Calgary has one of the most aggressive programs in North America to encourage the conversion of office space into residential towers.
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Canadian cities could become guiding stars for cities struggling to fill half-empty downtown areas.
Calgary, in the western Canadian province of Alberta, has one of the most aggressive programs in North America to encourage the conversion of office space into residential towers, and leaders in U.S. cities are taking notice. Wall Street Journal.
Calgary is ahead of the curve on this issue. When oil prices plummeted between 2014 and 2016, the city, which is dominated by the oil industry, saw vacancy rates soar. In 2021, the city approved a residential conversion program that uses a C$75 (equivalent to $55 per square foot) subsidy with no strings attached, such as a stipulation that some developed housing be affordable, like As some cities in the United States have done.
The city has made some progress, but it’s been slow, the report said. In April, the first fully renovated building opened: a 10-story building with 112 apartments for rent called The Cornerstone, a former office building. There are 11 renovation projects (over 2,100 units) still underway, Magazine the report said.
Cornerstone developer Maxim Olshevsky told The Cornerstone Magazine He paid about $55 per square foot for the property, which he estimated was worth about $300 per square foot before the oil bubble burst. He said the low cost of the property coupled with subsidies minimized the project’s risks.
But the economics of these improvements are feasible even with Calgary’s hefty subsidies, the report says, because developers are able to purchase buildings for roughly the value of the land beneath them. Additionally, cities with tighter budgets than Calgary may have difficulty providing equally generous subsidies.
Meanwhile, higher construction costs and borrowing rates have stalled many ongoing renovation projects in Calgary, even with subsidies. Developers must also have deep pockets, as subsidies cannot be paid until the project is completed.
“Three years ago, $75 per square foot was the right amount to bridge the gap,” Greg Kwong, CBRE Group’s Calgary regional leader, told reporters. Magazine. “With construction costs going up, $75 really isn’t enough.”
Despite the sharp rise in costs, the local government has no plans to increase subsidies.
“We don’t have enough evidence [increase the subsidy] Tom Mahler, director of downtown Calgary strategy, told the media: Magazine. “If a developer comes forward with a case, we will consider it.”
