May 18, 2023 at 10:56 am EDT
There is a crane almost everywhere in downtown Calgary. Calgary, an Alberta city of 1.4 million people often referred to as “Canada’s Texas” for its connections to the oil and gas industry, is undergoing the downtown transformation that so many other cities are desperate for. But today, office towers that once housed energy companies are being rapidly converted into apartments. Calgary offers a roadmap — and a toolkit — for DC and other struggling cities on how to transition quickly and efficiently.
The fall in oil prices in 2014 gave Calgary a boost for downtown metamorphosis. Initially, many believed the industry would bounce back, but when the coronavirus crisis hit, even the discussion at the Calgary Petroleum Club turned to how to reinvent the city.
The numbers were frightening: more than 30 percent of the offices were empty. It wasn’t just empty floors; There were empty towers. The fear is spreading that the city could become the “next Detroit”. City officials calculated that the value of downtown commercial buildings has fallen from nearly CA$25 billion in 2015 to about CA$9 billion in 2021. (One Canadian dollar is worth about 75 cents.) Ultimately, it got the community involved in the dramatic action.
The greatest benefit is to go big and bold. Calgary started its turnaround plan with CA$200 million and a goal to invest CA$1 billion over the next decade. It included incentives of up to CA$75 per square foot for developers, and—just as important—City Hall reduced the approval process to less than two months. So many developers applied that it was tantamount to a bidding war.
Another lesson is the importance of broad community participation. Real estate mogul Hannes Kovac took over as chair of the city’s real estate sector advisory committee in late 2020. He and his co-chairman Trent Edwards held their first meeting in January 2021. When City Council presented a major downtown plan in April 2021, it was clear that this was not a real estate developer’s wish list; It was a community plan with contributions from retail, arts, nonprofits, government, business, education and more. Support for so many sectors resulted in a 10:3 approval from the Council.
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At the core of the strategy was a large but simple office-to-apartment conversion incentive program to increase downtown occupancy. As part of the plan, developers will submit bids to a newly created Downtown Strategy office. Funds will be set aside if approved, but developers will not receive the money until the building opens to residents. This puts the developer at risk if a project fails.
As for the approval, “Our mantra is to keep up with the pace of business,” said Sheryl McMullen, manager of investments and marketing at the Downtown Strategy office.
Two years after the Calgary City Council approved the turnaround plan, the city has achieved nearly a quarter of its goal of converting 6 million square feet of office space into new uses, primarily residential. Calgary is largely a commuter city, with many living in the suburbs and quick to leave after work, creating a ghost town feel.
A converted building already has occupants and consists entirely of affordable housing. Eleven other office conversions are underway, with one scheduled to open later this year. The first round was so successful that the city quickly agreed to a second. More applications were received, including from large national companies. Now there are moves to speed up the conversion of offices into hotels, schools and arts centers and the demolition of buildings deemed too difficult to convert.
Maxim Olshevsky, executive director of Peoplefirst Developments, is a Ukrainian immigrant who grew up a few blocks from the office tower he is now remodeling. He had watched Calgary’s “West End” deteriorate after the 2014 oil price collapse. He knew the corner building at 909 5th Ave SW had been empty for years. In 2018, he even emailed his mortgage broker with interest because he saw the potential (his broker wasn’t thrilled at the time). But after the council approved the incentives, it bought it.
Wearing his hard hat, Mr. Olshevsky walks through the building, also known as the “Cornerstone,” pointing to the balconies and three-bedroom family apartments he plans to build. There is already a waiting list of prospective tenants. The project has gone so well that Mr. Olshevsky has just announced that he will be doing another rebuild close by. He plans to redesign the city’s iconic Petro-Fina building to make it a beacon of the city’s growing prosperity in a new era.
“Nothing attracts investors and developers more than reducing bureaucracy,” said Mr. Olshevsky, praising Calgary’s speeding up of bureaucracy.
One of the controversial aspects of the Calgary program is that it awards grants with no strings attached. There are no requirements for affordable housing or other equality goals. Projects like Mr. Olshevsky’s strive for “attainable luxury” with units priced about 40 percent below market. In a city where rents have risen 25 percent in the past year, there is a dire need for housing that the middle class can afford, let alone families living on paychecks. Officials say so many developers applied, the city could be selective. Projects aimed at building larger, lower-priced units are usually preferred.
Calgary was also fortunate that at the same time that the city approved the downtown plan, a nonprofit developer specializing in affordable housing called HomeSpace also came up with a proposal for an office building remodel. (It received local, state, and state funding.) The project was completed in a miraculous 12 months and was Calgary’s first office-to-residential conversion to open. The Neoma building houses a homeless shelter on two floors and low-income shelters on the remaining floors. It is bright and modern with large murals inside and out. Kids who live there can even choose artworks donated by local artists to decorate their bedrooms. It’s being hailed as a smashing success, but there are no other affordable remodeling projects like this in the works. “Not everyone makes the most money and can live in those million-dollar condos,” said Bernadette Majdell, executive director of HomeSpace.
The momentum can be felt with builders and city officials, who say the 10-year plan is beating even their most optimistic forecasts. Downtown’s “East Village” side is blooming again, buoyed by Calgary’s Central Library, an architectural masterpiece that opened in late 2018 and continues to attract people of all ages. Sarah Meilleur, executive director of the Calgary Public Library, said 86 percent of visitors are back at the central site. Art centers and a nearby college are also buzzing again. It is no longer a leap of faith to invest there.
It’s different on the west side of downtown, where much of the city’s conversion money flows. Traveling west from Calgary on the free streetcar line reveals even more graffiti, boarded up buildings and “for rent” signs, which comes as a shock with the impressive Canadian Rockies in the distance. Small business owners at Yara Flower Art and Daily King convenience store said they haven’t felt a rebound yet. There are glimmers of hope — the Westley Hotel occupies a recently converted office — but across the street are empty buildings and a concrete lot where a construction company is holding replacement windows and dumpsters. As with many cities, Calgary has experienced some increase in crime. A series of downtown stabbings in early April added to fears.
But almost everyone, even shopkeepers, said they stayed because they could see movement.
Mayor Jyoti Gondek was a progressive councilor in April 2021 when she voted to transform downtown. Now, as mayor, she recalls a warning from Houston leaders when quizzed about resuscitation: “People get nervous in the first year and they want results right away. You have to stay the course.”
Ms. Gondek’s next task is to persuade the province to provide funding for another university campus downtown. It has become a big issue in Alberta’s upcoming provincial elections this month. But most assume that some money will come at some point.
Right now, Calgary executives are pointing to the cranes — and the emails and voicemails they receive from executives in San Francisco and other US cities — as a reminder that they’re doing a lot of things right. DC officials should also call.
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