The Calgary skyline on Oct. 2, 2021. Calgary and Vancouver are taking opposite approaches in what to do about empty office space.Todd Korol/The Globe and Mail
In Vancouver, as workers slowly return to downtown, the city has made a firm decision not to cede any of its office-tower space over to residential, resisting suggestions such conversions might help lessen the city’s serious housing crisis.
Calgary is doing the opposite, regarding office conversions as an opportunity to reshape its downtown away from what one city manager called a “monoculture,” beholden to a past that isn’t coming back.
“We needed to take action. Our downtown was our bread and butter. But it was created entirely to support the oil and gas industry,” said Natalie Marchut, Calgary’s manager of strategy and developments. “Now we’re completely reshaping how we see our downtown.”
As the economies of the two cities shift and businesses figure out whether their workers need to be back in the office full-time, Calgary and Vancouver are taking opposite approaches in what to do about empty office space.
Vancouver, unlike Calgary and many other cities in the U.S. and Canada that are encouraging owners to remake their offices into residential, is not enthusiastic about giving up a square inch of job space in its downtown because the office vacancy rate isn’t high.
Toronto’s downtown office district faces long-term slump as new work patterns take hold
“We’ve held a strong line on that. We continue to hold the strong line to ensure we have office space,” says Chris Robertson, the director of citywide and regional planning.
But Calgary is attracting attention from around the world as it forges ahead with incentives to do just that, including paying office-tower owners hefty subsidies to tear down their buildings or convert them to apartments, to hotels, to university, college or private-school spaces, to performing-arts venues.
Calgary started allocating money to individual projects last spring after council unanimously voted the previous year to dedicate $153-million as an incentive for owners to make changes.
“We’ve been planning around this for a long time,” said Ms. Marchut. “Calgary is in this position because of the oil recession, not the pandemic. And it’s bigger than an office-vacancy problem. We’re never going to get back to 2013. It’s never going to happen.”
So far, the city has approved money to convert eight of the 13 buildings that were in its first round of applications – $75 a square foot, about a third of the estimated cost to transition to apartments or demolition. More approvals are in the works and the city is looking to expand the program. Council also recently voted to allow office space to be converted to hotels, performing-arts venues and schools of all descriptions.
The original goal was to repurpose six million square feet of office, out of the 12 million vacant. (It’s grown to 14 million since the program started.)
Calgary’s drive is akin to one Vancouver launched 30 years ago, as it pushed to create residential neighbourhoods in its downtown after Expo ‘86. Vancouver now has more than 100,000 people living in the downtown peninsula, more than double the 40,000 that used to be mainly concentrated in the West End. An estimated 45,000 people live in downtown Calgary and surrounding neighbourhoods, and the city wants to add another 40,000 people to the area.
Vancouver had some advantages, though, in an early transformation of its downtown. It was never a national capital for any one sector – like Toronto is for financial services or Calgary was for oil and gas – so it had more flexibility earlier on. Its modest downtown, which primarily served B.C.’s resource industries, stagnated at the same rate as those industries, allowing city planners to encourage and, in some cases, require other uses.
As a result, the downtown peninsula has seen new community centres, parks and theatres. It is also home to dozens of private English-language schools, bringing an international mix of students and the world-cuisine restaurants they love, along with branch campuses of the city’s major universities.
Two office buildings – B.C. Electric and Qube – were converted to apartments in the condo boom of the ‘90s and early 2000s, while the Hudson condo tower was allowed at the major downtown intersection of Granville and Dunsmuir in the same period. Other projects were halted out of concern office space downtown would be crowded out.
The result was a downtown Vancouver better able to weather the pandemic than other cities because there were more people living within walking distance of downtown retail and restaurants.
Now Calgary imagines having those kinds of schools and university faculties downtown which would then inevitably ignite a boom of small businesses to serve those students.
In the meantime, the first of the buildings that the city provided a subsidy for is due to start housing its first occupants by the end of the year.
The former SNC Lavalin building, which had sat empty for 10 years, will become home to 112 families, after Maxim Olshevsky at PeopleFirst Developments spends the $37-million it is taking to convert 130,000 square feet.
Maxim Olshevsky, managing director of PeopleFirst Developments, one of the companies working alongside the city of Calgary to develop office space into residential space.Glenn Lowson/The Globe and Mail
Forty per cent of the apartments in the new Cornerstone project – all two- and three-bedrooms – will be offered at below market rates.
Mr. Olshevsky estimates rents will range from $1,450 to $2,400. All the electrical and plumbing is new. He’s added balconies. And there will be retail on the ground floor and a co-working space for nail/hair/beauty operations on the second floor.
“Our goal was to completely transform the tower,” said Mr. Olshevsky, who has two other towers that he’s hoping to do the same with.
He bought the empty tower in February last year when he knew the city money would be coming available.
“None of this would be possible without the city’s help,” said Mr. Olshevsky. That help isn’t just the subsidy. It’s also the speeded up permitting time. He got his building permits for the complex project in two months – unheard of in Vancouver.
He noted that not every building can be converted.
The Canadian Urban Institute is preparing to release a study showing that many cities have office buildings that are candidates for conversion and possible solutions for the housing shortage that now plagues almost every city. The study estimates as many as 22,000 new homes could be created in just 11 cities, five of the biggest and six medium-sized.
The study’s authors say that conversion could bring many benefits.
Conversions, besides providing much-needed new housing, “also support downtown revitalization to achieve a healthier mix of housing types, diversified tax base, 24/7 economy, larger residential population, more sustainable built form and the preservation of heritage buildings.”
The report analyzes different office-building types, looking at how convertible they are, and outlines the challenges that exist in many cities to encouraging change, from a reluctance by city officials to give up lucrative business-tax revenue to hesitance by individual owners.
It also lists many cities that have encouraged conversion and seen big results. London, England, saw 72,000 homes created out of office buildings between 2015 and 2020.
The commercial brokerage Avison Young also recently released a report that calculated about 30 per cent of office buildings in Canada, which equates to 3,000, have the potential for conversion. That won’t include the higher-end office towers, still in demand by tenants. But older, smaller ones – Class B and C, as they’re known – and those with the smaller floor plates are definite possibilities.
“We’re seeing returns to downtown but just not to offices,” said Sheila Botting, the North American president for professional and technical services for Avison Young.
Ms. Botting said, even without city help, some people might get desperate enough, and creative enough, as vacancies persist.
She agreed that Vancouver, even though Avison identified 548 potential conversion buildings, is unlikely to see a lot of change because the vacancy rate is still so low – 8.5 per cent – the lowest in Canada and about a quarter of what Calgary’s is.
That vacancy rate is what Vancouver planners are weighing: They’re not seeing anyone panting to convert.
“I have not seen a single inquiry,” said Mr. Robertson. “Vancouver is unique. It’s a bit of a unicorn. We haven’t seen the same decline.”
Special to The Globe and Mail