Startup Arthroto has partnered with DIRTT to “revolutionize” the future of housing, providing a way to meet the urgent need for affordable and sustainable development by converting unused office spaces into residential, mixed-use and potentially also flexible housing.
Calgary-based Arthroto delivers end-to-end solutions to ensure efficient construction processes while DIRTT is a company focused on prefabrication methodologies.
“The launch of Arthroto marks a groundbreaking evolution in the housing industry as we strive to repurpose under-utilized office spaces into thriving residential and mixed-use communities,” Doug Hayden, president and founder of Arthroto, told RENX Homes. “By leveraging the principles that have existed for decades in prefabricated, prefinished, volumetric construction for office spaces, Arthroto applies massive gains in productivity.
“By using new technologies, we can ensure cleaner and safer construction projects, rapid deployment times, reduced onsite labour and help clients meet their ESG targets, which in turn helps pave the way for sustainable urban development.”
The company was launched in June, amid ongoing high vacancy in Calgary's office sector, particularly in the downtown.
'Innovative' urban redevelopment approach
Hayden said it dawned on him that companies were approaching conversion projects done in Calgary using traditional methods. He also believes the market is going to be much larger than just Calgary – he expects it to be North American-wide.
DIRTT is the primary fabricator, working with Arthroto to build out customized residential solutions.
“Our collaboration with Arthroto represents an innovative stride in urban redevelopment that aims to set new standards in the industry,” DIRTT CEO Benjamin Urban said. “Our approach to adaptable interior construction and our focus on sustainable building aligns well with Arthroto’s mission.”
Hayden described Arthroto as an “integrator" on the construction, engineering and software side.
“We can take a building that somebody owns and work with them to convert it. But we do it with prefabricated methodology . . . I don’t know anybody that’s doing it prefabricated,” he said. The company will work with architects and designers to design the interior of the space, and with a general contractor to make the necessary modifications to the building’s mechanical, electrical and plumbing systems.
“Hence we’ll go in with a prefabricated solution. So there’s a lot less onsite labour on the interior build-out. And, we compress the timelines – the timeline is greatly compressed."
Once the preparation is complete, interior elements will be prefabricated offsite, then delivered to the building for final assembly and finishing work.
“Much like they do with office or with healthcare now, we’re doing that with residential," he said. "The only thing that’s held the whole industry back from ever kind of getting in, is the fact that there’s never been a need to convert offices to residential like there is now . . . So we just see that as an opportunity.
"All the data that we pulled in, all the studies that we went through, (we) conducted some of our own research, just said it was a market that’s just going to explode and sure enough it did.”
Large amount of office stock can be converted
Governments are on board as well, he said, noting the U.S. recently announced a $45 billion program to support conversions of unused office to residential.
Arthroto has also established its own acquisitions team which it hopes will be able to acquire buildings to convert to residential.
“We believe we can convert probably half the stock that’s out there from office to a residence, far more than what some people think that you can convert. I’ve heard some people say only about five per cent or less of the buildings can be converted. I think it’s much, much higher than that,” Hayden said.
“We think we have a very novel approach. We call it construction without disruption . . . It’s taking a methodology that’s been around for awhile, tweaking it and then adding to it.”
Arthroto is working through an angel financing round, and Hayden said there is financial interest from "a couple of real estate folks."
Urban said the partnership with Arthroto is a natural alignment of the differentiated value DIRTT brings as a construction firm with Arthroto's focus on the conversion sector.
Many benefits to prefabricated housing
“No one’s approached the challenge of housing, alongside the challenge that the macro headwinds that the commercial real estate segment is facing right now, and then combining all those with a differentiated version of construction. That’s where we come in,” he said. “The barriers to conversion in many of these spaces – be it time, be it cost, be it indoor air quality, it could be from a sustainability perspective – DIRTT answers all of those and even more."
He said from a construction perspective the approach helps solve the existing labour shortage by shortening timelines, creating a more efficient and clean building process.
From a risk perspective, everything DIRTT does aligns well with what Arthroto is trying to do, Urban added.
“It’s not just necessarily a business opportunity, it’s actually solving a challenge or a problem within these communities. Calgary’s pretty much at the epicentre of it; that we just don’t have enough housing and there isn’t any on the horizon in the immediate near-term to solve it," Urban explained. "The challenge is only going to get worse and as we stare at these empty buildings that are not going to fill up overnight, clearly the opportunity is there to align these pieces.”
He said utilizing DIRTT’s construction solutions has another benefit – giving building owners and tenants the ability to move their walls around. The flexibility to change the spaces within a unit has never been available to residents on this type of scale, he said.
“This changes the dynamics. Now you can actually customize your actual space to yourself and that’s not just finishes. Normally you get an apartment, townhome or condominium, whatever, you have a floor plan. The floor plan is what it is. It’s not changing," Urban explained. "This allows you then to flex as your needs change and you may not need to go to a larger space or a smaller space, you may be able to reconfigure that."