Calgary's Aspen Properties is weighing a major new downtown residential development at a site previously planned for new office space. Executive chair Scott Hutcheson says the new strategy means company is “much closer” to moving ahead on the project.

The block near Aspen’s 400-unit Sullivan conversion, formerly known as Palliser One, could accommodate up to a million square feet of new residential construction, likely built out as three towers. Hutcheson said the company is also considering incorporating a hotel and a mix of condos, rentals and build-to-suit units as it studies the right mix of uses for the site.

He said Calgary’s high downtown office vacancy and shifting market dynamics have made residential development more attractive, noting the location is “unique and exciting” for new housing and could see construction begin within three to four years.

Founded in 1998, Aspen Properties has 15 downtown properties - 12 in Calgary and three in Edmonton. It owns and manages about 4.25 million square feet of office space.

Calgary Tower, Palliser, Sullivan property

One of its jewel sites is in the heart of downtown Calgary where the Calgary Tower is situated. On that site, in addition to the tower, Aspen has Palliser South, a 19-storey, just-over-300,000-square-foot office tower, and the low-rise Tower Centre office/retail building with just over 260,000 square feet. Palliser One, which is being converted to the Sullivan, is close to 400,000 square feet. 

On its website, Aspen cites it as a $160-million project. 

In an interview with RENX at his downtown Calgary office, Hutcheson said there’s a million square feet on the block it could build out for residential development. 

“That likely looks like three towers. You can’t do it in one tower because you’d bring too much product to market at once,” he said. “We’re also discussing whether that million square feet could include a hotel.

"We don’t know yet if we’d go condo or rental. It’s a lot of product. We’re looking forward to figuring out on the Sullivan what mistakes we make and what we like about rental and what we don’t like. The market changes quickly.... I’d love a mix of hotel, residential, condos and build-to-suit rentals.”

Why a residential tower would be built faster

Hutcheson said Aspen believes a residential project could move ahead much more quickly.

“We’ve got high vacancy downtown (in the office sector), 25 to 30 per cent. If the city’s plan works and we take six million square feet out of 40 million square feet, that’s north of 10 per cent of vacancy could be chewed up through conversions to residential. That could get us into the teens,” he observed.

“We’re seeing the 'back-to-work' phase helping the downtown office vacancy, but it’s really a move-up market: the best quality assets are not in the place of a single-digit vacancy yet, but they will take some years to get there."

Construction costs are also a critical factor. 

“It’s crazy the cost of construction today," Hutcheson said, noting the timeline for a new office tower to be completed would be four to five years. "It will be $900 per square foot to build a building and that takes $90 rent to get a 10 per cent yield.... Today for the very best buildings we’re hitting $30 a square foot or the low $30s. I don’t see rent tripling in the next bunch of years and I see escalation causing the postponement of more buildings.”

Meanwhile, the residential market is hot, he said. Rental is a bit off, maybe five to 10 per cent this year, but that location for rental or condos is unique and exciting.

Sullivan Phases I, II to be delivered in 2027

The Sullivan, which is under construction, will have one phase ready to market by 2027, and about a year later, the second phase. About 400 units will be available by the end of 2027. It is part of the city’s incentive program to convert office space to residential.

As for calling it The Sullivan, Hutcheson said naming a building takes some time. 

“We do lots of studies, lots of research, lots of marketing with consultants to build a brand. Sullivan was an explorer who worked with Palliser," he said.,

"When we found that name and that history, he was one of the senior guys with Palliser who explored the West. We liked the name, the history of the name and we wanted to get away a little bit from Palliser because that was the office complex. The Sullivan is now the residential complex."

Currently, the Sullivan is the only asset in Aspen’s portfolio that is residential.

“We’re going to learn a lot," Hutcheson observed. "We’re looking forward to it. It’s fun to do something new. We’ve been very static, one product, one province.

"We know what we do well. We’ve led in innovation, amenities, creativity, making office space less corporate and more playful. That’s kept us excited for years. But it’s still one product. Now we’re in a different product type and that’s interesting and fun for the team."