If your daily commute has you fuming about an increase in the number of cars vying for space on the streets of downtown Calgary, take heart. You are not imagining things.

If your company has short-term plans to expand its office space in that downtown core, however, it may well be OK to worry about your mental health.

Information presented to 600 delegates at last week’s Real Estate Forum in downtown Calgary shows the city’s downtown office market dominates the country in terms of its economic strength. But when it comes to sourcing space for expanding companies, there is very little room at the inn.

Statistics show Calgary’s suburban office market is growing faster than in the downtown core. But of the 13,000 new office jobs created in this city in the past four years, 6,000 have been added to downtown Calgary, says Sandy McNair, president of InSite Real Estate Information Systems.

Scott Hutcheson sees a “dramatic” period ahead for the downtown office market.

Those figures are in stark contrast to Toronto, where only 4,000 net new jobs have been created over the same period, a period that saw 5,300 office jobs lost from downtown Toronto, says McNair.

A provider of information to the commercial real estate industry, InSite tracks 3,300 office buildings with more than 20,000 square feet of office space in Canada’s seven major markets – Vancouver, Edmonton, Calgary, Toronto, Ottawa, Montreal and Halifax.

McNair was in Calgary to talk about current and emerging trends in Calgary’s office market. His presentation was part of a day-long forum that also looked at trends in the city’s industrial and retail real estate markets, as well as the reality of the Alberta Advantage and issues related to how Calgary’s economic strength impacts commercial real estate investment.

The gist of McNair’s presentation comes as no surprise to Gary Jones of Corporate Real Estate Service Advisors (CRESA) Partners, a tenant-only real estate brokerage firm with an office in Calgary. Information presented at the forum supports the ongoing contention that “generally speaking, large companies (100-plus employees) will have a difficult time finding acceptable office space” in Calgary as we move into 2005, says Jones.

“We’ve seen the tighter market coming for a while now,” says Jones, whose company offers its clients site selection, negotiation and disposition services, and capital markets expertise.

He expects companies that haven’t planned for the current space squeeze will find the market tough to negotiate, especially if rising energy prices push mergers and acquisitions. “For the most part, Calgary’s quality buildings are full.”

Higher-than-expected oil and gas prices fuel a significant portion of growth in demand for downtown office space, adds Scott Hutcheson, forum chair and the president and CEO of Aspen Properties Ltd. and Consolidated Properties Ltd. Hutcheson says Calgary has absorbed more than one million square feet of office space in the last 12 months, leading to single-digit office vacancy rates ranging from seven to nine per cent, depending on the source.

Hutcheson, who predicts Calgary’s downtown office market is “on the cusp of a very dramatic 24 to 36 months,” stops short of predicting when new office space will be developed.

Like several guest speakers at the forum, however, he agrees energy prices and a visible end to Alberta’s economic debt bode well for the commercial real estate industry’s ability to attract investment to Calgary.

Optimism for Calgary’s commercial real estate market banks on the province’s current reputation as an economic powerhouse, agrees Jason Clemens, director of fiscal studies at the Fraser Institute. Clemens, who spoke to the forum about the Alberta Advantage, says Alberta’s high GDP, low debt, low tax burden and high capital yield make Calgary a good place to invest.

Commercial real estate investors need to understand pricing power in terms of tenant options, adds InSite’s McNair. As of Oct. 13, Calgary had six buildings in the downtown core with more than 50,000 square feet. That’s a dramatic decline from the 15 buildings tenants could choose from one year ago. Compare that to Toronto, with 27 choices in the downtown core and “no pricing power in the hands of landlords,” says McNair.

“In a big tenant market like Calgary, once shouldn’t be surprised to see some new construction” in the coming months, adds McNair. “Tenants will be feeling the squeeze.”

Looking at larger trends in the office market, McNair also predicts an increase in build-to-suit development and says increased condominium development in the downtown core will likely prompt office- use changes over time.

(Joy Gregory can be reached at joy@businessedge.ca)