Street to SunLife Plaza on 14th Avenue S.W. — are looking to lure technology and other creative-industry companies by modernizing their esthetic and amenities. This means open-concept floor plans, lots of light, rooftop patios, employee lounges and state-of-the-art fitness studios.
“For a variety of reasons, the downtown core has not always been the top choice for tech companies,” Fisher said. “But some of these landlords are changing the narrative, so that technology companies are feeling more welcome.”
Tech CEO Hanif Joshaghani was not interested in a typical downtown Calgary office space when he went looking for new headquarters for his company, Symend. One of the fastest-growing tech companies in North America, Symend — which has developed a software platform that engages with “at-risk” or delinquent customers on behalf of large corporations — had fewer than 20 employees in the spring of 2019 and today has more than 200.
In January 2021, Symend will move into 79,000-square-feet in First Tower, at 411 1st St. S.E., owned by international real estate firm Hines. The tower's website boasts that it offers a “new way to attract and retain the best talent in the market,” with building features that include an expansive lounge and collaboration space, an outdoor terrace, a “spa-quality” fitness facility, and co-working and meeting spaces.
“The way they set up a floor as a demo for us, we walked in and were like, `yes, this is exactly what we were looking for,'” Joshaghani said. “It is far more in line with what you'd see in San Francisco or Seattle, compared to other buildings we'd looked at.”
While the growth of the tech sector in Calgary and its movement into the downtown shows promise, it doesn't come close to filling the gap left behind by the city's shrinking energy sector. At this rate, Calgary Economic Development president and CEO Mary Moran estimates it could take 15 years — or more — to fill the city's downtown office space.
But as more and more tech companies converge into the downtown, it helps create a “cluster” — a group of like-minded individuals who work together, collaborate and compete, and who, in turn, attract more tech talent and startups to the area. And many of the companies moving into Calgary's core are on a fast-growth trajectory — Symend is planning to hire an additional 200 to 300 people next year, while Helcim has its sights set on expanding into additional floors of Millennium Tower as it grows.
“Tech companies are weathering the storm relatively well in terms of what's happening with the pandemic. They have the capacity for chewing up a lot of space (in the downtown) and adding a lot of bodies very quickly,” Fisher said. “I'd say the characteristics of tech companies in Calgary right now are not too dissimilar from what oil and gas companies were in 2006 and 2007. They have the capacity for fast growth.”
PROGRESSIVE AND INNOVATIVE LANDLORDS ARE LOOKING FOR WAYS TO LESSEN THE EXPOSURE TO THE ENERGY INDUSTRY THROUGH THEIR TENANCIES. AND ONE OF THE CONCLUSIONS THAT A FEW LANDLORDS HAVE COME UP WITH IS, `CAN I APPEAL TO TECHNOLOGY COMPANIES?'