Conversion Potential Sparks Office Sales As Calgary Relaunches Incentive Program

Last week, the City of Calgary announced that it was relaunching its office conversions incentive program, continuing the City's efforts to revitalize its downtown core by making better use of its excess office space.

The core of the program, officially called the Downtown Development Incentive Program, has not been changed, with eligible projects receiving up to $75 per square foot of office space that is converted into residential use, up to a maximum of $15 million per project.

The incentive program was originally launched in 2021, but was then paused in October 2023 after the demand exceeded the amount of funding that was available. Since then, however, Calgary has secured $228 million from the Government of Canada through the Housing Accelerator Fund, and has allocated $52.5 million towards the Downtown Development Incentive Program.

To date, a total of 11 office-to-residential conversion projects have received approval under the program, creating approximately 1,500 new apartments in downtown Calgary. The first of the 11 to be completed was The Cornerstone, which was converted by Peoplefirst Developments and finished up in April 2024. Peoplefirst is now working on another project approved under the office conversion program, Petro Fina.

"Transforming unused office space into homes for Calgarians is not only a practical solution but a transformative one," said Mayor Jyoti Gondek in a press release. "By partnering with the private sector, we're boosting the number of downtown residents, energizing local businesses, and enhancing public spaces. This initiative strengthens our economy, improves public safety, and addresses the critical need for housing."

Outside of the effect on housing, Calgary's office conversion incentive program has also inspired numerous cities across North America to explore their own such programs, citing Calgary's program as a proof of concept that office conversions can be done en masse. Last year, Edmonton took a serious look at creating its own incentive program, although it ultimately did not proceed due to a lack of funding.

The 11 office conversions approved under the Downtown Development Incentive Program. / City of Calgary.

Conversion As A Catalyst

In addition to those effects, the incentive program has also played a significant role in Calgary's office market. According to an office market report published by Colliers earlier this summer, a total of 19 office buildings located in downtown Calgary have changed hands since January 2023.

The 19 office buildings were not identified in the report, but a list was provided to STOREYS courtesy of Colliers. They are, in chronological order of when the transactions occurred, beginning in January 2023:

1. The Standard Life Tower (639 th Avenue SW)
2. Optima Place (744 4th Avenue SW)
3. Petro Fina Building (736 8th Avenue SW)
4. Eau Claire Place I (535 3rd Avenue SW)
5. Place 800 (800 6th Avenue SW)
6. Altius Centre (500 4th Avenue SW)
7. Calgary Place I & II (333 4th Avenue SW)
8. Hanover Place (101 6th Avenue SW)
9. Chartwell House (750 11th Street SW)
10. 1019 7th Avenue SW (1019 7th Avenue SW)
11. Plaza 1000 (1000 7th Avenue SW)
12. Altius Centre (500 4th Avenue SW) (Sold a second time.)
13. Calgary House (550 6th Avenue SW)
14. Dominion Centre (665 8th Street SW)
15. 520 Fifth (520 5th Avenue SW)
16. Canada Place (407 2nd Street SW)
17. 1000 8th Avenue SW (1000 8th Avenue SW)
18. 640 Fifth (640 5th Avenue SW)
19. Encor Place (645 7th Avenue SW)

Colliers tells STOREYS that the office buildings that are expected to be converted include 1000 8th Avenue SW, 640 Fifth, and Encor Place, all three of which changed hands in 2024.

Colliers notes in their report, published on July 2, that the change in the capital gains tax that came into effect on June 25 could potentially slow things down, but could also have minimal impact as a result of many Calgary office properties being available "at historically low prices."

In fact, office buildings have continued to transact since then. Last month, Avison Young brokered the sale of Five Ten Fifth, an 18-storey office tower located at 510 5th Street SW. Then, earlier this month, CBRE brokered the sale of Atrium I and Atrium II, two eight-storey office buildings located at 839 5th Avenue SW and 840 6th Avenue SW. Both transactions were for office properties located in downtown Calgary and perhaps in a foreshadowing of what's to come, CBRE noted in their announcement that Atrium I and Atrium II were surrounded by other conversion projects.