Office Space Conversion

[Zoom]

Calgary has so much office space for a city this size that I can see someday there will be a large inventory of extra space. In my mind it's very possible to some of the older office buildings, converted to office space for maybe recreational or some other type of use .

 

[BKha]

Time to convert some of those older office buildings into residential.

 

[Always_Biking]

I don't think we are under-demolished?? The mentality in this city is sometimes mind boggling. Don't tear down an older building, instead re-use it!

More of the same....

http://www.calgaryherald.com/landlo...s+dotting+calgary+skyline/12058561/story.html

 

[Zoom]

There are a few older buildings that arent terribly nice, but yes I know what you mean, why not just keep them? Especially when you have empty parking lots here and there, does need to be developed first.

 

[Surrealplaces]

Exactly, alternate uses like Dance Studio, Day Care or preschool, art studio, gym, maybe a small college, maybe a youth hostel? I know there use to be some small colleges downtown, but I suspect most have moved out of the core. Residential space would be very cool.

Many buildings downtown are offering almost free subleasing if tenants take over maintenance payments......I know of one particular building where the tenant can have 4,500 sq ft of space for $2k/month. Fairly old building, but still a very reasonable deal for a business out there. Effectively leasing for about $6.00/sq ft.

 

[RyLucky]

^With a deal like that, it's tempting not to start a "company" (tax-write off), and move in a few beds and furniture. Claim a parent of relatives' address as your official place of residence. What the heck, maybe even turn it into a profitable company eventually.

 

[Surrealplaces]

I was thinking the same thing.....it's cheaper than an apartment. I don't know what the regulations are or how that would work, but it could be pretty cool. IIRC there are about a dozen offices and a boardroom.

 

[Momin]

SRC Article: Will Calgary Begin Converting Office Space to Residential?

 

[Always_Biking]

SRC Article: Will Calgary Begin Converting Office Space to Residential?

Nice article. I wonder what some of those older buildings will be worth a couple of years if the vacancy rate stays high.

 

[Surrealplaces]

That's the million dollar question (no pun intended) Right now the class C vacancy is surprisingly low, but should change as the leases come up. How much of that Class C space is actually occupied is anyone's guess. I bet the older buildings will see some major vacancy in the next couple of years....even if the economy picks up I'm not sure those buildings will get tenants.

 

[Always_Biking]

I wonder if it's all a pipedream. In the article it shows the Pittsburgh building being sold for $18.00 per sq ft, which is far cheaper than those Calgary buildings sold for.

 

[Surrealplaces]

Pittsburgh's situation is a bit different in that the buildings were older and more in need of repair than the older calgary buildings. Oddly enough their vacancy rate overall is much lower than Calgary's but they are seeing the same situation as Boston and Chicago where new buildings are getting built, and taking the tenant from older buildings and becuse there are no oil booms happening there, landlords feel the buildings may never get new tenants.

Calgary's never had that problem before as landlords have been used to constant demand.....it might be different going forward. Right now all buildings are owned by REITs and pension funds, and all sales have been from one fund owner to another fund owner becuse they have believed the market for that old space is viable. I'm not sure that will be the case in the future.

 

[maestro]

It's not just occupancy. Conversion are typical when older buildings revenues are less than capital costs. There have been residential and commercial buildings with good occupancy that have converted from rental to residential condominiums because of a cap on how much they could charge for low quality space.

Calgary buildings are in great shape partly because rents were high enough to continually upgrade older buildings and partly because the inventory isn't that old. I believe office buildings owners will hold out for some time. The high rise residential market is in better shape but, it isn't red hot either.

 

[Surrealplaces]

I don't disagree about the owners holding out for a while yet. I guess the question is how long. In the past Calgary's office space market has rebounded fairly quickly and has gotten to really low vacancy rates allowing the older buildings to get the good revenues. I feel like this downturn will be different, that owners might have to sit for a while and that the rates will drop significantly. Even if the economy picks up, will it just spur on more development of new buildings? You're right about the older buildings being in good shape compared to other buildings that have been converted, and that may keep some life as an office building going a bit longer.

 

[Always_Biking]

It's not just occupancy. Conversion are typical when older buildings revenues are less than capital costs. There have been residential and commercial buildings with good occupancy that have converted from rental to residential condominiums because of a cap on how much they could charge for low quality space.

Calgary buildings are in great shape partly because rents were high enough to continually upgrade older buildings and partly because the inventory isn't that old. I believe office buildings owners will hold out for some time. The high rise residential market is in better shape but, it isn't red hot either.

I wouldn't be surprised if Calgary sees some conversion at some point, but it's a stars aligning type of deal. Older buildings need to get to a point where the lease rates are really low, and also the high rise residential market needs to be better. At some point the economy will probably pick up, and the high rise market will pick up. with any luck the office market will pick up but like SP had said only the class A or AA market picks up. If we can get those two things to happen together at the same time we would see some conversion.