Why Demolish a Skyscraper Instead of Converting or Renovating It?

In an era of high office vacancy and diminishing returns on commercial properties, the decision of what to do with an outdated high-rise can tip in favour of destruction, paving the way for new possibilities.

Site of the former Grosvenor building at 17th Avenue and 4th Street, S.W. Photo by Jared Sych.

There was a moment most afternoons last summer when the sun would crest over the roofline of the hollowed-out structure of the Grosvenor building on the corner of 17th Avenue and 4th Street S.W. and blind Matt Baker. It’s a sensation that Calgary drivers are all too familiar with, when the prairie sun hovers low in the sky and beams directly into your windshield and eyeballs. Baker and his team of heavy equipment operators learned to plan their lunch breaks around the same time so they could wait out the debilitating glare. You don’t want to take any chances when using a 200-ton excavator to demolish a 10-storey building in a crowded urban environment.

The Kobelco 1600 belongs to a class of ultra-high, high-reach excavators. Its robotic arm extends to 53 metres and is outfitted with hydraulic jaws that can pulverize concrete and snap rebar like it’s uncooked spaghetti. Baker is one of a handful of operators in Canada qualified to run such a powerful machine. He lives in King, Ont., a rural area north of Toronto, but follows the 1600 from one job site to the next across Canada and the U.S. It takes a day to take the excavator apart so it can be loaded onto eight transport trucks.

Priestly Demolition Inc. (PDI), is one of the largest demolition contractors in Canada and has an in-house engineering team that developed the plan for safely dismantling the Grosvenor. The 43-metre tower was surrounded by busy sidewalks and roadways on three sides, with a restaurant just steps away on the fourth side. Baker had to chew the building down to manageable pieces, somewhere between the size of a baseball and a basketball, while at the same time ensuring he didn’t compromise its overall stability.

“We didn’t want to push too hard on the building, or pull at all, because we didn’t want to damage the columns and the structural integrity of the building,” Baker said. It was a trickier balance to strike than usual since the Grosvenor had been underbuilt, meaning the columns were too small for the tower’s overall size and weight.

Those kinds of stakes and that level of responsibility demands razor-sharp focus. Baker controls the 1600 with four foot pedals and three joysticks, each of which have two buttons. “I forget to blink sometimes,” he said. “I’m just staring up there and then I feel my eyes burning.”.

The 1600 and its operator represent a new type of expertise and technology for Calgary. The city is home to several seasoned demolition contractors, but the Grosvenor project was the first time a company used a high-reach excavator in Calgary to masticate an old office tower into rubble. In March 2023, about the same time that PDI’s crew first arrived on site, the City of Calgary announced an incentive program to nudge the owners of downtown office towers to consider taking a wrecking ball to a few of their struggling properties. The available pool of money is relatively small at $3 million, but it still seems like a curious strategy, one that speaks to the age-old, but counterintuitive idea that destruction can actually be a potent form of creativity.

The funding for demolitions is a new aspect of the Downtown Calgary Development Incentive Program, which includes the office-to-residential conversions grant, and was announced back in the spring of 2021 as part of the Greater Downtown Plan. This big-picture municipal strategy set the ambitious goal to remove six million square feet of office space from the core by 2031. Downtown property values have fallen by more than $16 billion since 2015, creating a huge shortfall in property tax revenue, among other challenges, for the local government. CBRE, an international commercial real estate firm, reported more than 30 per cent of the fleet of downtown skyscrapers were unoccupied at the end of 2023. The exodus of office workers started in 2014 with the drop in oil prices and accelerated during the pandemic.

By now, many Calgarians have acclimatized to the lighter traffic, forsaken sidewalks and omnipresent “For Lease” signs that decorate so many of the city’s office windows. And so it might be helpful to try a visualization exercise to get a feel for how much emptiness we’re talking about. There are roughly 130 office buildings in the Downtown Commercial Core for a total of 42,082,140 sq. ft. of real estate. One third, 12,702,688 sq. ft., sits empty. That’s about 292 acres (118 hectares), or the equivalent of 13 Riley Parks.

Picture that expansive green space on a summer afternoon in July. Families crowd the lagoon-like wading pool and playground. Friends stroll the walking paths bordered by flower beds that attract both bees and wedding parties for photos. People practise yoga, throw frisbees, kick hacky sacks and play that other odd game where you use your hands to bounce a ball off a small trampoline. Then, there are the never-ending cricket matches. And don’t forget the rock garden that climbs the hill alongside 10th Street N.W. Imagine all that activity playing out on that lush, green stage. And then multiply that vision by 13, one bountiful Riley Park lined up next to the other, to get a feel for how much idle office space is hidden behind the glass and concrete walls of all those confident-seeming towers in the heart of the city.

Bloomberg Business News published a story in February by Nathalie Wong and Patrick Clark about how many of the consequences of the drop in office real estate values in American cities are only now beginning to surface. It outlined how lenders and property owners have been playing a kind of waiting game, where both sides have been reluctant to acknowledge the new reality in hopes that either interest rates for loans would fall back down or people would return to office work in greater numbers.

The wishful thinking has not materialized on either front. “Across the country, deals are starting to pick up, revealing just how far real estate prices have fallen. That’s spurring widespread concern about losses that can ripple across the global financial system,” wrote Wong and Clark. They explained how a trillion dollars’ worth of loans on commercial estate in the U.S. are set to mature by the end of 2025. Persistently high vacancy rates have cratered the value of office space, which is forcing some owners to walk away from buildings, giving the keys back to the bank, instead of investing more equity to qualify for a new loan at a higher rate for a property that generates less money.

As regional managing director for Alberta for CBRE, Greg Kwong keeps an eye on how these market forces are playing out in Calgary. According to Kwong, there were a handful of foreclosures on buildings in the downtown area in 2023.

“The bigger concern is it’s just the start. There could be more if property values continue to remain low,” Kwong said. “It’s a a double-edged sword: higher interest rates in a lower-value environment.”

High-reach excavator operator Matt Baker during the Grosvenor Building demolition project. Photo courtesy of PDI.

Some Calgary office buildings have been selling, Kwong wrote earlier this year in an article for CBRE’s website, but at 20 to 25 cents on the dollar compared to five years ago. He estimated that the value of mortgages coming up for renewal in Canada for commercial real estate in the next year and a half will be in the billions of dollars. One good thing about the market in Calgary, Kwong explained, is that the majority of the skyscrapers are owned by large institutional investors, such as pension funds and real-estate investment trusts — deep-pocketed organizations that are equipped to manage the volatility of the real-estate market.

The resilient appeal of remote and hybrid work arrangements has created what real estate experts call a “flight to quality.” Workers expect more amenities and creature comforts in exchange for a return to “hard pants” (traditional business attire, as opposed to home-office sweatpants) and daily commuting. Tenants have all the leverage when negotiating leases in a renter’s market for office space. The CBRE reported that the vacancy rate in Calgary’s top-tier buildings, which are called Class AA, was at 15.6 per cent at the end of 2023. The more vintage towers in less-desirable locations are called Class B and C. These buildings, by contrast, had a vacancy of 42 per cent at the start of 2024.

Many of Calgary’s old guard of office towers — those built in the 1960s, ’70s and ’80s — are concentrated in the west end of the Downtown Commercial Core. Kwong predicted that it will likely be a small number of buildings in this area, and only ones owned by private investors, that could end up being demolished. “I’m saying a handful, at the most,” he said.

A skyscraper, unlike a carton of milk, does not have a fixed expiry date. You can keep most any building in good working order; it’s just a question of how much money you want to spend. The flight to quality has changed that equation because it means owners of Class B and C buildings need to make a much larger investment in order to keep up with their flashy neighbours. Even the Class A and AA buildings downtown have several Riley Parks’ worth of available space.

The decision to demolish, Kwong explained, will come down to an effort to limit losses, to avoid having to pay hundreds of thousands of dollars in property taxes and utility bills for a building that’s generating little to no income.

“The land value is not high enough to justify demolishing the buildings and then selling it, because there is still the cost of demolition that you have to factor into your value,” Kwong said.

And that’s where City officials have stepped in to put their thumb on the scale and tip the balance towards demolition — but only for the right properties. One of the criteria to qualify for the demolition grant of $15 per sq. ft. (an extra $5 per sq. ft. is available for hazardous material abatement), is that the tower would not work as a conversion to residential.

Calgary has earned international attention for the success of its office-to-residential conversion program. Seventeen of these projects (13 active and four under review) could result in 2,300 new homes in the core, simultaneously erasing 2.3 million sq. ft. of office space.

The logic of conversion is tremendously appealing: you can hug two birds with one arm (a sunnier version of the old adage) by using one intractable crisis, high office vacancy, to solve another, the housing shortage. The rub, however, is that relatively few buildings make any financial sense to convert to multifamily residences, even with the city’s grant of $75 per sq. ft.

The Kobelco 1600 high-reach excavator chewing down the former Grosvenor Building on 17th Avenue and 4th Street S.W. in 2023. Photo courtesy of PDI.

Duanne Render is an architect with Gensler, a firm that used an algorithmic tool to identify which towers in the core are good candidates for residential conversions and provided those results to the City. Using this algorithm, Render said his team has evaluated more than 1,300 buildings in dozens of cities across North America and estimated that 25 to 30 per cent of buildings can be candidates for conversion. But these figures drop to as low as five to seven per cent when property value is factored into the equation (a lower property value means a building will be more compatible as a residential conversion).

Floorplate and form are major determining factors for how close an office tower can get to what the market expects for inner-city apartments. The right distance between the windows and the core of the building is a critical dimension. And the best form, it turns out, is the humble rectangle, because an irregular shape is going to mean wasted space and fewer overall units. So, while the conversion program has been an exciting success story for Calgary, something worth celebrating after years of discouraging news, it’s not a panacea.

Natalie Marchut is the City’s manager of Development & Strategy. As of this past April, she reported that the City had received one official application for the demolition grant program, and that her team was in discussion with several other property owners on other potential sites. “Based on current discussions underway, I do think that we will see additional applications to the program this year, and am hopeful that we are in a position to allocate the full $3 million currently available,” Marchut said.

According to Marchut, the grant was designed “to support the removal of obsolete/end-of-useful-life office space and to enable redevelopment of housing, mixed-use and/or amenity space.” The program won’t fund a demolition if the site’s ultimate destiny is to become a surface parking lot, or an unsightly hole that lingers for years.

The Greater Downtown Plan is a blueprint for how to transform the core into a place where people want to live, work and play. It’s an immense challenge to reverse-engineer Calgary’s downtown, which was designed to allow commuters to drive to work, park their cars and then leave at the end of the day. The scope and scale of this new vision, however, indicates that government officials see an opportunity in the crisis.

“The office-vacancy situation led to some deep thinking on how to solve the (…) issue, but also solve the greater issue of how do we change the character of downtown forever at this point in its history,” said David Down, the chief urban designer with the City. “The number of big civic projects we have underway right now is pretty unprecedented in my 20 years.”

That list of projects includes Olympic Plaza and the Arts Commons Transformation, the new event centre, the Glenbow renovation, the Green Line, the recently completed BMO Centre, and several streetscape overhauls. “It’s just astounding that we’re pulling all of this off at once,” Down said.

Most Calgarians, when you mention demolition, think of the Calgary General Hospital, which was blown up on a Sunday morning in early October 1998 using 1,700 kilograms of dynamite. The hospital included an entire campus of buildings, some as high as 12 storeys.

Reporting for the Calgary Herald, Peter Stockland wrote: “The structures did not seem to collapse so much as pitch across the field of vision in a helpless, rolling stagger. The last down was the smokestack, which went over like the funnel of a ship heeling into fog.”

Back then, Down was a public member of the committee that was advising on the master-planning of the General Hospital site — a mixed-use, walkable hub for Bridgeland, complete with a new community centre, sporting field and multifamily residential housing. “I remember taking my kids to see the implosion,” Down said, noting he still has one of the bricks from the old hospital. “I don’t know if we’ve ever seen a demolition project of that scale in the downtown, or in fact anywhere in the city since then.”

Thirteen years later, on another Sunday morning in October, the Ogden Federal Elevator, a 12-storey concrete structure built in 1915, was blown up in southeast Calgary. A crowd of a hundred or so people gathered to watch the destruction.

“That was pretty cool,” one onlooker told a CBC reporter. “It was a little underwhelming compared to the General Hospital explosion, but it was pretty cool.”

According to Down, most demolition projects in the downtown have involved low-rise buildings like the Penny Lane Mall and the former Art Central. “If we end up with some incentivized demolitions as a result of our program, these will be the first office building demolitions we have seen in some time, as this scale of removal is rare downtown,” he said.

One of the largest demolitions to have ever taken place in downtown Calgary was the 10-storey Southam Building in 1972, an ornate and gothic-styled edifice of brick and sandstone. Eight gargoyles, each depicting a character from the newspaper industry, were preserved and later affixed to the exterior of the Alberta Hotel a block away on Stephen Avenue.

The York Hotel, an eight-storey building constructed in 1930, was dismantled in 2007 (and its heritage features allegedly put into storage) to clear space for a phase of The Bow tower development that has yet to materialize. The six-storey Southam Chambers building, a former home for the Calgary Herald, came down in 2013 to make way for Brookfield Place.

Enrique Bayata, general manager for PDI’s West Coast operations, enjoys the logistical challenge of large-scale demo projects. “Not one day is like the next. It’s an industry that really keeps you on your toes,” he said. Bayata has worked for PDI for five years but has been in the industry for 12. “I learned the business by doing it,” he said. “That’s the thing about demolition, it’s not something you can really go to school for.” (Bayata might not have gone to demolition school, but he does have two master’s degrees, one in education and another in international affairs and political science.)

According to Baker, learning to run a high-reach excavator is also a less-formal, more “old-school”process — essentially, you have to convince a veteran operator to give you a chance in the seat. So, it’s surprising that Baker, who was 29 when he worked on the Grosvenor (he’s now 30) has had time to gain the experience to become one of the most skilled operators for the biggest excavator in PDI’s fleet. He was 16 and in high school when he started working for PDI. His first job was pulling nails out of sheets of plywood at the company’s headquarters in King. Sorting, separating and recycling are major components of modern demolition projects. Bayata said at least 90 per cent of all the material taken from a site gets reused, whether that’s rebar going to a scrapyard to get melted down, or concrete rubble going to a facility to get crushed down so it can be reused.

A new construction project on 17th Avenue S.W. begins from the ground up. Photo by Jared Sych.

The value of experience underscores how every demolition is unique; you learn something that you can apply to the next one. PDI opened an office in Calgary by taking over another company, Dakota Reclamators, in 2021. The Grosvenor building was its first project in Calgary of that scale — not to mention the first time a high-reach excavator was used in Calgary — and one thing Bayata learned was to factor in more weather days into the schedule. The crew working on the Grosvenor had used two cranes to hold up immense chain-link and mesh screens to prevent any material that was knocked loose by the 1600 from falling off site.

“When you have the Alberta winds hit them, they will act like sails,” Bayata said.

Even though they anchored the screens to the structure for one part on one side, they ultimately discovered that it was best just to wait out the powerful chinook winds that funnel through Calgary’s gridded network of streets.

The 1600 made sense for the Grosvenor because the building’s two-storey addition, the former studios of local dance company Decidedly Jazz Danceworks, could be cleared away first to make enough space next to the tower for the excavator to operate. If they didn’t have that extra room, another option would have been to shore up the structure so it could support the weight of an excavator, and then attack the building from the top.

Not long after Baker had finished with the Grosvenor, he was back at work with the 1600 in Calgary on the old YWCA facility, which sprawled across an entire block in the northeast corner of downtown, just south of where 4th Avenue S.E. crosses the Bow River.

While the Grosvenor and the YWCA were a step up when it comes to demolition projects for Calgary, the city has yet to see the same degree of sophisticated dismantling of office towers as some other major metropolitan centres. Watch online the time-lapsed video created by the Japan Times of the ingenious dismantling of the 40-storey Grand Prince Hotel Akasaka in Tokyo. It was demolished from the top down, but the work was hidden by a moving scaffold covered in panels that mimicked the exterior. The roof of the building was left intact, supported by hydraulic jacks that were lowered as the project progressed. It looks as if the building is miraculously shrinking at the rate of two floors every 10 days.

In an article for the New York Times, Henry Fountain wrote about this technique, and another one developed by Japanese contractors that involves demolishing a skyscraper from the bottom up: The building’s steel columns are cut out at ground level and then the entire structure is jacked down as each successive floor is removed. “Here in Tokyo, a cheek-by-jowl city with many outdated high-rises and tough recycling and environmental restrictions, Japanese companies are perfecting what might be called stealth demolition,” Fountain wrote.

Photo by Jared Sych.

Grosvenor (the company) announced a proposal in early 2017 for a mixed-use development at 1520 17 Ave. S.W. that would have retained and refurbished the10-storey Grosvenor building and its two-storey addition. The now obsolete drawings show enlarged windows and the precast concrete panels swapped out for a sleek white facade. The designs, undertaken by local architects McKinley Burkart, included two new residential towers on the site, one 32 floors and the other 38, built behind the addition and facing 15th Avenue S.W.

But the recent demolition has now wiped the slate clean. PDI returned the L-shaped gravel lot to its client in October 2023. The site has since been sold and, according to Down, a new application is under review. The now vacant 1.67-acre plot (about one-13th of a Riley Park) is at the confluence of two of the city’s liveliest communities ­— the Beltline to the north and Mission to the south — and is encompassed by the 17th Ave business improvement area.

The creative potential of demolition all depends on what happens next.

This article appears in the July 2024 issue of Avenue Calgary.

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