As Edmonton’s downtown office vacancy rate spiked to 15% in 2017 due to projects like the Ice District and Edmonton Tower, downtown property owners and managers have been considering how they might survive through this change, and how long it will take before there’s real absorption in the market that will fill some of the space in existing buildings.
But as retired basketball player Troy Smith said, “Pressure can burst a pipe or make a diamond,” and Edmonton is notorious for thriving in tough economic times.
“Rather than pulling our heads in and thinking, ‘oh my goodness, this is the worst we’ve seen things since the 80s,’ instead, let’s look at how we can use this tough economic position to improve our city,” says Percy Woods, President of the Building Owners and Managers Association (BOMA) of Edmonton.
And Edmonton developers are doing just that.
“A lot of property owners and managers in Edmonton have been exploring the opportunities of repurposing office space as residential apartment space,” says Randy Ferguson, COO of Strategic Group, which has planned and overseen three redevelopment projects in the past year – the CN Tower, Harley Court and Centre West.
Strategic – which strictly builds and redevelops commercial and rental space, realized there was some interesting opportunity in both the Edmonton and Calgary markets.
"Over 50 per cent of the rental apartments in Edmonton and Calgary were built prior to 1979, so you have an inventory that is aging and lacks the benefits of modern construction,” says Ferguson. “You also have an economy that lends itself to an increase in renters and an increase in rents due to the lack of quality, modern rental apartments.”
With that in mind, Strategic has begun purchasing old office buildings with the intent of converting them into apartment buildings.
One of the first buildings they looked at was the city’s famous CN Tower, the first skyscraper in Edmonton.
“We studied CN as a hotel option, we studied it with a multi-family rental option, and we compared that with its long-term position in the market as an office building,” says Ferguson.
At the end of the day Strategic came to the conclusion that the building’s most feasible option was to remain an office building. “That building actually has a lot of attributes,” Ferguson says. “It’s located smack in the middle of some incredible things going on - The Royal Alberta Museum right next door to the east, Epcor Tower directly to the north, the Ice District to the west and kitty corner to the new Edmonton Tower.
The building is also close to the LRT, a ton of amenities and one of its best hidden attributes - the fiber grid beneath it driving the SuperNet, resulting in exceptional connectivity.
With these perks in mind, the Strategic team approached potential customers to see what they thought about the building. The result? “In a building we felt was going to take at least a dozen years to lease the floors we did, we leased most of it in less than a year,” says Ferguson.
Strategic also owns Harley Court, a 1970s office building in the downtown neighbourhood of Oliver, which it will be converting into apartments this fall.
“Harley Court is 156,000 square feet and will accommodate 177 one- and two-bedroom apartments,” says Ferguson. “Of the properties we’ve studied so far, it's the one which has been identified as having the greatest potential for residential conversion in terms of its architecture and location. Harley Court is now under construction and will be most likely take several years to complete.
Last but not least, Strategic also acquired Centre West. Located on Capital Boulevard, just off of Jasper Ave on 8th StreetJasper Ave, the building was vacated by a government tenant, and Strategic purchased it with the sole purpose of repurposing it into multi-family rental.
Since 2013 Strategic group has acquired and built more than 1,400 apartment units in Alberta, primarily in Edmonton and Calgary, and Ferguson says he sees a ton more potential for conversions in the city’s downtown.
“We’re excited and think that there should be more conversions downtown, which will add more residents to the streets while repurposing old buildings that are outdated for their existing purpose – it’s truly a way to keep a vibrant community moving forward.”