Sat. Feb 24th, 2024

Calgary is transforming its old office buildings into apartment buildings. housing

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In Calgary, underutilized office towers are being transformed into apartment buildings.

The Canadian Press

No city, anywhere, would be keen on the idea of ​​having a rate of " vacancy of nearly 30% in its downtown offices. Faced with this problem, a Canadian city implemented a strategy that now serves as an example for all municipalities facing a housing shortage.

The City of Calgary is actively working to convert underutilized office towers into residential housing through a unique grant program.

< p class="StyledBodyHtmlParagraph-sc-48221190-4 hnvfyV">In just two years, 13 conversion projects have been approved, while four more are currently under consideration.

The first project, in which a 10-story office tower was transformed into a 112-apartment residential building at a cost of $38 million, is almost complete and is expected to welcome its first tenants in the coming months.

This is something that can work in any big city. Especially in Canada where, in my opinion, we are all struggling to build enough housing, said capital markets partner at commercial real estate firm Avison Young, Walsh Mannas.

Calgary's Downtown Development Incentive Program, which offers $75 per square meter to building owners who want to convert underground office space used in residential apartments, is unique in North America.

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It was launched in 2021, at a time when the city, which is home to more head offices of businesses per capita than anywhere else in Canada, was grappling with a prolonged drop in oil prices and the effects of the COVID-19 pandemic.

Commercial property values ​​in the city's core have collapsed due to a wave of layoffs and consolidations in the energy sector that has left nearly one A third of the office spaces in its city center were left empty.

Looking to fill nearly 1.25 million square meters of unoccupied space and increase its tax base, Calgary launched the incentive program with the aim of removing more than 555,000 square meters of empty office space from downtown city ​​by 2031.

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The City of Calgary is offering a grant of $75 per square meter to building owners who want to convert underutilized office space into apartments.

Sheryl McMullen, who manages the program for the City of Calgary, wasn't sure what the response would be when this initiative was introduced.

But the program proved so popular that in October 2023, the City was forced to pause after reaching its $253 million funding threshold. When we launched the program, we didn't know if we were going to receive one proposal or ten, she said.

We ended up receive 15 in the first round. When we saw the interest from promoters, we understood that we had something good on our hands.

Canada is facing a housing crisis. According to the Canada Mortgage and Housing Corporation, 3.5 million homes will need to be built in the country by the end of the decade in addition to those already under construction in order to maintain affordability.

Office-to-residential conversions are not a silver bullet, but they can be part of the solution, according to commercial real estate firm CBRE's Alberta regional director, Greg Kwong.

It's not a panacea, but it's one of the levers that we can use to make our centers – more dynamic and lively cities, he observed.

As of the third quarter of 2023, Vancouver and Toronto both had downtown commercial vacancy rates of 12.5%, while the rate was 14.7% in Ottawa, according to data from Avison Young.

In Montreal and Edmonton, more than 20% of downtown office spaces are empty.

Downtowns in Toronto, Vancouver and Montreal are still in a much better shape than Calgary, but those cities are also struggling in the post-COVID office market, a mentioned Mr. Mannas.

I think it's going to take a little time to understand what the new reality of city centers is. If vacancy rates continue to rise, perhaps converting offices into apartments will become more attractive.

Conversion office tower into residential building is, however, no easy task.

Office buildings weren't designed for that. There are several design issues, which scare many developers, said Strategic Group's senior vice president of development, Ken Toews.

Strategic Group has already completed three conversion projects in Alberta without the assistance of an incentive program. While he favors this model, Mr. Toews admitted that most conversion projects require some form of financial support from the government.

As more conversions are completed and developers and architects gain more experience, a wider variety of buildings will become viable candidates, Toews said.

We know that this is part of the solution to the housing crisis and that it can probably work in any city that is willing to implement a financial incentive, he assured.

With the housing crisis before us, I think we have to go for it and be creative in the solutions you find.

A text by Amanda Stephenson of The Canadian Press

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