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Old Posted Jul 14, 2016, 3:49 PM
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WhipperSnapper WhipperSnapper is offline
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Join Date: Sep 2002
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Originally Posted by Spocket View Post
The tower owners will be very reluctant to do that. When Calgary goes into full growth mode, the demand for office space is so high that they can barely keep up. As a result the rental rates per square foot can go way, way up. Converting a tower to condo units essentially takes those buildings off the market indefinitely. If they convert them now, they lose a huge amount of potential profit because housing prices are just as much tied to demand for office space in a city like Calgary. Calgary's a white collar town and to make a profit on any conversion from office to condo necessitates the property command premium rates. If there's no demand for office space then there's even less demand for condos that a real estate management company can capitalize on.

I'm not saying it won't happen as obviously I'm no insider. What I do know is that the Calgary market is intimately tied to the price of oil. Sooner or later the price per barrel will rise again but it all depends on how long it takes to reach a particular threshold. I would want to hold off as long as possible before making any decision to convert an office property to residential. I suspect that the tower owners in Calgary share this sentiment.
The huge absorption of office space was in part to the hoarding of space. That may not happen next time after being burned by the blip in 2008 and this much more devastating downturn. I guess it comes down to budgets which will be based on cash flows. Vacancy also haven't been remotely close to this high before. It will take 4 years at record absorption to get back to the peak of the boom.

The problem with conversion is the condo market needs to be strong while the office market is very weak. This is an unlikely scenario in Calgary. Currently, the condo is in much better shape than commercial office however, I wouldn't call it booming.
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