Bow Valley Square's four towers comprise the second major office acquisition for Armco Capital in Calgary during the past year. (File image, courtesy Oxford Properties) The recent purchase of iconic property Bow Valley Square in downtown Calgary signals a growing confidence and optimism by Armco Capital about the city’s downtown office market.
Steven Darrow, president of Atlantic Canada and Alberta for Armco, said the company got involved in Calgary a few years back through G2S2 Capital (Armco’s Halifax-based parent company) by making “some significant investments in the oil and gas sector when there was a bit of a downturn in 2020.”
“We’re just excited about the growth and the potential of Calgary in general. We’re opportunistic investors, I would say. That kind of speaks to the timing of the oil and gas investments and kind of the same with the office,” he said.
“We’re a big believer in the return to office. We don’t think work from home is a permanent thing. I’m sure there will always be some flexibility but we’re big believers in the return to office. "
He also reiterated what some other private investors in the Calgary office market have been saying in recent interviews with RENX.
“A lot of the pension funds kind of exited the office space and we think that’s a good opportunity for us. So there’s been some nice iconic properties like Bow Valley come up on the market and we think those are good opportunities and the market will rebound.”
Armco founded by Armoyan family
Darrow said Armco is a real estate development company which owns a handful of commercial properties, schools and land for development. Armco Capital Inc. was founded in 1982 by members of the Armoyan family.
The recent purchase of the 1.4-million-square-foot Bow Valley Square is the crown jewel in the company’s portfolio, which also includes about 500,000 square feet of commercial space in Halifax.
Last year, Armco also acquired the Altius Centre in downtown Calgary which is about 330,000 square feet.
Bow Valley Square was acquired from Oxford Properties while the Altius Centre was purchased from Canadian Property Holdings (Alberta) Inc.
No financial details were disclosed.
Darrow said the company was attracted to the Altius Centre because it was a nice property, well-maintained, at a good, fair price.
Bow Valley Square a "great asset"
Bow Valley Square encompasses approximately 1.4 million square feet of mixed-use office, retail and commercial space in four towers standing 17, 32, 37 and 39 storeys. The majority of the space is for office while about 100,000 square feet is dedicated to retail.
“We saw the opportunity out there. It’s a great asset, well-maintained and managed by Oxford over the years. They’ve put a lot of money into it in recent years in terms of upgrading the amenities and just keeping it well-maintained,” Darrow said.
“The asset itself was one thing. Good occupancy still. It also allowed us to scale up quite quickly. To go from 330,000 square feet in the market to we’re pushing close to two million now. We wanted to make a splash in the Calgary market, thought it was a good opportunity at a good, fair price.”
Darrow said the company will talk to the staff and the tenants at Bow Valley Square and real estate brokers to hear what the market might be looking for regarding downtown office space. But Oxford had already completed significant updates, spending $40 million a few years ago on things like a tenant lounge, a gym, patios and other improvements.
“I think a lot of the heavy lifting has probably already been done, but we’ll listen to the tenants and listen to the market and see if there are other needs,” he said.
The Garage is a new restaurant in the complex.
Building occupancy currently at 90 per cent
Darrow said Bow Valley Square is about 90 per cent occupied. But tenant KPMG, with about 10 per cent of the space, will be leaving in 2026.
“No immediate plans, but we’ll continue to kind of tinker with things. We want to see where we could run it more efficiently maybe and bring the costs down a little bit in terms of operating costs for the tenants,” Darrow added. “We’re a pretty lean company (when it comes to) overhead. So I think we could probably cut some costs there. So hopefully we’ll be able to deliver that value to tenants. They say price is the ultimate amenity.”
Darrow said the company sees more potential opportunities in Calgary.
“We’re opportunistic investors so we’ll continue to look for deals. I think there are still some out there. We’ll continue to look for those. We’re probably not going to do deals for the sake of doing one but if the right opportunity is there we would definitely continue to invest in Calgary,” he explained.
“You’re seeing the pension funds and the REITs look to exit office. Where traditionally that might have been the buyer pool for any transactions, that buyer pool I think has kind of gone away and it’s mostly private now.”
According to a Q3 office report by real estate company Avison Young, the downtown Calgary office market saw positive absorption of 204,948 square feet in the quarter, bringing the vacancy rate down to 24.5 per cent.
Most leasing activity occurred in class-AA office spaces, which accounted for 135,147 square feet of absorption. The class-A market also performed well with 58,597 square feet absorbed.
The report said year-to-date absorption has surpassed 670,000 square feet - a high not seen since 2018.