On Thursday, a former office tower in Calgary’s downtown reopened as the Element Calgary Downtown hotel, marking the city’s first completed office-to-hotel conversion under its downtown office conversion program.
For officials who have spent years plotting the program, it’s not just about the hotel, which sports 226 rooms, along with a rooftop bar.
More than that, officials say it represents an important step on a long journey to diversify the downtown, providing more things for people to do in the core than just go to work.
“For us, it’s pretty exciting,” said Thom Mahler, the director of the city’s downtown strategy, in an interview.
“If you remember going back to 2014, 2015, a lot of stuff we talked about then at that time was how our downtown was heavily reliant on one industry, very focused on head office and office space.”
It’s a notable moment in the ongoing plan to reinvent Calgary’s hollowed-out downtown core.
But there’s still a long road ahead, as many approved projects remain unfinished and vacancy rates remain high.
Still, for Calgary Mayor Jyoti Gondek, it’s the sort of project she feels the city should have acted quickly on when the energy sector was in dire straights 10 years ago.
“It took us a lot of time, because we had so many cynics who said, you can’t do anything but office downtown. And to those cynics, I say, you were wrong,” Gondek said. “We proved out that you can do things differently.”
Calgary’s downtown problem did start in earnest in 2015, after the price of oil crashed.
At that time, an office-leasing principal at Avison Young told Bloomberg News it was a “bloodbath.” The COVID-19 pandemic five years later only made things worse.
Today, while the bleeding may have been slowed, recovery remains a work in progress.
Industry figures vary, but as of the first quarter of 2025, about 30.2 per cent of Calgary’s downtown office space was vacant, down from a peak of 33.8 per cent in the second quarter of 2022, according to the real estate firm CBRE Canada.
Meanwhile, overall Class AA real estate — sometimes referred to as “trophy buildings” — was around 17 per cent vacant.
But whether that overall number sits at 33 per cent or 28 per cent or anywhere in between, it still represents a big chunk of vacant office space in the downtown core, said Greg Kwong, CBRE’s executive chair for Alberta.
“The average person goes, ‘Oh, that’s too bad.’ But they don’t understand that a lot of the tax revenue the city needs from property taxes in the downtown core just isn’t available right now. That’s a concern,” Kwong said.
“At the same time, it’s also indicative of the work-from-home issue that every country, quite frankly, and every city are dealing with.”
From Kwong’s vantage point, the whole city is hoping this program will help with its vacancy problem. But up to this point, it’s been “baby steps.”
“Of the buildings that originally got approved for this grant, only a handful have been completed,” he said.
“So, it’s still early stages … it’s slower than everyone’s anticipated, but through no fault of anyone. It’s COVID, and the rise in construction costs.”
So far, of 11 original approved projects, three have been completed: the Element Hotel, and two office towers converted into residential buildings, The Cornerstone and the HAT at Eau Claire. Five more are expected to open later this year.
There were also 10 projects recently announced by the city with locations yet to be announced, supported by the federal Housing Accelerator Fund.
There are also separate incentives available for office demolition projects and for post-secondary institutions. In April, it was announced that the University of Calgary’s campus would expand into a space on Seventh Avenue S.W. in what was formerly known as the Nexen Building.
The demolition incentive has also seen one project approved.
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As it set out in its plan, Calgary aimed to remove six million square feet of office space from the downtown by 2031. Mahler said that target is still the goal.
That figure was chosen based on a model that suggested doing so would stabilize property values and see the remaining office buildings go back up in value.
“We’re almost halfway there. But on a regular basis, we’re talking to other investors who are coming into the Calgary market, some from external, some are just existing developers,” he said.
“We’re looking at the buildings that are left, and [asking], what can we do with them?”
At the same time, Mahler acknowledged that challenges remain, particularly around health and safety concerns in the core.
He said the city is committed to creating a more active and livable downtown that draws people in not just during weekday office hours, but during evenings and weekends too.
“If you hadn’t come down for 15 years, you’d see a very different downtown. You see a downtown that’s much more lively in the evenings and on weekends, which is what we are starting to see,” he said.
Still, there’s “no one panacea” that can solve this issue, according to Kwong with CBRE.
“I think the city and the business community, everybody has to be pulling on the levers,” he said.
And he added that it’s still going to take considerable time before it’s possible to get the vacancy down to a more reasonable 10 to 12 per cent rate.
“I really don’t see it coming down from 30 per cent to 10 per cent in the next five years, for sure. But I see a trend of vacancy rates dropping,” he said.
“The long-term trend is through a combination of, again, repurposing buildings and things like that. We will definitely see a lower vacancy rate. But it’s certainly not in the next five years.”
