Varcoe: What’s the answer to decrepit office buildings in Calgary? Knock them down

via Calgary Herald by Chris Varcoe

The city will offer grants to approved property owners to tear down ‘inefficient and end-of-life buildings that negatively impact downtown vibrancy’

Calgary has a partial solution to the problem of decrepit downtown office buildings languishing in the city’s core.

Knock ’em down.

It seems like a counterintuitive suggestion: blow something up to make things better.

Yet, it’s one new piece in a broader strategy to eliminate six million square feet of vacant office space from the area by 2031.

On Tuesday evening, city council approved the terms of reference for the Downtown Office Demolition Incentive Program.

The $3-million program aims to accelerate the removal of up to 200,000 square feet of vacant office space. It will offer grants to approved property owners to tear down “inefficient and end-of-life buildings that negatively impact downtown vibrancy.”

City hall hopes to begin accepting submissions in May.

“Sometimes, the life cycle of a building is such that it does need to come down and we’re willing to be partners,” Mayor Jyoti Gondek said in an interview Wednesday.

Under the program, the city will provide grants of $15 per square foot of space that’s demolished — up to half of the total costs — to owners of eligible buildings.

Another $5 per square foot could come if asbestos or hazardous material needs to be removed.

In total, developers could receive up to $3 million for each structure that’s turned to rubble. So far, that’s the entire pot of money set aside for the new program, which is tapping unused funding from the city’s existing downtown plan.

There are several reasons to pay owners to flatten such structures.

The vacancy rate in downtown offices dipped slightly to 32.6 per cent at the end of last year, although more than 14 million square feet of office space is sitting empty, according to CBRE.

The city’s core has a lot of older Class B and C office buildings that were built decades ago during earlier energy booms. Many have sky-high vacancy rates, particularly in the west end.

These structures “aren’t needed for office, nor are they desired,” said Trent Edwards, co-chair of Calgary Economic Development’s real estate sector advisory committee and Canadian president for Brookfield Properties Development.

“If we’re thinking about how we will ultimately create the best downtown that we possibly can, I do think demolition needs to be part of that.”

The program will eliminate surplus office space from the mix and could trigger new development ideas.

It would also assist in the broader civic campaign to slowly ratchet down the office vacancy rate, which remains the highest in the country.

And then it comes to public safety issues, it could remove decrepit buildings that blight a street and lower property values in an area.

“Vacant, derelict buildings are the opposite of vibrancy. They also create safety issues. We know unsavoury activities can happen in some of the derelict buildings,” said Natalie Marchut, manager of development and strategy for the city’s Downtown Strategy.

“There are buildings in the downtown stock that really have no future but to demo or rethink the site.”

City council previously set aside $153 million to convert empty office space into residences. To date, 14 projects have been approved for funding, announced or are now under consideration.

If all proceed, it would eliminate two million square feet of empty office space and create 1,800 housing units.

Council also approved some changes on Tuesday to the city’s existing office conversion program, letting owners receive grants for properties that are transformed into schools, hotels and performing arts centres.

Last November, another $9 million in civic money was approved to turn offices into post-secondary space, increasing the presence of colleges and universities in the core.

The program would offer a $50 per square foot grant. It also requires that there be a commitment by the provincial government to support and fund the lease agreement of the post-secondary institution for at least 20 years. Talks with the province are ongoing.

But the demolition program is an entirely new step.

City rules indicate any approved development must eliminate office space and preference will go toward buildings deemed unsuitable for adaptation.

Chosen properties can’t simply be turned into a parking lot; the vacant site can’t be used to house another office for at least a decade.

What’s the incentive for the owner of a building to raze an old structure?

If a building has reached the end of its useful life, knocking it down can carry risks for the owner, such as unforeseen costs tied to remediation, said Ken Toews, senior vice-president of development with Strategic Group.

Tapping into the city’s incentive program would help defray such costs.

“If a building owner demolishes a building and has it as a vacant site, it takes the risk away and enables someone to come in and develop it,” he said.

If an agreement is reached between the city and building owner to turn a vacant site into an amenity — serving as a green space, outdoor market or playground — the owners would see their property taxes reduced.

It’s unknown how much demand there will be for the program, but the office-to-residential program has been more popular than initially anticipated by civic officials.

Edwards said it will be up to private sector building owners to decide the best future use of a property that has seen the aging structure bulldozed.

“The opportunity is to remove some of those tired buildings to create a much better overall space,” he said.

“I’m not thinking about it as ‘destroy to fix,’ but about here is the vision we need to work toward and how do we get there?”


Chris Varcoe is a Calgary Herald columnist.

Article by Lena Hogarth
March 22, 2023

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