Calgary pauses applications for office-to-residential conversions due to 'tremendous' demand

With 13 projects approved and four under review, the program has reached its $153-million funding threshold

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Calgary’s office-to-residential conversion program is hitting pause as the city expects to hit its ceiling for available funding, a sign of the plan’s “tremendous uptake,” according to officials.

With 13 projects approved and four under review, the program has reached its $153-million funding threshold, the city said Wednesday.

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If those remaining four projects are approved, the city said it will have replaced 2.3 million square feet of office space with 2,300 new homes, leveraging $567 million in private investment.

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Calgary has rejected four applications while 17 have been approved or are under review, said Sharyl McMullen, manager of investment and marketing for downtown strategy.

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The city’s new housing strategy — adopted in September and deemed by city officials “an important turning point” in the city’s ongoing housing crisis — was also behind the pause.

Several of the strategy’s items related to student, non-market, affordable and inclusive housing need to be taken into account in revisiting the conversion program’s terms of reference. McMullen said adjustments will “ensure that we constantly include those desires of council when we reopen the program.”

Meanwhile, the city said it will pursue additional funding when the program reopens and more funding becomes available.

City is ‘smartly’ pausing its program, waiting to see results of first round of developments

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The city’s decision to pause the program allows it to determine its success, said Greg Kwong, Alberta region managing director at CBRE, a commercial real estate services and investment firm.

If the approved developments follow through on their commitments and are deemed a success by the city, Kwong said he could foresee the city developing a secondary program.

“Smartly, I think they’re holding off . . . they’re just saying, ‘Look, are you going to go ahead or not?’ ” he said. “It’d be difficult to go and raise more money for the second program when they don’t even know the results of the first program.”

He said Calgary is one of the few cities answering questions other cities are only starting to ask.

“(Calgary was) downsizing and repurposing before it was cool. I wouldn’t say we are a shining star, but we are leading, we’ve gone through and answered the questions a lot of cities are just starting to have.”

Greg Kwong, CBRE
Greg Kwong, executive VP and regional manager of CBRE looks over downtown from his office building on Wednesday, January 12, 2022. Darren Makowichuk/Postmedia

The city running out of funding in just three years “a really good-news story,” said Mark Garner, executive director of the Calgary Downtown Association.

“It was a 10-year plan and we’re three years into it, and we’ve run out of cash. There’s enough activity and interest to continue to do this work.”

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Post-secondary conversion, teardown programs remain open

The initiative, formally known as the Downtown Calgary Development Incentive Program, will close applications for office-to-residential, hotel, school and performing arts centre conversions.

Post-secondary institutions looking to convert office space are still able to apply. The city’s downtown office demolition incentive program, which offers grants to tear down offices unsuitable for conversions, also remains open.

The city will advocate with both the federal and provincial governments on adding funding for future conversions.

As Calgary has moved forward with the conversions, early signs show Calgary’s chronic vacancy rates in the downtown have started to lift.

A September report by Avison Young found Calgary is back to its pre-COVID downtown vacancy numbers, which have healed from 32.6 per cent in 2021 to 27.3 per cent.

— With files from Bill Kaufmann, Scott Strasser

[email protected]

X: @mattscace67

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