The conversion of excess Calgary office space into other uses – primarily residential units – is underway as, despite an upturn in Alberta’s oil-fired economy, the downtown has a stubborn glut of empty office towers.
Calgary is home to 44 million square feet of downtown office space, making it the largest market in Western Canada. While vacancies are running around 30 per cent, Calgary’s downtown has more leased office space than Regina, Saskatoon and Winnipeg combined, simply because it has such a towering inventory.
Now a flight to quality by tenants means older space is languishing, and there are fewer workers to fill the acres of empty offices.
“Those energy companies have just spent the last six-plus years downsizing and bringing in efficiencies, which now mean they need less employees than they used to,” said Susan Thompson, associate director, research with Colliers International. “Tenants might be coming out of their lease in a relatively healthy position, with a similar budget to what they did five or 10 years ago, but now they can afford nicer buildings, nice space, better location.”
The result is a city that’s overbuilt with respect to office space and looking to repurpose existing sites in ways that help revitalize the downtown core through the Downtown Calgary Development Incentive Program launched last summer.
Three buildings were recently named as receiving incentives for conversion to residential, including 909 Fifth Avenue SW, recently purchased by Peoplefirst Developments with an eye to redevelopment. The others include Palliser One at 125 Ninth Avenue SE and 205 Ninth Avenue SE.
In total, the buildings to be converted cover 414,000 square feet, a relative drop in the bucket when compared with the excess office space downtown.
In announcing the $31 million in city incentives for the first office conversion, Calgary Mayor Jyoti Gondek, referenced the extent of the city’s office glut.
“We have estimated that approximately six million square feet of office space needs to be removed from the market through conversion, adaptive reuse and or demolition, to stabilize downtown property values over the next decade," Gondek said in a statement.
“We’re seeing a lot of conversions, across the spectrum,” Thompson said. “They’re trying to increase the vitality and health of downtown by trying to get rid of excess or obsolete office inventory.”
She noted that some properties could be demolished and replaced.
“They’re going to look to be reducing their overall office inventory in Calgary, which means there’s going to be opportunities for redevelopment sites,” Thompson said, noting that other Prairie markets may follow its lead. “Some of these markets that are maybe a little further behind, they’ll start to consider this as well.”
