Layoffs to hit Calgary core hard

Vacancy rate close to 30 per cent

EDMONTON • The merger of Cenovus Energy Inc. and Husky Energy Inc. is going to have a spillover effect into the downtown core of Calgary, where high-rise office space has sat vacant for months and years as the economic downturn and the COVID-19 pandemic have battered the oil and gas industry, clearing out commuter traffic and having a devastating effect on business and culture in the city's core.

The two companies said Tuesday the merger would result in roughly 2,150 layoffs as Husky joins Cenovus in a $3.8-billion deal that will make Cenovus the third-largest energy company in Canada. It's not clear what jobs, specifically, might be lost.

“The downtown of Calgary is the goose that lays the golden eggs in terms of the operation of our city and these job losses will hurt in a number of different ways,” said Coun. Evan Woolley, whose ward encompasses half of downtown Calgary.

Tuesday's news is just the latest blow Calgary in general, and downtown Calgary in particular, has faced. Adam Legge, CEO of the Business Council of Alberta, said the downtown vacancy rate is close to 30 per cent, and any further reduction will mean fewer downtown workers frequenting small businesses such as restaurants and dry cleaners in the city centre.

“Any time we see layoffs of that magnitude, there's a concern for a whole host of things, including the livelihoods of those affected and what it means for a downtown that is already struggling,” Legge said.

Downtown Calgary, unlike many other large cities, is heavily commercial, with few residential properties. This means, simply, the businesses and organizations downtown rely, in large part, on commuter traffic to put bottoms in barstools and cash on counters.

“While we started from this incredible high level of downtown commercial activity, it means we had a long way to fall,” Mayor Naheed Nenshi said in an interview.

The vacancy effects are clear enough. The Plus 15s, the nearly 16 kilometres of pedestrian walkways with 83 bridges that connect buildings in downtown Calgary, are practically deserted. “What were once bustling networks, particularly in the winter, are quiet,” said Woolley.

In Calgary's case, much of that premier downtown real estate is — or was — occupied by oil and gas giants.

“To suggest that the oil and gas industry will fill up that vacancy any time soon, or ever, is a faulty assumption. If this isn't the wakeup call in the sense of the oil and gas industry is not going to save Calgary, then I don't know what is,” said Dan Harmsen at Barclay Street Real Estate.

Harmsen said there's an excess amount of office space in the city that will take years to absorb, but added the situation has led to an attractive rental market, where premium office space can be had for 20-per-cent to 40-per-cent cheaper than any other city in North America.

Commercial realtors in Calgary have seen some firms outside the oil and gas industry take advantage of lower costs and lease additional space in recent months.

Rachel Notley, the leader of the New Democrats, told the Post that this is a trend that isn't going to stop, even with COVID recovery or as oil prices rebound.

“As it relates to the downtown of Calgary, just generally, what we need to be doing is looking at ways to diversify the economy and attract other businesses back to Alberta and of course to Calgary,” Notley said. “In terms of job creation, what we need to be understanding then is that we have to look for other eggs to put in our baskets — in fact, we need more baskets, is a better way to put it.”

The layoffs at Cenovus-Husky aren't even the first in recent weeks.

TC Energy, the firm behind the Coastal GasLink pipeline through northern B.C., announced an unspecified number of layoffs some weeks ago, followed by Suncor, which said it would shed 2,000 jobs over the next 18 months. In total, the energy industry dropped 23,600 Canadian jobs in just three months this spring.

The downsizing of Calgary's energy industry, while it has obviously affected thousands of Calgarians directly, has several other spillover effects; the city itself has lost hundreds of millions of dollars because of downtown vacancies affecting property tax returns. That tax revenue, in turn, needs to be made up elsewhere through, say, residential property taxes.

The lack of commuter traffic affects revenues from parking, or bus tickets and passes, for example. And, obviously, fewer people in office spaces affects other businesses downtown, whether that's cultural groups and non-profits or bars and restaurants. There has also been an increase in crime downtown, said Woolley.

What is trickier to sort out, though, is the effects more recent layoffs have had because it's in the midst of the COVID-19 pandemic, when most people are already working from home and not travelling downtown for work.

Karen Ball, interim CEO of Calgary Chamber of Voluntary Organizations, said there have been effects on volunteerism and the not-forprofit sector because fewer people downtown means that office-based volunteerism and donations — such as the United Way campaigns — are harder to maintain when workers aren't in the office.

“It's an unfortunate thing, because, the timing being such, the pandemic has affected everyone in Calgary and certainly in Alberta,” Ball said. “For non-profits it means there's been an increase in the demands for their services.”

It's especially acute for the cultural non-profits, most of which are based downtown, she said. “Of course people working downtown creates a vibrancy 5 to 7 and 7 beyond for bars and restaurants and also live in-person events and so the arts sector is tied to, in some ways, the vitality of the downtown core.”

Still, in spite of the gloom, there are bright spots: On Monday, Suncor announced it would be relocating its branch offices in the Toronto area to Calgary, essentially bringing 700 positions.

Nenshi said that Suncor moving people to the city is good news, evidence of the city's appealing real-estate market, something he hopes will bring even more business. “That's really the pitch that we're making to a lot of firms,” said Nenshi.

Woolley, for his part, also remains optimistic: “There is hope, I am a hopeful, optimistic Calgarian, I believe in our city, but it really does speak to the importance of us taking a look at economic diversification,” said Woolley.