Empty Shell Centre in downtown Calgary snatched up by Canadian ...

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CNRL will move from its offices in Bankers Hall and TD Square in 2025 and 2026, taking the space vacated last year by Shell — a move experts say is encouraging for downtown Calgary

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One of Calgary’s oldest office buildings — sitting vacant since last year — has a new tenant.

Canadian Natural Resources Ltd. (CNRL) will move into the Shell Centre in 2025 and 2026, leaving its spaces in Bankers Hall and TD Square. It’s also scooping up about 276,000 square feet of office space across the street at 400 Third, formerly known as Devon Tower, according to Colliers Research, a commercial real estate research firm.

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Last year, Shell vacated the 33-storey Shell Centre that was constructed in downtown Calgary in 1977. Shell announced in August 2022 it would move to The Bow, at 500 Centre St. S., downsizing its office footprint in Calgary by nearly 315,000 square feet.

The terms of the deal have not been publicly disclosed. CNRL did not immediately respond to a request for comment.

CNRL will occupy the entirety of the Shell Centre’s more than 640,000 square feet.

CNRL’s leases add up to nearly one million square feet of office space, but its departures from Bankers Hall and TD Square will leave about 650,000 square feet available, according to Jones Lang LaSalle Inc. (JLL), a Calgary-based real estate services firm.

The move will temporarily take two large chunks of office space off the market, said Mason Lam, senior vice-president, office practice lead at JLL. But even so, CNRL’s new leases won’t absorb a significant portion of downtown office space.

“There’s still a bit of time that . . . they’re occupying effectively two million square feet. Once they make that move you’re going to see a surge in availability as their space (being vacated) comes back on the market,” Lam said.

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While he’s unaware of the specific terms, Lam said CNRL would have likely been motivated by low rental rates to move into the nearly 50-year-old office building. “We know that they’re always driven by economics. Cost is always primary,” Lam said.

Cadillac Fairview, which owns Shell Centre, did not immediately respond to a request for comment.

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Landlords likely to pursue smaller tenants to occupy space vacated by CNRL

CNRL’s departure from Bankers Hall and TD Square allows their landlords to pursue smaller tenants looking for 40,000 to 60,000 square feet of space in one of Calgary’s landmark downtown areas, which already has restaurants and stores in the surrounding area.

“They see this as an opportunity to, instead of targeting one massive tenant, they can go after smaller ones and fill it up a little bit differently,” Lam said. “They don’t have to rely entirely on one oil-and-gas company to control their destiny.”

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The move could be a win for downtown Calgary, Lam said, because Shell Centre is surrounded by a handful of the city’s office-to-residential conversions coming online over the next couple years — many of which are in the relatively quiet West End.

“One of the big issues with the West End with all the conversions happening is the lack of amenities,” Lam said. “But now you have a major tenant moving into the northwest area, which should naturally cause some businesses to pop up over the next couple of years.”

Ben Tatterton, research manager at Avison Young Calgary, said Class AA buildings in Calgary — high-quality office buildings in areas with strong amenities — have the lowest vacancy rates in the city at about 15 per cent.

“AA premium spaces are sort of the place to be and we have a finite supply of those — and you’ve got a Class-A market that wants to get in to be that premium desired place to be,” Tatterton said.

Calgary’s overall office vacancy is at 26.9 per cent, according to Avison Young’s fourth-quarter report. Tatterton said several landlords are attempting to upgrade their properties to meet the demand for high-quality office spaces.

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“Landlords want to position their properties to be that desired place for tenants,” he said.

Calgary’s office market is still tilted in tenants’ favour, Lam said, but he expects availability to decrease in coming years — particularly considering the record migration Alberta has posted in recent years.

“Within the next three to four quarters, I would say nothing’s going to change that dramatically,” he said.

“I think within the next couple of years — because as the market has moved along we’ve seen a big surge in population growth — inevitably there’s going to be more startups and there’s going to be more people coming into the core working.”

mscace@postmedia.comX: @mattscace67

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