2024 Fall Issue of Urban Land - 92

conversions in a defined area to meet a
city's strategic objectives and oversight
capacity as suggested by Brookings and
also by Smith and Greenhalgh in a 2016
article in Planning Theory and Practice.
A city that converts empty office to
multifamily in its downtown gets clear
social, environmental, and economic benefits.
This solution should not be considered
a panacea for the housing shortage,
however, as downtowns constitute only
a fraction of cities as a whole. Although
conversions might not solve the housing
crisis in many cities, as the office issue
worsens, the number of units being created
has jumped. Gensler estimates that
10 percent of downtown gross floor area
will be converted to residential. It is likely
that conversions will amount to 20 percent
to 50 percent of all new housing in
cities.
Three case studies
Calgary
Calgary is a world leader in office conversion.
In 2014, its economy began to
waver amid a downturn in the oil and gas
industry. As those companies downsized
and moved, the supporting services that
constituted most of the city's economy
did, too, which emptied office buildings.
Office vacancy there peaked in 2022 at
34 percent as the C$25 billion Canadian
sector shrank to C$9 billion, with significant
ramifications for the city's tax base.
Smaller businesses likewise felt the burden
as their taxes increased-anywhere from
20 percent to 40 percent-to offset the
loss of larger businesses.
Realizing it had to act to stem this
decline, the city partnered with the real
estate industry to produce the Greater
Downtown Plan in 2021. The plan included
incentives of C$75 per square foot (0.09
sq m) for office conversions, calculated to
be approximately 25 percent-30 percent
of the total construction costs, based on
projects that were already being planned.
This incentive is awarded as a cash payment
upon project completion and receipt
of an occupancy permit through city, provincial,
and federal funding. Money came
from Calgary's " rainy day " fund, which
stemmed from any underspending during
the last few years. It's worth noting that
Calgary chose to do so because it kept
having to give residents and businesses
" one-off " tax exemptions every year,
which, after five years, became untenable.
Calgary's downtown has approximately
48 million square feet of office space, of
which approximately 17 million square
feet (4.5 million sq m) were vacant in
2022. The city's goal for the incentive
program was to reduce the amount of
vacant office space by 6 million square
feet (560,000 sq m) by 2031. At the time
of our interview with Sheryl McMullen,
manager of investment and marketing
for Calgary's Downtown Strategy team,
11 projects had been approved, with one
complete and another 8 under construction.
These conversions are expected to
deliver 1,490 homes and 226 hotel rooms.
One of Calgary's greatest success
stories is a building called the Cornerstone,
developed by the Astra Group. The
80,000-square-foot (7,400 sq m) building
was 100 percent vacant upon purchase in
the spring of 2022. The permitting process
took only a month because Calgary
has no change of use permit requirements,
which McMullen estimates to have
prevented six months of delays. By October,
the company had begun renovations.
It was able to complete the project-from
purchase to completion of renovations-in
little more than a year.
The process is not only quicker than
a new build but also cheaper, as well.
Maxim Olshevsky, CEO of Astra Group,
notes that the major savings were in
bypassing the foundation, structure, and
BEFORE
AFTER
The Cornerstone Building in Calgary was converted by the Astra Group in just one year. Astra Group CEO Maxim Olshevsky
notes that the major savings were in bypassing the foundation, structure, and elevator costs. He emphasized that the project
would not have been possible without the incentive program and the easy permitting process.
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2024 Fall Issue of Urban Land

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