Edmonton Plans Incentives for Office-to-Apartment Conversions

Edmonton is joining a Canada-wide movement to revive downtown cores desolated by the rise of remote work, with forthcoming plans to help developers convert vacant office towers into apartments.

“The process has been going on for decades, and at least 30 such buildings downtown have already been converted from office space to housing units,” writes CBC News.

Now, by the end of October, Edmonton’s urban planning committee will see a report with options for a new incentive program to help developers transform offices and increase density downtown.

With a downtown office vacancy rate of 24.1%, the third highest in Canada in the second quarter and 6% higher than the national rate, Edmonton could use the boost.

Details of the program are still under wraps, but expectations are that the report will present a mix of financial incentives and policy changes. Elsewhere, Calgary’s highly-praised downtown development program has already approved 10 conversion projects with funding at C$75 per square foot, to a maximum of $15 million per property.

Such incentives address the expensive challenges of converting office spaces, writes CBC, which include installing separate plumbing and heating systems for every residential unit in a building that was originally designed around a single system. Inoperable floor-to-ceiling windows are another costly challenge.

There is also the question of whether people will want to live in these buildings, given the tenuous state of many downtown cores. And, if they do, whether an influx of people living downtown will be enough to restore vibrancy and businesses.

Anuj Gupta, president of Anu Developments, told CBC he wasn’t so sure. Gupta’s company is working on an office tower conversion outside Edmonton’s core, and after running some “density math,” he pointed out that “whereas a 100,000-square-foot tower could house about 300 people in apartments, that same building used as an office tower would host 1,000 workers.” That would mean about 700 more people buying lunch and coffee and going out for dinner after work.

Will 300 people living downtown bring more life and money than 1,000 passing through five days a week? “Is it the chicken or the egg, right?” pondered Gupta. “Do you build stuff where people can live and then everything else follows?”

He said his company won’t consider office conversions downtown until Edmonton presents a strategy that rebuilds a thriving business sector in the core and ensures employees spend money there.

As the problem of depopulated office buildings persists across Canadian cities, one subset of downtown real estate is thriving: ‘Class A’ office towers—gleaming edifices with coveted concierge services, gyms, cafés, and the latest HVAC technology.

Leased by large businesses like big banks and law firms, Class A real estate is thriving, even as less-glitzy Class B and C towers struggle to justify their existence, reports the Globe and Mail.

“It’s the best versus the rest,” said Paul Morassutti, chair of CBRE, a commercial real estate firm.

“Remote work has led tenants to reduce their office footprint or get rid of space on the sublet market,” explains the Globe. “At the same time, more office towers have been completed, pushing additional space on the market. That additional space has forced the top building owners to offer incentives to retain and get new tenants, leading to an exodus from the less desirable buildings.”

The division is stark in downtown Ottawa, where data show vacancy rates of 14% for Class A buildings and 33% for Class C.

Pointing out the dangers of such “flight to quality,” a Calgary office revitalization report published [pdf] in 2022 warned that the exodus from Class B and C buildings in the downtown’s west end to new Class A builds in the east was contributing to “a lack of vibrancy overall, no increase in property tax revenues for the city and the province, and little to no capital investment from institutional or private capital.”