A new report is offering recommendations for what it calls Calgary’s “office vacancy crisis.”
The report from the University of Calgary’s School of Public Policy examines the office vacancy rate, its implications and strategies for building use.
“Calgary and Alberta have the highest office vacancy rates of any major Canadian city and province,” the report said.
In 2014, the downtown office vacancy rate was 6.1 per cent, according to the report. In 2020, it was 24.7 per cent.
The report, which was released Wednesday, said even before the COVID-19 pandemic, Calgary was “already experiencing a serious office vacancy crisis.” Now, with more people working from home, the outlook is even bleaker.
It will take at least a decade for the market to absorb the current amount of empty office space, the report said.
The authors suggest the solution comes in the form of adaptive reuse, which involves repurposing office space as a mixed-use building or affordable housing. The report calls it a “promising approach” to address the office space surplus — but it can be complicated and expensive.
Benefits of adaptive reuse include limiting urban sprawl, revitalizing declining neighbourhoods, saving money by reusing structural parts and meeting sustainability objectives.
But not all buildings are suited for conversion and owners must be convinced that “conversion is a better alternative than demolition or maintaining the existing condition and waiting for economic conditions to recover,” the report said.
One of the report’s authors said the city could use larger units that accommodate families downtown.
“We mention that Calgary has the lowest percentage of affordable housing in any major city in Canada,” said Jenna Dutton, a research co-ordinator of the urban policy platform for the School of Public Policy.
“With that in mind, I think there is definitely an opportunity, especially considering the downtown is located in very close proximity to public transit… I think there’s great opportunity for affordable housing and also to mix market housing with different levels of affordable housing.”
Dutton said the city could create a phased plan where adaptive reuse happens in a staggered way across downtown to “maintain some level of vibrancy.”
The report’s six recommendations are: developing an inventory of buildings that are candidates for conversion, engaging with stakeholders, giving consideration to local government, creating an office vacancy policy, aligning with other projects on environmental goals and increasing affordable housing.
Vacancy to vibrancy
There are several challenges of converting downtown office space, which include a limited availability of empty buildings as well as high costs to retrofit an entire building from office space to multiple residential units.
“The restriction really has been the actual physical structures, the size of the floor plate, where the elevator core resides, and things like that,” said Greg Kwong, executive vice-president of commercial real estate company CBRE, on Wednesday. “Then, quite frankly, the cost to repurpose has always been restrictive.”
To tackle restrictions with adaptive reuse, Ward 6 Coun. Jeff Davison brought forward a notice of motion to council in December to explore potential regulatory and financial investment incentives for the conversion of downtown office space and the development of new high-density residential complexes.
“We know that just creating more people downtown will move us from sort of a vacancy to a vibrancy state,” Davison said.
Davison, who described the report’s findings as “fantastic,” noted the timing of its release as administration is expected to report back to council at the end of 2021’s first quarter with potential solutions to create development incentives.
“If we’re going to compete for investment dollars, if we’re going to compete to move from a vacancy to a vibrancy state, all of those things matter,” Davison said. “It’s going to mean moving at the speed of business — not at the speed of government.”
‘There’s a lot of opportunity’
Dutton warned that if measures aren’t taken to deal with the vacancy problem, Calgary risks economic impacts, vandalism and safety hazards that come with unoccupied buildings as well as a downtown that people won’t want to visit.
“With larger pockets of vacant offices, that relates to businesses staying open,” she said.
Examples of Calgary buildings that have been converted include the former St. Louis Hotel, the King Edward Hotel, the Simmons Building and Cube.
According to the City of Calgary, office buildings have lost 13 per cent of value — nearly $2.3 billion — over the past year due to higher vacancy rates and lower rents.
“When properties depreciate, we have less tax revenue, which limits our ability to deliver services to Calgarians,” Gondek said. “It’s absolutely critical for us to fill those vacancies.”
According to Kwong, the biggest solution to the downtown office vacancy rate is a diversified economy — not retrofits.
“It’s a symptom of the bigger issue, which is unemployment,” Kwong said. “If we get people back to work, and quite frankly, working downtown, all this goes away.”