Change remains a constant in the downtown cores of cities across Canada, and Edmonton’s is no exception.
As high office vacancy rates batter the city’s centre, the Downtown Revitalization Coalition, a group of community and business organizations such as the Edmonton Chamber of Commerce, BILD Edmonton Metro and the Edmonton Downtown Business Association, has asked city hall to follow Calgary’s lead and create a financial incentive to convert vacant office space into much-needed housing. But Edmonton city council hasn’t been as receptive as has Calgary’s.
The Edmonton group called for the creation of a $100-million fund for office-to-residential conversions last year, but city administrators estimated it would take at least 46 years for the public to recover this investment, or about three times as long as subsidizing the construction of new multifamily buildings. Following this analysis, city councillors voted against a motion to fund office conversions.
The Downtown Revitalization Coalition, however, remains undeterred.
In October, the group released a plan calling all levels of government to invest $427-million in a series of 19 actions, including $100-million for an attainable housing fund that would leverage the conversion of underused downtown space, whether in vacant office buildings or unoccupied parcels, into housing to double the number of residents in the city’s core and revitalize the area.
“What we need is transformational investments to bring people back, to feel comfortable to invest in the core, live in the core, and play and go to school in it,” says Kalen Anderson, CEO of BILD Edmonton Metro and steering committee member of the Downtown Revitalization Coalition.
The group moved to create the Downtown Investment Plan not only because the value of vacant office buildings is declining, Ms. Anderson says, but also because residential construction activity in downtown Edmonton is stalling, despite the city’s sustained population growth.
So far this year, CMHC has recorded only 100 apartment starts in downtown Edmonton, or about 2 per cent of the city’s total.
For Ms. Anderson, one of the reasons for this slowdown in new development in the city’s centre is that the rental rates that can be obtained for apartments in Alberta’s capital city are too low to cover the cost of land, construction, labour – and turn a profit.
“Pro formas are simply not pencilling out,” she says, emphasizing that investing $100 million to support the development of 1,000 apartments in downtown Edmonton would help steer development in the right direction.
“Ultimately, what we’d like to do is to be able to get some dollars invested into our downtown so that we can turn our fate around together – because we all depend on it.”
Karen Chapple, director of the School of Cities at the University of Toronto, says that a failure to address downtown office vacancy can increase the risks associated with the “doughnut effect,” and jeopardize the long-term viability of retail and services in the area as jobs relocate away from the core.
“If the public doesn’t take action, you’ll see property values drop and continued office vacancies will create more retail vacancies, and make it harder to support other firms in the area, creating a downward spiral,” she explains.
While lower property values could also create opportunities for future investment at a fraction of the cost, betting on this is not advisable, Prof. Chapple says. “There’s a risk that the area will bottom out so much that nobody will have the vision to see what it could be – and that investors won’t be attracted back.”
But office to residential conversions aren’t a silver bullet for downtown revitalization.
Between 1995 and 2004, the City of Edmonton invested $4.5-million to support the conversion of 11 office buildings into 1,000 housing units via the Downtown Housing Reinvestment Program. Although this grant helped diversify the downtown core and bolstered property values, today the city’s centre experiences challenges akin to Calgary’s.
Although the City of Calgary’s investment of $153-million since 2021 to incentivize office-to-residential conversions has succeeded at reducing office vacancy rates, vacancy in downtown retail space, a key indicator of vitality, continues to lag behind.
In the first half of 2024, 13.1 per cent of retail space in downtown Calgary sat vacant, a rate slightly lower than downtown Edmonton, where it reached 13.6 per cent over the same period.
With only one office-to-residential conversion completed, however, it’s still too early to evaluate the outcomes of Calgary’s program, Prof. Chapple says. “We usually want to leave a period of at least five years to see how effective [an initiative] is.”
By 2026, the City of Calgary expects 11 building conversions will have reached completion, and many more public dollars invested, including $52.5-million from CMHC’s Housing Accelerator Fund.
Moreover, office vacancy rates in Class B and C buildings remain above 40 per cent in Calgary, as the physical features of these properties make them difficult to adapt to residential uses.
For this reason, modernizing outdated buildings to continue to serve their original purpose can also help bolster downtown vitality, Prof. Chapple says, noting that despite the popularity of remote work, the benefits of business agglomeration remain.
“When there’s lots of firms clustered near each other, they’re more productive and they’re more innovative.”
Who exactly should foot the bill of upgrading underused buildings, however, remains contested.
“There’s a lot of money to be made in real estate, and you can understand why the government doesn’t necessarily want to use its own money for that,” Prof. Chapple says.
“Ultimately, downtown is a public good, so it’s the government’s responsibility to make sure that it’s vibrant and healthy.”
Since 2015, the City of Edmonton has invested more than $4.7-billion in downtown development, launched a downtown construction grant that incentivized the construction of 2,341 dwellings, and allocated $383-million to support current and future construction.
“I truly believe that additional residential development in the downtown is critical for the success of the area,” says Ward O-day’min Councillor Anne Stevenson. “I think that where the tension has laid is in the level of public investment that industry has been looking for to make residential development work.”
In a statement, Edmonton Mayor Amarjeet Sohi recognized the opportunities for growth and innovation in the city’s downtown, and said he looks forward to finding alignments with the Edmonton Redevelopment Coalition. “I appreciate the community coming together to bring their ideas forward, and I hope to learn more and support them in their advocacy to other orders of government.”