In the past year, we have extensively profiled the collapse of ground zero of Canada's oil industry as a result of the plunge in the price of oil, in posts such as the following:

Since then it has gotten far, far worse for Canada. In fact, as of September 1 it culminated with the first official recession in 7 years.

And it's only downhill from there. As Mark Thornton of the Mises Institute points out, in a report from the Financial Post shows that Calgary in Alberta Canada now has 1.7 million square feet of empty office space, the most in North America with another 5.2 million under construction! After years of booming construction, the natural resource rich country is starting to feel the pinch. To wit:

The number of half-empty office buildings in Alberta is projected to spike, as Colliers International predicts an “ill-timed” building boom should push up vacancy rates in Calgary and Edmonton. In a report released Tuesday, the real-estate brokerage’s chief economist Andrew Nelson said, “the fall in oil prices has had a negative impact on the energy-reliant markets (in Western Canada),” which has contributed to rising vacancy rates and falling rental prices in Alberta’s two largest cities. Vacancy rates jumped over the course of the second quarter. In Calgary’s case, Colliers reported the downtown vacancy rate rose to 13 per cent from 10 per cent, while Edmonton’s vacancy rate increased to 11.2 per cent from 10.6 per cent. A glut of new buildings under construction in both cities could push those numbers up even higher. “Canada is also in the midst of an ill-timed supply surge that caused vacancy rates to rise even in markets with positive absorption in (the second quarter),” the report noted. There are 5.2 million square feet of office space under construction in Calgary right now, which is the largest amount of new commercial space being built in any city in Canada and could further push up vacancy rates. Edmonton, a city with a current total of 17 million square feet of office space, is in the middle of its own building boom with over 2 million square feet of space under construction.

There is a silver lining:

Some observers see at least a partial silver lining in the numbers. In recent years, Calgary Chamber of Commerce director of policy and research Justin Smith said, commercial real estate costs downtown Calgary were “going through the roof” and “accelerating at a pace far beyond the Canadian average.” He said those escalating costs made it difficult for some companies to stay in downtown Calgary and noted that even large companies like Imperial Oil Ltd. and CP Rail Ltd. moved their head offices to the suburbs. The uptick in vacancy rates, he said, could provide some relief to smaller companies looking to do business downtown, as rental rates are projected to fall as vacancies rise. * * * Weakening demand for office space in both Calgary and Edmonton has resulted in large quantities of commercial real estate coming back on the market this year. The report showed that 1.7 million square feet of office space has become available in Calgary’s downtown core, thanks in part to thousands of layoffs in the oil patch and a decline in the need for commercial space. That is the largest quantity of newly empty space in any downtown in North America, including Houston, an oil and gas town where 1.6 million square feet have become available this year.

Who said deflation is a bad thing? Well, all the rich people for one, whose liabilities are denominated in fixed value debt, yet whose equity value and whose cash flow has just crashed through the floor, forcing them liquidate assets.

Which means that for all the pain in the oil sector, one industry is booming: pawn shops. As CBC reports, "some of the newly rich and long time wealthy in Calgary's once hot economy are now looking for fast cash because of the economic downturn, and they're turning to pawn shops."



?"Right now we have one, two...10 Rolexes for sale, two Panerais, a few Tag Heuers," said John Sanford, one of the owners of Rocky Mountain Pawn on Macleod Trail, as he counts the luxury watches in a glass case.

He has 100 more in a back room. He will have many more because "the economy has changed his clientele too, as formerly well-paid people are telling him they've been laid off or plan to leave town."

"People have come in and they've said, 'That's it, I'm heading back to Ottawa, Montreal,'" he said.

About six months ago, high-end items started rolling in to his shop, such as a 5.1-carat diamond — a $200,000 stone — and designer hand bags "whether it be Louis Vuitton, Chanel or Gucci."

Some of the items Calgarians are pawning to weather the recession.

(Kate Adach/CBC)

For some the current recession, Canada's second since the great financial crisis, is already worse than the last one: "in the 2008 recession, some pawn shops had to close because they were giving out more money than they were able to make up in sales, Sanford says." Not this time, though: this time, Sanford is being careful about the items he takes in because fewer people are buying.

"And whether it be Louis Vuitton, Chanel or, you know, Gucci, it's special and sometimes the person is pawning it, getting that $400 or $500, and they truly are going to be back for it."

Gucci and Louis Vuitton goods are just some of the designer items at

Calgary pawn shops. (Kate Adach/CBC)

And this is what it looks like when recent millionaires are scrambling for any source of cash: there has been a steady stream of customers, including a woman pawning Vera Wang earrings for about $3,000, or a man who can't find steady work as a truck driver so he's putting some art work on loan for short-term cash.

"That's a good grocery bill for a month, so — yeah — it's very important to get that $200," said Robert Huntington, who has used the pawn shop for the third time this year. He intends to pay back the money he borrowed from the pawn shop, plus rent, and eventually get his art work back — one of the many customers hoping to reclaim their items when things turn around, says Sanford.

Good luck to him, and in retrospect perhaps deflation isn't good for everyone: certainly not those whose cash outflows are greater than their current inflows, and have debt. They may not survive.

For everyone else in Canada's recessionary ground zero, strap in because it is only going to get worse. And if Goldman's $20 oil price target is correct (unlike its $200 price target 7 years ago) it will get a lot worse.