Calgary's long quest to infuse downtown with life enters new phase as election looms

In recent years, if you were to walk by theTaylor Building a modern-style office tower built downtown during Calgary's 1950s oil boom it may not have been its history that struck you. It might have been the prominent "FOR LEASE" sign on display.

The downturn that hit the oilpatch eight years ago wasn't kind to downtown workers or the buildings they once filled. Vacancies soared, especially in older buildings, regardless of their once sought after addresses.

The lease sign on the Taylor Building is now being taken down, though not because an upstart petroleum firm is moving in. On Wednesday, the city announced the Taylor Building would be converted to residential housing, one of five of the latest conversions announced as a part of the program.

It's the latest in a strategy that traces back years and is entering a new phase. And it's one that, if successful, could define the next era of Calgary's downtown in the same way oil and gas defined its last.

But it's also a vision that doesn't precisely align with the philosophy of both the leading parties in the upcoming provincial election even if all involved say they agree about the necessity to draw life back into a downtown that, after hours, Calgarians often refer to as a "ghost town."

A 'bloodbath'

In 2015, after the price of oil crashed, you didn't have to look at the charts to understand the downtown problem. It was a "bloodbath," an office-leasing principal at Avison Young told Bloomberg at the time.

Vacancies soared. Thousands of jobs were cut. Newly shrunk energy firms vacated multiple floors, hoping tenants would take over their leases.

Then came the pandemic and hybrid work. Calgary, already home to countless quiet towers, saw even more turn out the lights.

The fingerprints of the oil industry are all over Calgary's downtown. The Calgary Tower originally opened as the Husky Tower. Various energy firms such as Suncor and TC Energy still call the downtown home. Even Calgary's slogan, Be Part of the Energy, is a reference to the oil and gas industry.

But that industry is changing, perhaps forever. Many of the white-collar energy workers who were laid off haven't been hired back, even as the industry's profits have again ballooned.

Though some tech firms have slowly started to move into the core, city officials came to a realization before the latest boom, and years before the pandemic further hollowed out these towers: things were changing. For good. The downtown market was not going to correct itself.

Today, Calgary city council is chasing a goal to remove six million square feet of office space from the downtown by 2031. To do that, it has committed to an approach that has drawn interest from Canadian cities like Montreal and Ottawa, but also, in the United States, Portland, Chicago and Houston.

It's a fundamental shift for a downtown core that has long emphasized a commercial base as its sole priority. It was an effort that raised important questions on whether public dollars should be used to incentivize corporate business plans. And it's not a cure-all, representing a plan of attack only for a small portion of Calgary's approximately 44 million square feet of office space.

"It's certainly one of the many levers we have to be pulling over the course of the next 24 to 48 months to get our downtown core back on track," said Greg Kwong, regional managing director with the real estate firm CBRE Canada.

He notes that attempting to draw more companies to the city is another top priority.

Industry figures vary, but CBRE reports the vacancy ratefor downtown Calgary was 32 per cent in the first quarter of 2023.

Commercial real estate brokerAvison Young said the overall downtown rate was 27.1 per cent, while overall Class AA real estate considered the highest quality was 16.6 per cent.

The next phase

Though the approach is popular in other cities, not everyone is convinced.

Many buildings in Calgary's downtown core have very deep floor plates, making them inherently unsuitable to residential use, where windows are needed for all major rooms, said Patrick Condon, the James Taylor Chair in Landscape and Liveable Environments at the University of British Columbia.

Getting at least a kitchen and a washroom into every few hundred square feet is "eye-wateringly expensive" to achieve in buildings with concrete floors, he said.

But for Condon, the larger question is what all of this says about the future of downtowns in general, and the transportation systems that support them. That has particular relevance in Calgary, with its unusually bifurcated urban landscape.

"Calgary's road and transit system has been organized around the twice-a-day movement of workers from suburban homes to downtown jobs, creating what many call a 'hub and spoke' transportation system," Condon wrote in an email. "[It's] a system that does not work well if the hub fails as a jobs centre."

The city believes buildings that aren't suitable for office-to-residential conversions can be incentivized by the program for hotel, school and performing arts space conversions. And for those office buildings that appear hopeless, the city is offeringa demolition incentive, with a hope that some of those land parcels could eventually become park spaces in the downtown.

It also points to the Greater Downtown Plan, approved in April 2021, which, among other initiatives, seeks to redesign streets to better serve a downtown increasingly focused on residential amenity and visitor experiences.

The city considers this first round a success, and says it was "massively oversubscribed." But the next phase involves a more dramatic shift, something that Calgarians have long sought: making downtown a desirable place to be, even when the offices closefor the day.

In practice, the city hopes that translates into a healthy residential population, post-secondary usage and a better mix of services and amenities.

"I think downtown Calgary is going to look like a very different place in five or 10 years," said Natalie Marchut, the city's manager of strategy and developments.

On Wednesday, the director of the city's downtown strategy, Thom Mahler, said funding for theoffice-to-residential conversion program might be exhausted soon, but the city is hopeful the market interest could entice investment from the provincial and federal governments.

Provincial priorities

Calgary municipal officials haven't made a secret of it: they want more money to do more with this program. After the release of the most recent provincial budget, Calgary Mayor Jyoti Gondek expressed frustration that dollars hadn't been allocated towardthe program.

The conversation has since resumed between the city and the province.

The approaches each possible government might take towardthe issue perhaps was best exemplified on Tuesday night as Gondek interviewed Opposition NDP Leader Rachel Notley, followed by Premier Danielle Smith, at an economic forum in Calgary.

Notley said an NDP government would match Calgary's $155-million investment for office conversions and capital improvements, a pledge the party made last April.

She also cited the party's affordable housing plan, and its plan to build 8,500 more affordable housing units across Alberta over the next five years.

The party also recently announced plans to commit up to $200 million for a downtown Calgary campus, though no decision has yet been made on which university would run the campus.

After the NDP announced those plans, the UCP released a statement saying it was in talks with the University of Calgary about a potential new campus space downtown.

Notley said the party's strategy needed to consider how to get people downtown while increasing vibrancy and dealing with public safety. She said everyone remembered what downtown Calgary looked like full of activity and entrepreneurial spirit.

"I believe we can get back there," she said.

Smith has not committed to a provincial match of city dollars for the project. She did applaud the work the private sector has contributed.

On Wednesday, Gondek saidcity incentives for 10 buildings totalled about $86 million, but it has leveraged nearly $190 million in investment from private owners.

When asked last month why the province didn't provide matching funding in the budget, Smith said it was complicated for her "to explain why I would give $100 million to a Toronto-based REIT [real estate investment trust] so that they can renovate their building."

When Calgary gets the economics right, Smith said Tuesday, then more companies will recognize it as a place where they want to do business and make the necessary investment.

"One of the things that we've been focusing onis how we can help build out all the economic corridors in and around the city to be able to enhance the supply chain model," Smith said Tuesday, citing among other initiatives the province's recent commitment to improve Deerfoot Trail.

Smith also mentioned the province's commitment to finishing the Calgary Ring Road and also expressed a wish to send a train to the airport. She also said the province would like to support a new downtown arena, and was committed to working with the city on addressing social disorder.

The writ for the upcoming provincial election is scheduled to be dropped May 1. Polling day is May 29.

WATCH |Opposition NDP Leader Rachel Notley andPremier Danielle Smith discussed downtown revitalization:

Notley and Smith offer competing visions at Calgary economic forum

1 year ago

Duration 1:28

Alberta's two main provincial party leaders, Premier Danielle Smith and Opposition NDP Leader Rachel Notley offered competing visions for Calgary at an economic forum on Tuesday.