Office-To-Residential Conversions: Won't Save Calgary's Downtown
The BIG IDEA that arose from the City of Calgary’s “Downtown Economic Summit” this past March was the need to convert some of our downtown’s vacant office space into residential. Doing so would help create a more vibrant downtown in evenings and weekends when it tends to become a ghost town when the 150,000 downtown office workers leave.
There are numerous smaller, older office buildings surrounding Hotchkiss Gardens in downtown Calgary, that could potentially be converted to residential. However, due to lack of parking, building code requirements and other factors many are not suitable for conversion.
Feasibility?
This idea is not new. In the early ‘90s (also a time when Calgary’s downtown office vacancies were very high), Paul Maas, an architect and urban planner at the City of Calgary championed the idea that Calgary’s downtown core needed more residential development. He advocated for residential above the shops in the historic buildings along Stephen Avenue. He also thought old office buildings would make for ideal conversions to residential. His ideas fell on deaf ears, partly because at that time, there was no market for residential development in the core or surrounding \ communities.
The Calgary Downtown Association even had an architect on staff for a time, researching the feasibility of office conversions to residential. His conclusion - conversions were too costly, complex and there was no market for residential in the core.
Built in 1958, the owners of Sierra Place (7th Ave and 6th St. SW) have decided to convert the 92,000 sq.ft. of office space to 100 residential units.
Have Times Changed?
Fast forward to today. There has been an incredible renaissance in urban living, not only in Calgary but in major cities across North America for more than a decade now. Today, new residential buildings are routinely under construction in the communities surrounding our downtown - West Downtown, Eau Claire, East Village, Bridgeland/Riverside, Inglewood, Victoria Park, Beltline, Mission and Hillhurst.
But in the downtown core itself (9th to 4th Ave SW and 8th St SW to Centre Street), there has only been two buildings with any residential component built since the ‘90s - Germain hotel, office, condo project and the TELUS Sky, currently under construction.
Telus Sky currently under construction at 7th Avenue and Centre St. will have 422,000 sq.ft. of office space on the lower level and 341 residential units on the top floors. It has been designed by the world renown architecture firm Bjarke Ingels Group.
Office Conversions Are Difficult
Over the years, numerous studies have documented the difficulties of office-to-residential conversions - building code issues, costs, lack of market and parking requirements being the key ones.
To get a current picture of the feasibility of office conversion in Calgary, I spoke with decided with Bruce McKenzie, Vice President, Business Development, NORR Calgary office as they have probably designed more urban residential buildings in Calgary than any other architectural firm.
He was quick to agree - office conversions face many challenges including:
- Inability to control construction costs due to unforeseen extras (renovation / code extras).
- Lack of parking means most likely these properties will remain rental (and probably should as people aren’t apt to take the risk of an old building and the potential future condo fee escalations).
- Mechanical systems are totally unusable from office to condo/rental so a total gut job is usually needed.
- Never able to achieve National Energy Code of Canada for buildings’ envelop requirements.
- Floor plate sizes are too deep to create usable residential space at appropriate scale i.e. smaller units, which are typically what the market wants in conversion buildings.
That being said, NORR Calgary is currently doing several conversion studies, with one downtown Calgary project in working drawings.
Rocky Mountain Plaza is another example of an older building that might be considered for conversion given it proximity to Olympic Plaza, Art Commons, Stephen Avenue Walk and Glenbow.
Criteria For Conversion
I also connected with Strategic Group who owns a number of older buildings in downtown Calgary and are doing an office-to-residential conversion of the Harley Court building in downtown Edmonton.
COO Randy Ferguson, indicates his firm is a big proponent of conversion when certain criteria are met:
- Design efficiency. (Note: Not as many office buildings are designed in a way that facilitate repurposing as many people would think – side core; offset core; odd rectangular buildings; oversized floor plates all drive inefficiency and quickly are eliminated as they can’t meet this requirement. Also must be able to accommodate built-in amenities - rooftop terrace, fitness, community space.)
- Location. Must have urban living amenities nearby - grocery, street life, churches, arts facilities, sports facilities, cool restaurants, bars and shopping
- Near major employment districts
- Close proximity to high speed public transportation
- Walkable 24/7 streets
- Rental demand in the neighbourhood
- A mix of architectural expression and affordability in the neighbourhood
Older buildings along downtown's 7th Avenue are more attractive for conversions even though they lack parking, as they have excellent access to transit.
He indicated the three biggest barriers to conversions are:
- Inefficiency of design
- Zoning
- Lack of demand for residential
Ferguson says Strategic Group “is currently studying the assets they own in Calgary to ascertain which may be appropriate for conversion and whether or not office or residential are the highest and best use” adding “some office buildings are too successful to convert.”
When asked how the City of Calgary could foster more office conversions his response is plain and clear - “We believe the call to action is not to provide incentives, rather to facilitate the approval process by expediting matters such as zoning, permitting and plans examination. This would outweigh any incentive a municipality is at liberty to provide.”
Recently, while surfing Twitter, I learned Winnipeg-based Artis REIT has proposed the redevelopment of Calgary’s Sierra Place (7th Ave and 5th St SW) office building to residential. Zeidler BKDI architects have recently submitted a development permit on their behalf, proposing to convert the ten-storey, 92,000 square foot building into a 72-suite residential building.
Obviously, while converting old office buildings to residential is difficult, it is not impossible.
The PanCanadian Building (located across from the Fairmont Palliser Hotel) has been renamed The Edison and is being marketed as a funky space for start-ups. Already Silicon Valley's RocketSpace has leased 75,000 sq.ft. for a co-working space that could accommodate as many as 1,000 start-ups.
Old Buildings Are Not The Problem
Calgary’s downtown office space vacancy problem is not with its older buildings, but rather with its tall shiny new buildings. Some quick math shows older office buildings (C Class) make up only 6% of the total downtown office space (or about 2.3 million square feet) of which 630,000 square feet is vacant. The conversion of three or four older office buildings will not solve our downtown office vacancy problem.
On the other hand, Class A and AA office space (newer buildings, best location, best amenities) make up 72% of the total downtown office space. Currently, there is about 7 million square feet of vacant A and AA space (or about 65% of the total current vacant space – becoming higher with the completion of Brookfield Place and TELUS Sky). The reality is Class A or AA office buildings are not good candidates for conversions from both a design perspective and location, as well the owners (pension funds) have deep pockets and for them the best return on their investment is still as offices.
At the beginning of 2017, Calgary has more office space under construction than any city in Canada, even more than Toronto. Downtown Calgary's office space surplus is the result of too much new construction over the past few years.
Just one of several new office towers being built for the Amazon campus in downtown Seattle. They are all quite spectacular.
Last Word
Also let’s not forget a healthy downtown needs older office buildings. They offer the cheaper rent and funky character spaces that are often very attractive to start-up business, i.e. the exact businesses we want to attract downtown to help diversify the economic base.
Today’s start-up in a tired older office building could be tomorrow’s Amazon, which by the way, has created a funky, new multi-new building campus (9 million square feet in all) in downtown Seattle, for its 25,000+ employees.
Office-to-residential conversions will not save our downtown!
Note: An edited version of this blog was published in the Calgary Herald's New Condo section on September 30, 2017.