Empty downtown office space could be converted to residential, Edmonton city councillor says

An Edmonton city councillor wants the city to encourage developers to turn empty office space into places for people to live, in an effort to help revitalize the downtown core, which has been battered by the pandemic.

In an interview Monday, Ward Nakota Isga Coun. Andrew Knack said the city should work with the provincial government, local real estate and business groups to come up with an incentive program for developers to convert unused downtown office space to residential units.

He plans to introduce a motion on the subject at today's meeting of city council.

Knack said the city should encourage more people to live downtown, not just visit for hockey games, concerts and special events.

"You come here on an Oilers night, it is hopping. People feel comfortable," he said.

"If you actually have people living downtown, visiting their grocery stores, going to you know, going to the Winspear — anything like that, that's how you increase vibrancy and safety as well."

Edmonton has one of the highest office vacancy rates in the country — 23.5 per cent in the first quarter of 2023, compared to 22 per cent in late 2022, according to new figures from commercial real estate firm CBRE Limited.

Canada's overall national office vacancy rate increased to an all-time high of 17.7 per cent in the first three months of 2023, CBRE said Tuesday in a news release.

Ryan Starr, manager of media and content with the CBRE Limited, said the office sector is undergoing a "once-in-a-generation evolution," with tenants seeking to adjust to hybrid work. 

Incentive for developers

Knack said existing legislation introduced by the UCP government allows municipalities to forgo collecting property taxes until a development is complete, leased and operated. It was meant to encourage more industrial development across the province.

"It seemingly has been a fairly good tool and so what I was interested in is, is there a way to adjust that to, or expand it to use it towards something like office tower conversions," he said.

Anand Pye, executive director of the Association for Commercial Real Estate Development in Edmonton, said the group welcomes any innovative solutions where the province and the city can work together. 

Ongoing office vacancies will affect how much the city can collect in taxes. 

"If you have empty office buildings, that number will just go down because those buildings won't be worth as much," Pye said.

"That's going to have an effect on people's residential taxes no matter where you live in the city because we have to make that money up from somewhere else."

Community league likes idea

The Downtown Edmonton community league also welcomes the idea of converting offices into homes. 

League president Chris Buyze notes that downtown properties contribute a higher percentage of taxes to the city than other areas — about 10 per cent of the city's tax base.

If office vacancies linger, all Edmontonians are going to end up paying more taxes as a result, he said.

"If we can convert that to residential and encourage people to live downtown and support businesses downtown, that may require some incentives for a short period of time to ensure that our downtown is sustainable in the long term."

Calgary went through a massive increase in office tower vacancies a few years ago, Knack noted. 

Because the value of buildings dropped, the tax burden was transferred to small businesses outside the downtown core. 

"There is a risk that that could happen [in Edmonton]," Knack said.

His motion calls for the city to work with the province, the Downtown Business Association, the Building Owners and Managers Association and the Urban Development Institute.

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Pye, meanwhile, said he's optimistic the province is interested in helping bring vibrancy to downtown Edmonton. 

The province released a final report Monday from the Edmonton Metro Region Economic Recovery Working Group.

One part of the report focuses on revitalizing downtown, including offering a residential construction grant per door, aimed at drawing people back for work and living. 

"We're sure that they're interested in this, but how does it work is a different question and maybe more complicated," Pye said.