Strategic Group finds opportunity in empty offices
Updated: May 4
Source: Journal of Commerce
STRATEGIC GROUP - A rendering shows Calgary’s historic Barron building which developer Strategic Group is turning into homes and retail space. Rather than let office space go empty in Calgary and Edmonton, the company has been repurposing them into residential projects.
Where some see an old empty office, Strategic Group sees opportunity.
Cities like Calgary have seen office building vacancy rates as high as 27 per cent in the past few years. Rather than let downtown buildings go unused, developer Strategic Group has been converting them into housing.
“It is definitely a challenging process and takes a lot of planning up front,” explained Ken Toews, senior vice president of development at Strategic.
The process begins by finding a building that is empty or will soon be empty. Then the team must determine if its floor plate will accommodate resident units. Most won’t, noted Toews.
“They are usually too big, or the distances are from the core of the building to the glazing is too long,” he said. “Usually it takes a lot of creative thought to make it work. It takes a lot of time to make the suite layouts work. We could spend three or four months just doing that because if your suite layouts don’t work, you just can’t go forward with the project.”
Once that layouts are completed, the team determines what condition remaining components are in like glazing or structural pieces.
“The mechanical and electrical have pretty well come out of it so you don’t really have to worry about that, but you try to save what you can. Once that is done, you can do a full financial analysis,” Toews said.
The project must also work its way through the city approval process, which has been without issue in Calgary for Strategic. Toews noted city officials have bent over backwards to help make the company’s innovative repurposing projects work.
“Depending on the municipality it can be good or not so good,” said Toews. “Calgary is great. They bend over backwards to make these things work.”
But like many projects that involve older buildings, there are often unexpected challenges.
“And it’s like renovating your house,” said Toews. “You always are going to come up with a problem that you didn’t know was there. Same thing with an office building. You come across problems and you try to figure out the most cost-effective way to solve that.”
Toews explained that one of the big problems the team has run into on these projects is that the buildings are often not up to code. One of the first things that must be done, if needed, is asbestos removal and sometimes more must be dealt with than anticipated.
“Some of them are from the 60s, 70s or even 80s,” said Toews. “So they have challenges and they weren’t designed to work as residential buildings. So you have to work with the cities on code issues and get some variances that way. So far that has worked out really well for us.”
Toews explained that not only do the projects make sense from a business standpoint, they also go a long way to improve Calgary by helping revitalize its downtown.
“We are big believers in this city,” said Toews. “We are city builders and we look at it from an economic standpoint. We know that if we take underutilized office buildings and convert them to residential, that’s really good for the economy and that’s really good for downtown.”
Toews also explained that repurposing older buildings, from an environmental standpoint, is the right thing to do. He estimates that the company’s current projects are keeping an estimated 55,965 tons of material from going to landfills in Edmonton and Calgary by not demolishing.
The integrated company owns, manages, leases, develops, re-develops and re-purposes its own portfolio.
Toews said the company has been developing the repurposing projects for around three years now. Strategic currently has four repurposing projects under construction in Calgary and Edmonton – with another two projects in the design stages.
This includes Calgary’s historic 12-storey Barron Building which opened in 1951 as the city’s first high rise. According to Strategic, it marked a significant turning point in the oil and gas industry and was a symbol of Calgary’s economic, social, and political growth. The 85,223 square foot office building is being repurposed into a mixed-use space with retail and 94 rental residences.
The project team plans to preserve the building’s art deco-styled exterior along with some interior details. It is scheduled to open to residents in 2020.