Calgary-based Strategic Group began reviewing its Alberta office building assets in 2015 in order to find aging structures ripe for conversion to residential. On June 1, its first building to receive a complete refit – e11even on 111th Street in downtown Edmonton – will have its first rental occupancy.
“We had been looking for this opportunity and worked a third of the way through our portfolio,” Strategic president Randy Ferguson told RENX. That’s when Harley Court, a 12-storey late 1970s building with 148,855 square feet of office space, passed the economic conversion feasibility test.
“We came to the conclusion we would see a sustained high rate of (office) vacancy in Harley Court over time. The time horizon was 10 years we looked at.”
e11even now houses 177 studio, one-bedroom and two-bedroom apartments. Strategic hasn’t yet launched full marketing for the building as finishing touches are being completed.
Although Strategic launched e11even as its first office-to-residential conversion project, it isn’t the first to go to rental. Calgary’s smaller Cube in the Beltline district, with 65 units, received first occupancy a few weeks ago, says Ferguson.
Privately owned Strategic Group owns, manages and develops office, retail and apartment properties across the country.
e11even near government, financial districts
Edmonton’s e11even suites will rent for rates typical of middle-of-the-market new builds in the area, Ferguson said. The rates vary by floor and view but run to $1,300 for a studio, one-bedrooms in the $1,400 to $1,500 range and two-bedrooms at $1,600 to $1,800.
The building is close to major employers in the government centre and financial district. Ferguson said Strategic expects interest from millennials looking for walk-to-work convenience and nearby entertainment and dining options. Health care professionals working in nearby Alberta Health office towers or the General Hospital, and adult students attending Norquest College and MacEwan University are also likely renter prospects.
Strategic has two more office-to-residential conversions underway. Capital is a 12-storey building a couple of blocks north of the Alberta legislature on 108th Street in Edmonton. Barron is a mixed-use building in Calgary.
Capital will also include a new-build companion low-rise building next door.
The launch of Strategic’s office conversions coincided with a severe downturn in Calgary and Edmonton’s office market. Hit by an oil-price downturn in 2014 and 2015, Calgary and Edmonton have both been plagued with downtown office vacancy rates above 20 per cent.
Provincial government cuts loom
Now two of those conversions are coming on-line in the provincial capital just as the new United Conservative Party government promises to shrink government, a major employment source for potential renters at e11even and Capital.
Ferguson sees a bit of a trade-off in terms of government policy in terms of the viability of the projects.
“Repealing corporate taxes and carbon taxes is all according to well-understood economic principles and should lead to job creation. If there’s an offset in the public service, that offset shouldn’t be felt.”
He admitted, however, there might be some short-term lag in rentals.
“If you have employment vacancy two blocks from wherever you are, you’re going to feel it. So if it takes a little more time to occupy, we’re absolutely OK with that because we’re not looking for a short-term win. We’re looking for long-term value.”
Strategic Group “bullish” on Alberta
Conversion basically creates a new building with a new building’s lifespan, he adds.
“It’s kind of like buying a vintage car and you redo the interior, the exterior, the motor and drivetrain. What you’ve really got is a new car. And that’s really what you’ve got . . . when you take a building down to the structure and rebuild it again with new electrical, new mechanical systems, new corridors . . .”
Ferguson said Strategic, which has properties across the country, is committed to Alberta.
In addition to the conversions, the developer has just completed a six-floor building called Marda and is 20 floors up on its 41-storey ONE project. Both are in Calgary.
The company has 1,000 units in planning and 1,000 units under construction at the moment in Alberta, said Ferguson.
“We’re acquiring in Atlantic Canada and we’re developing in Alberta and we’re very, very bullish on Alberta for the long term.”