City launches downtown development incentive program
Today, The City launched the Downtown Calgary Development Incentive Program to support downtown office conversions, office replacement, and new residential development. It’s one of the steps that The City of Calgary is taking to make Calgary’s downtown even more vibrant and to address downtown office vacancy.
An initial $45 million in funding is available to downtown office building owners who are interested in converting office space to an alternate use. The initial phase of the program will run from August to December 2021 and will focus on office to residential conversion, with a priority placed on the Downtown Core, which currently has the greatest level of office vacancy in the Greater downtown, which include the Downtown Core, Downtown West, Eau Claire, Chinatown, East Village and the Beltline.
“The City is excited to launch this program in order to begin to make an impact on downtown office vacancy and support vibrant downtown communities,” said Thom Mahler, program lead for The City’s Downtown Strategy. “This is an issue with wide-reaching impacts. High downtown office vacancy means low downtown property values which creates property tax burdens to residential and commercial properties outside the Downtown Core. This program is part of The City’s effort to stop that shift.”
Downtown office vacancy is approximated at 14 million square feet or 32.59 per cent (CBRE, Q2 2021). Downtown office property values have declined by $16 billion (60 per cent) since 2015, resulting in a tax shift that affects City finances as well as residential, commercial, and industrial property taxes throughout the city.
“Converting office to residential uses is complex and expensive, with incentives being required to stimulate investment,” said Trent Edwards, President, Canada Land & Housing, Brookfield Properties Development and Co-Chair of Calgary Economic Development’s Real Estate Sector Advisory Committee. “Similar public investments have also been made in cities such as Denver, Nashville, Austin, Pittsburgh, Houston and Detroit to successfully improve vibrancy, private investment and tax base. The status quo or “do-nothing” scenario for Calgary’s downtown office vacancy rate is the biggest risk to downtown vibrancy, Calgary’s economic competitiveness, and The City’s fiscal sustainability.”
Approximately six million square feet of office space needs to be removed from the market through leasing, conversion, adaptive reuse, and/or demolition to help address downtown office vacancy and stabilize downtown office property values over the next decade. The City is working with industry experts including Calgary Economic Development’s (CED) Real Estate Sector Advisory Committee (RESAC) and the Real Estate Working Group (REWG) to develop the Downtown Calgary Development Incentive Program.
Property owners within the Greater Downtown Plan area (Downtown Core, Eau Claire, Chinatown, Downtown West, East Village, and the Beltline) can apply for funding between August 16 and September 15, 2021. A priority will be placed on properties within the Downtown Core. The program is offering a grant for office to residential conversions of $75 per square foot, based on the original gross building area of existing office space that will be converted. The grant will be up to a maximum of $10 million per property unless City Council approves a greater amount for a particular application.
Further information about the program and application process can be found at calgary.ca/downtownincentives.