While it is shocking Calgary’s downtown skyscraper “vacancy rate” skyrocketed to 20% at the end of March, (and that it could soon surpass the vacancy record of 22% set in 1983, twice what it was a year ago), we should keep some perspective.
These numbers are not unheard of in major corporate headquarter cities. Back in the ‘70s, New York City was in decline. By the mid ‘70s, New York City came close to bankruptcy and their office vacancy rate hit 20%. In 1993, Toronto’s downtown office vacancy rate hit 20.4% and Vancouver’s rose to 17.4% in 2004. And these may not even be records as data only goes back only to 1990 for those cities.
Today, New York City, Toronto and Vancouver’s downtowns are booming a testament to the fact that all downtowns go through periods of growth, decline and rebirth.
Heyday and Decline
It might surprise some people to learn that in the early 20th century, Buffalo was one of the world’s leading cities.
Home to America's first electric streetlights, it also had one of the world's first skyscrapers (Guaranty Building, 1894) and the world's largest office building (Ellicott Square, 1896). It hosted the 1901 Pan-American Exhibition and its beautiful park system was designed by none other than Fredrick Law Olmstead, the designer of New York City’s Central Park.
At the beginning of the 20st century Winnipeg was the fastest growing city on the continent. In 1912, a Chicago Tribune writer called Winnipeg “Chicago of the North” and described it as Canada’s most cosmopolitan and ethnically diverse centre, with most of its population under the age of forty. It was described as Canada’s liveliest city, full of bustle and optimism. In 1911, Winnipeg was Canada’s third largest city; today it is eighth.
The downtowns of both these cities fell into decline in the middle of the 20th century and while they have not returned to the hustle and bustle of their heydays, both are enjoying a modest renaissance.
Decline and Rebirth
In the ‘60s, the case could still be made that Montreal was Canada’s business capital. Its downtown was a major office headquarters for Quebec’s natural resource industry as well as a thriving financial industry, including the head offices of the Bank of Montreal, Royal Bank of Canada and insurance giant, Sun Life.
In 1962, when the Place Ville Marie office designed by iconic architects I.M. Pei and Henry N. Cobb opened, it symbolized Montreal’s arrival as world-class city. This was further reinforced with the hosting of Expo 67, the arrival of Montreal Expos baseball team in 1969, and the 1976 Olympics.
However, the ‘70s brought the threat of separation, which resulted in many corporate headquarters and their executives moving to Toronto. By 1971, Toronto’s population surpassed Montreal’s. The 1976 Montreal Olympics, the most expensive in history, plunged the City into a legacy of debt and decline for decades.
Today, Montreal downtown has reinvented itself as an international tourist destination and a major player in the gaming and music industries.
Then there was New York City. In 1975, it was on the brink of bankruptcy.
The gradual economic and social decay set in during the‘60s. The city's subway system was regarded as unsafe due to crime and frequent mechanical breakdowns. Central Park was the site of numerous muggings and rapes; homeless persons and drug dealers occupied boarded-up and abandoned buildings. Times Square became an ugly, seedy place dominated by crime, drugs and prostitution.
Today, New York City is back as one of the world’s most successful cities, economically and culturally…and Times Square is again one of the world’s most popular urban tourist attractions.
Perhaps Calgary has already begun to reinvent itself.
The CBRE’s First Quarter 2016 Report states, “Not all commercial real estate in the city has been affected, though. Suburban office space held steady fro,m the last quarter, and the industrial real estate market is still robust because it’s not tied to oil and gas.”
Indeed, Calgary has become one of North America’s largest Inland Port cities, including two state-of-the art intermodal rail operations. Calgary is now the distribution headquarters for Western Canada a position once held by Winnipeg. Today, Calgary’s industrial sectors employ more people than the energy sector. However, this new economic engine won’t help vacant downtown office spaces as it is not downtown- oriented.
Calgary Economic Development is working with the real estate community to implement a Head Office/Downtown Office Plan with three action items.
One idea is the repurposing of smaller older office spaces as incubators and innovation hubs to attract millennials and/or entrepreneurs and the creation of incubation and co-sharing space. A good example of this is in West Hillhurst, where Arlene Dickenson (a successful Calgary entrepreneur, venture capitalist and former start of the TV show Dragon’s Den) has converted an old office building at the corner of Memorial Drive and Kensington Road (once home to an engineering firm) into District Ventures, home to several start-up packaged goods companies.
Another “repurposing” idea would be to convert some older office buildings into residential uses. In the US, programs like “Vacant places into Vibrant spaces,” have been successful but mostly for office to residential conversions of older buildings with smaller floor plates. They don’t work for offices buildings with floor plates over 7,500 square feet (which is the case for most of Calgary’s empty high rise office space), as it is expensive and difficult to meet residential building codes which are very different from commercial ones, making it difficult to compete with new residential construction.
In an ideal world, Calgary could become a “Global Talent Hub” where skilled workers who have been displaced from the energy and related industries continue to live in Calgary but become a remote workforce for energy projects around the world. Temporary and permanent satellite offices could be established in Calgary with teams of engineers, geologists, accountants, bankers etc. working on projects around the world.
The obvious strategy would be to woo international companies in the finance, insurance, transportation, agriculture, digital media and renewable resources industries to set up a Canadian or North American office in Calgary, maybe even relocate their headquarters here. With cities like San Francisco, Seattle and Boston facing mega affordable housing crisis for millennial workers, Calgary could become a very attractive place for a satellite office for companies in those cities.
One “off the wall idea” postulated by George Brookman, C.E.O of West Canadian Industries, would be to promote Calgary as an International Centre for Energy Dispute Resolution, similar to the Netherland’s TAMARA (Transportation And Maritime Arbitration Rotterdam-Amsterdam) that offers an extrajudicial platform for conducting professional arbitration for settling disputes. However, this would take years and one wonders could Calgary compete with London and New York who are already leaders in International Arbitration business?
Calgary has reinvented itself before. It evolved from a ranching/agriculture-based economy to an oil and gas one in the middle of the 20th century, which was when our downtown came of age. The downtown core which is an office ghetto today would benefit immensely if incentives could be made to convert a dozen or so office buildings into condos, apartments or hotels to create a better “live, work, play” balance.
Note: An edited version of this blog was published by CBC Crossroads titled “Revitalizing Calgary’s core: Some possibilities for rebirth” on June 17, 2016.