New incentives for developers to undertake process of flipping office buildings into multi-unit residential properties
The new round of funding sets aside $52.5 million in another attempt to lure developers to undertake the expensive and burdensome process of flipping office buildings into multi-unit residential properties.
The renewed efforts come as Calgary’s downtown office space continues to show slight recovery from the doldrums earlier in the decade when large parts of the core hollowed out, with office vacancies peaking at a devastating 33.2 per cent in 2021. The city’s efforts, which began that year, gained attention across borders as a unique solution for cities whose downtown areas were suffering from chronic vacancies.
The new volume of the Downtown Development Incentive Program grants $75 per square foot to developers, with a maximum of $15 million per property once the projects are complete. New applications opened Thursday and will be open until Oct. 31.
Given those figures, at least three projects will be supported by the new funding.
Calgary Mayor Jyoti Gondek said in a statement that conversions “is not only a practical solution but a transformative one.”
The City does not release funding to the selected projects until construction is complete. The city’s commitment to the Barron Building conversion preceded the Downtown Development Incentive Program’s creation.
Skyrocketing construction costs, particularly for materials such as concrete and steel, which are critical to highrise construction projects, could hold back conversion developers from crossing the finish line on time and on budget, Greg Kwong, Alberta region managing director at CBRE, said in an April interview with Postmedia.
While the cost-per-square-foot has remained the same from the previous round, market conditions for materials necessary for construction have dramatically increased over the three-year period since the program was first unveiled.
“That 75 bucks a foot — you’d probably have to double it to make sense,” Kwong said at the time. The potential complications during construction that often occur during conversions also make them high-risk endeavours.
Only one project under the program’s first iteration — the 112-unit Cornerstone development — has finished and opened.
The previous iteration of the program has so far publicly supported 13 projects with four more under review. Thursday’s release and a social media post by Gondek said the city had approved 11 projects. The city told Postmedia it had changed how it publicly reports its office conversion statistics.