As preferences around where people want to live and work continue to evolve, one fascinating trend has been gaining momentum in recent years: the conversion of older, unused office spaces into vibrant new residences in the heart of downtown areas. This innovative approach not only breathes new life into forgotten spaces but also contributes to the urban renewal and sustainable growth of a city.
Calgary is often cited as the poster child for this kind of development: After Calgary City Council pledged up to $153M to office conversions, we've heard a steady drumbeat of new projects. Now there's 10 buildings slated for conversion, representing 1.35 million square feet of vacant office space removed and an additional 1200+ residences.
On August 17th 2023 NAIOP helped lead a tour of some of Edmonton's older buildings which could be converted into new residences. Attendees learned about the challenges and opportunities of these types of conversions, and heard from some developers who have done these types of projects before.
Some key takeaways included:
1. Conversions are important to Downtown Revitalization
Edmonton's downtown office vacancy rate has continued to rise, and now stands at 24.1%, the third worst vacancy rate in Canada according to CBRE. Brokers on the tour told attendees about declining sales values, especially for older (class B and C) office space, stating "there just isn't a market for these products as offices anymore."
Some buildings had seen a 70%+ drop in value. With downtown bringing in more than 10% of the overall tax base, major drops in assessment could mean higher taxes for residents and businesses outside the core, and less money for services elsewhere in the city. Conversion to residential could reverse this trend.
Additionally, converting unused or outdated office towers into residences revitalize downtown . These transformed spaces inject new energy into the city by repurposing underutilized structures, creating a more vibrant, mixed-use neighborhood. "Downtown Edmonton needs more people, and new residents are a big part of that" said Anand Pye, CEO of NAIOP, noting that the current population downtown is about 14,000 people but has the potential to grow faster than any other mature area. "Downtown revitalization is also self-fulfilling - more people moving downtown attracts more restaurants, more events, and that energy gets even more visitors and residents."
2. Sustainable Land Use and Environmental Impact
Repurposing existing office towers rather than constructing new buildings helps build a more compact city and reduces the need for new building materials which contribute significantly to CO2. By conserving land and utilizing already-built infrastructure, the conversion process also reduces the environmental impact and the City's ongoing liability to maintain new neighborhoods. This approach aligns with sustainability goals, preserves green spaces, and promotes efficient land use.
3. Meeting Diverse Housing Needs
Attendees of the tour heard from developers about Edmonton's advantages in providing housing to new residents. "I've worked in a lot of municipalities and we have to give credit to Edmonton; its easy to work with the city here" said one developer.
With housing shortages looming across the country, converting office towers into residences increases new supply in an affordable way. The housing units created through these conversions cater to a wide range of demographic groups, from students, to young professionals seeking central locations, to seniors.
4. Promoting Walkability and Transit-Oriented Development
Most sites downtown are right next to LRT or major transit centers. Many of the buildings we visited had less than one parking stall per unit. "We built the site with .7 stalls per unit and rented them out separately at about $100 a month" one property manager told us, "we haven't seen full occupancy of those stalls yet and so we're exploring how they could be used for the ground floor businesses."
Developers also highlighted how important it is to have sites in central locations in urban areas provide convenient access to public transportation, reducing traffic congestion and carbon emissions. Walkable neighborhoods are becoming more desirable, and also promote healthier lifestyles, as residents can easily access shops, services, and recreational areas on foot.
5. Enhancing Community and Social Connectivity
Developers profiled how they were designing to fit the constraints of existing buildings. Several had generous amenity areas on the ground floor. "Gyms, meeting rooms, work-live spaces, and planned common areas encourage socialization, which is important to residents choosing downtown" said a developer of a recently completed project. "We're seeing lower than average vacancy because these units are affordable, but also come with amenities you can't get in an older building."
What's old is new again
Many attendees also brought up the 1997 Downtown Redevelopment Plan in Edmonton, where 16 office buildings were converted into approximately 1,000 residential units. Developers mentioned drawing on this experience to regain our leadership position in Edmonton.
More recently the 2021 Downtown Construction Economic Incentive Grant led to 10 successful applications represent the addition of 2,341 new residential units in Downtown and Oliver. Developers seemed unphased by this new influx of other units. "Rental rates are pushing people to Alberta from across the country," one said, "even with higher interest rates and construction, we can still make new residences that people can actually afford here."
Converting office towers into homes offers a multifaceted solution that goes beyond just the transformation of a building. It reinvigorates urban areas, supports sustainable development, addresses housing shortages, and cultivates a stronger sense of community.