Bad office buildings make good residential spaces

Going into the pandemic, the city of Calgary was already facing an existential crisis. The office vacancy rate had risen to 24 per cent due to plunging oil prices. A year on, and the vacancy rate is hovering around 32 per cent. To put that into perspective, the corporate office vacancy rate is double that of Detroit’s when it declared bankruptcy in 2013. Calgary now has 12 million square feet of vacant office space on the market.

Aging office buildings are now sitting empty as tenants choose more modern buildings, and not just in Calgary. Many Canadian cities went through a building boom in the late ’60s and ’70s, and those buildings are now at the end of their life, requiring significant investment to bring them up to modern standards. As a principal and studio director at Gensler, I’ve heard from clients coast to coast that in order to future-proof older buildings so that they can continue to be useful, they’ll need to enhance air filtration, and add more indoor and outdoor space for physical distancing for the day when we are no longer working remotely. Costly elevator and energy efficiency improvements also need to be considered.

But the pandemic has revealed two fundamental truths: the way we’ll use our offices in the future is shifting, and our downtown business districts don’t offer a diversity of experiences. For example, a 2016 study by the University of Alberta found that Edmonton’s downtown is something of a “grocery desert.” In order to have a truly walkable, dense urban environment in a North American city, it’s advisable to have a grocery store within 500 metres of a residential building. This lack of a diverse mix results in city centres that are 9 to 5 instead of 24/7.

The shift to more modern and sustainable Class A buildings – the most prestigious buildings with above-average rents for the area, quality standard finishes, state-of-the-art systems and a definite market presence – was happening even before the pandemic struck. In Toronto, more than 10-million-square feet of brand-new office space are set to come on stream over the next few years.

The question then becomes what should be done with poorly performing older office buildings? As an exploratory exercise, we studied 28 buildings in Calgary. Gensler looked at which buildings would make good candidates for conversion, and whether there were enough buildings in the market that would qualify as candidates. We created a scorecard of all the factors that make for a good residential building: how deep the floor plate is (meaning how much of the leasable space gets natural light), the ceiling heights, the number of elevators, neighbourhood context, access to transit and availability of parking.

Of the buildings we assessed, we found 10 to 12 that were really solid candidates. If all 12 were to be converted, that would create space for approximately 4,000 people to start calling downtown home with an additional 2,000 units on the market.

In Calgary, the buildings were all clustered in the western part of the city. We believe this is a positive because if a number of nearby buildings are converted from office to residential use simultaneously, it creates a positive downstream effect on the neighbourhood. Services spring up to support residents, and it suddenly makes sense for city councils to invest in parks, libraries and improved transit. If the buildings were spread out, there wouldn’t be the same level of impact over a relatively short period of time.

How hard is this to do? Perhaps counterintuitively, we found that the worse the office building the better candidate it is for conversion to residential. Class C buildings – those offering rents below the market average – typically have 11-foot floor-to-floor heights (eight feet or seven feet six inches clear once you factor in the ducts and cabling that run through). This creates more generous ceiling heights than many new-build residential towers, allowing for lots of light and spacious-feeling apartments.

Beyond the challenge of adapting older buildings lies the risk inherent in such a move. In order to incentivize asset holders and build consensus within and between the public and private sectors, we did two things: conducted research into other cities that had made similar moves and researched what the city councils had done to stimulate change.

Our partners at Calgary Economic Development reviewed tax incentives, credits and other economic levers that cities have at their disposal. We also wanted to find other places that had successfully undertaken a transformation of this scale. The two stand-out success stories were Detroit and Kansas City.

In the former, a significant catalyst for change was the Shinola Hotel. After transforming two older buildings and three new ones into a unified hospitality anchor in the neighbourhood, the project led to the arrival of shops, cafés and restaurants, which have sprung up around the hotel. The hotel – a collaboration between Bedrock, Detroit’s largest real estate company, and Shinola, the Detroit-based watch and leather goods manufacturer – anchors a larger development on the block that includes a coffee shop, cosmetics store, florist and Italian restaurant and from its inception was conceived to be an ambassador for the city for out-of-towners and a living room of sorts for Detroiters. Bedrock has bought, renovated and reopened over 100 historical buildings in the heart of the city. Today, the downtown is flourishing, handsome and safe for travellers to wander about, day or night.

Kansas City offers a similar blueprint. Block by block, the central business district has transformed from commercial to residential. Activity is humming in its downtown, where redevelopers are returning life to abandoned office space. By 2016, the city had converted 11 buildings from under-performing office space, with a dozen more underway. Most of the conversions are in multi-floor towers abandoned by businesses that chose newer buildings in the suburbs over offices in the city’s core. The buildings that were deemed obsolete for offices are sturdy enough for reuse. Many of the reimagined buildings include ground-floor retail and, occasionally, offices on lower floors. A couple of building plans, such as one for the 12-story Brookfield Building at 101 W. 11th St., now a fun and informal hotel, intend to increase the number of hospitality options in the city. But most definitely, the changes in both cities rely on living, not working, for resuscitation.

Adaptive reuse also makes sense when viewed through a sustainability lens. With the building and construction industry responsible for a significant amount of carbon emissions, reusing our buildings impacts the triple bottom line – people, plant and profit.

As stated in Gensler’s Climate Action by Design, by renovating existing buildings and repurposing spaces and materials, developers can decrease the amount of carbon associated with new materials, and they can reduce the amount of debris and waste going into landfills. According to the U.S. Environmental Protection Agency, deconstruction rather than demolition of a building can save 90 per cent of a building’s materials.

Adaptive reuse is also much more cost-effective than building new. Demolition and new building costs can be side-stepped and, as is now the case in Calgary, developers can frequently access municipal incentives.

Today, Calgary faces tough challenges – too many empty office towers, an eroding tax base and not enough people living and working downtown. For many Calgarians, the adaptive reuse revolution can’t happen soon enough.

This article is part of the Reshaping Canada’s Cities After the Pandemic Shockwave special feature. 

This article first appeared on Policy Options and is republished here under a Creative Commons license.