Can converting empty offices into apartments solve the Canadian housing crisis?

Giving new meaning to 'work from home'

Toronto is currently reviewing several development applications that propose residential additions to existing office buildings or full conversions of office space into apartments. This includes the former Canadian Pacific Railway (CPR) headquarters at 69 Yonge Street and 3 King Street East. The City of Toronto recently approved the conversion of this historic 15-storey Beaux-Arts-style office tower, which will see the addition of six new storeys totalling 127 condos. Likewise, in a recent article, the Globe and Mail reported that one leading architectural firm speculated that as much as 45% of the office buildings owned and leased by the federal government could potentially be transformed into apartment housing.

Richard Whitney, vice president at Chicago-based architecture, design and sustainability firm FitzGerald, has worked on redevelopment projects, including the Millennium. "To me, there's no reason we shouldn't [reuse these buildings]," Whitney told Money.ca. "It's a great feeling to bring a building like this back to life."

Whitney explains that the COVID-19 pandemic accelerated an already existing trend of office-to-apartment conversions. "The pandemic, and the resulting work-from-home moves, have really made some buildings that were kind of borderline obsolete, pretty much absolutes," he said, adding that city leaders have been exploring ways to repurpose these unutilized spaces. He believes this trend will persist into the future, despite many employers calling workers back into the office. Canada's national downtown office vacancy rate reached a record high of 19.4% by the end of 2023.

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Conversion challanges

However, developers do face challenges when converting office buildings into residential apartments. Factors such as zoning regulations, building codes and the cost of retrofitting can make these projects difficult and expensive. Steven Paynter, a director and architect with Gensler in Toronto, has developed a “conversion calculator” (which assesses factors like location, floor plan suitability, window size and count, elevators and facade) and notes that unless an office tower scores 80 or higher out of 100, it's not usually a good candidate for conversion.

Whitney says these conversion projects aren't necessarily cheaper than starting from the ground up, but they can go to market faster than new constructions. "The one asset you have in a project like this is you're keeping the building structure — and to a large extent, the building envelope," he explained. Much of the existing infrastructure in an office building, such as elevators and stairs can be retained in a conversion project. That said, developers still need to put new electrical, plumbing and HVAC systems in place, while considering window replacements, which add to the costs of an office building makeover.

Is this an opportunity to ease the housing crisis?

Despite these challenges, the potential benefits of office-to-residential conversions are significant. These projects can help reduce office vacancy rates, revitalize downtown areas, produce housing more quickly compared to ground-up construction and even benefit the environment by reducing the carbon footprint associated with new builds.

Calgary is possibly Canada’s best example of successful office-to-residential conversions. In the last two years alone, the city’s program to encourage developers to convert office spaces has resulted in 13 new office-to-residential conversion projects being approved. The city has implemented public policies and financial tools, such as the Downtown Development Incentive Program, which offers grants of $75 per square foot to owners and developers for converting office space to residential homes. Calgary’s goal is to remove six million square feet of unused offices from the downtown area by 2031.

The Office-to-Residential Summit in Toronto, organized by Trueventus, is a sign of how the office-to-apartment movement is growing. The event aims to bring together professionals to explore the challenges and opportunities involved in repurposing office spaces into residential properties. It showcased case studies and discussed approaches to designing, developing and managing these conversions.

Though the exact cost to convert buildings and the number of buildings available for conversion differ depending on the study and criteria used, it’s clear that the office-to-residential building movement could play a big part in easing the housing crisis in many of Canada’s major urban centres.

— with files from Sandra MacGregor

Sources

1. Rent Cafe: Chicago, IL Rental Market Trends

2. Toronto Sun: "Turning empty offices into housing" (March 22, 2024)

3. Globe and Mail: "Nearly half of the federal government’s office space could be converted to housing, expert firm says" (June 3, 2024)

4. Globe and Mail: "Nearly half of the federal government’s office space could be converted to housing, expert firm says" (June 3, 2024)

5. Truventus: Office to Residential Summit (June 2024)

6. CTV News Calgary: "Calgary transforms old offices to apartments; experts say other cities should follow" (January 7, 2024)