The City of Calgary’s office to residential conversion incentive program is an interesting urban development experiment that is being watched by a lot of other cities to see if it works. Unfortunately, it will be ten years or more before we will really know if it is a success or failure.

Downtown Calgary currently has 123 office buildings nearing the end of their 50-year life span, 28 have been flagged for possible conversion to residential many of them on the west side (upper right corner) where there is a 50+% vacancy rate.

As of March 2023, here a summary of the success of office to residential conversion program.

More People Live Downtown Than You Think

When Calgarians think of their downtown they almost always think of it as only a place to work. But in reality it is one of Calgary’s most populated communities. The office core itself has 8,683 people living in it, making it one of the city’s most populated inner-city communities.

If you included everyone living from Shaw Millennium Park to Fort Calgary Park, from the railways tracks to the Bow River (about the same geographical size of Hillhurst/Sunnyside or the Beltline) it is had 19,862 people (2019 census). This is significantly higher than Hillhurst/Sunnyside which comes in at 10,788 and not far behind the Beltline at 25,129. It would be one of the top ten most populated communities in the city.

Downtown’s Decline

Everybody knows Calgary’s downtown is struggling as a place to work with over 30% of the 44 million square feet of office space vacant for several years now and no end in sight. However, the City of Calgary has a plan to change that, by converting numerous smaller old office buildings to residential, maybe student housing, a hotel or two and yes even demolition as last resort.

FYI: High downtown office vacancy rates are no longer just a Calgary phenomenon, San Francisco’s has 27% vacancy, London UK’s is 25%, Houston’s is 24%., Denver’s is 21% and Pittsburgh is 18%. All thanks to COVID and the popularity of working remotely.

The City’s Greater Downtown Plan calls for the removal of 6 million square feet of office space from the downtown core which would reduce the total amount of downtown office space from 44 million to 38 million or about a 15% decrease. Currently downtown Calgary has 123 office buildings nearing the end of their 50-year life span, 28 have been flagged for possible conversion many of them in the West Core (4th St to 8th St) where there is a 50+% vacancy rate.

Currently downtown’s 44 million square feet of office space has about 31 million square feet of occupied office space, if we remove 6 million square feet and IF (a big IF) the tenants in those spaces move to other downtown offices (WOOD, an engineering firm servicing the energy sector, just vacated downtown for a suburban office building) it would result in having 38 million square feet of downtown office space with an overall vacancy rate of about 18%. This is on par with most major head office downtowns in North America today.

Link: City of Caglary: Downtown Development Incentive Program

The Benefits Of Conversions

Increase the number of people living in and around the downtown to create more evening and weekend vitality and support for the downtown shops, cafes and restaurants.
Create a more robust downtown office market, resulting in increased building values which means more property taxes for the city. However, reducing office inventory doesn't necessarily drive an immediate rise in office values or taxes from other office buildings. It is complex but the bottom line is the city may not see any increase in tax revenue as a result of the conversion.
Add more eyes on the street to make it safer

Downtown’s Residential Makeover

The first downtown office conversion completed by HomeSpace was heavily subsidized by all levels of government, but it wasn’t part of the City’s Office Conversion program. Sierra Place office building which sat empty for years was converted to six floors of subsidized housing and four floors of shelter and transitional services. Renamed Neoma it has 82 new apartments and 10 shelter units. But it wasn’t cheap, with a total cost of $30 million that is $325,000 per home with an average size probably less than 600 square feet. This is HomeSpace’s second project in the downtown.

Note: The former owner of Sierra Place looked at converting the building to market housing and the numbers didn’t work. HomeSpace was able to get significant support from levels of government that exceeded the city’s current incentives because it was converting to subsidized housing, This makes the conversion of 6 million square feet of office to market housing questionable.

Question: Does downtown need more shelter, subsidized and transitional housing?

The City of Calgary has created the “Downtown Calgary Development Incentive Program” with $100 million to invest in office conversions. Office building owners are eligible for $75/square foot up to a maximum of $10 million per building to be paid upon completion of the conversion.

Currently five buildings have been approved totalling just over 650,000 square feet of office space which will be converted to 707 new homes with a potential of adding up to 1,000 more downtown residents. These are all private sector projects that will be charging market rents expected to be about $3 per square foot or about $1,800 per month for a 600 square foot apartment. So they won’t be cheap.

Questions: Some are questioning if the approved projects will all go ahead once the final cost of conversions are totalled up. Others are questioning the wisdom of the City subsidizing the conversions of these office buildings as they are owned by pension funds and corporations.

If the City’s incentive program is successful in converting 6 million square feet of office space into residential; this would mean a grand total of probably 6,000+ new homes in the downtown. This is significantly greater than the 4,000 new homes planned for East Village when fully built out by the end of the decade – hopefully!

Questions: Is there are market for 6,000 new homes in the downtown core. Will it delay residential developments in other parts of the Greater Downtown?

CUBE is an attractive office to residential conversion (with no subsidy) by Stategic Group, in the Beltline neighbourhood.

Downtown’s Herd of Elephants

When it comes to office conversions there are a herd of elephants roaming the downtown.

One is the fact we must be extremely careful not to “overload” downtown with shelter, transitional housing and low-income housing. Yes we need some of that, but we need to ensure a diversity of housing that will create a safe community for people of all ages and backgrounds. Currently the downtown has numerous shelters, affordable not-for-profit housing, and low rent apartments.

FYI: Safety is a huge issue in our downtown today. A VP of a major commercial leasing company told me “things have gotten so bad in East Village you can give away retail for free.”

What is needed to address the safety issue is a critical mass of people living downtown long term who will take a pride of ownership in it as their neighbourhood and champion it as a vibrant place to live. Not just young professionals who live downtown for a few years and then move to have a family in the burbs, or empty nesters who use downtown as a home base but have second homes and travel much of the year.

FYI: We can’t leave downtown’s transformation as a place to live to city planners and politicians.

Another elephant is downtown actually needs some low-cost office buildings as they provide the space for the start-ups that will grow to become the large corporations to fill the A-class office space in the future. They could be start-up solar, wind, tech and other emerging businesses as the world’s economy evolves. Maybe the next Garmin or Benevity.

Finally, there is also a very real chance we might be exchanging empty office buildings for empty residential ones if the demand for living downtown isn’t as great as some think it is. Let’s face it there are lots of new residential projects on the other side of the tracks and Bow River, that are much more attractive than downtown as a place to live.

Link: Calgary Herald: Calgarians Love Living On The Edge

Last Word

City building is an ongoing experiment to see what works and what doesn’t (Eau Claire Market) in an ever-evolving economy and market. Only time will tell if the City’s plans for office conversions will work on the scale needed to make our downtown core an attractive place to live, work and play.

Links to other downtown Calgary stories:

Calgary’s Biggest Issue Is Safety NOT Office Vacancy Rates.

City Centre Urban Renewal is often just urban cannibalism

Calgary in Crisis: Need To Rethink Our Future!

Reshaping Calgary’s Downtown As A Place To Live