Most of Canada’s major downtown office markets are in the doldrums — and that presents a unique opportunity to convert them into residential uses, says a new report from the Canadian Urban Institute.

“What we found is that among 11 Canadian cities, there is the potential for plus or minus 20,000 units to be created through the conversion of office space,” Jennifer Barrett, managing director of Canadian Urban Institute (CUI) and co-author of the 93-page report, told RENX.

The CUI report looked at the feasibility of repurposing the buildings, the local market conditions and the vacancies in each office property to come up with a range of potential conversions. 

“I see it as serving multiple purposes — one is to provide some additional housing,” Barrett added.

She noted conversions themselves won’t solve the housing crisis, “but (they) will be a step towards creating some new housing and even, potentially, in a shorter timeframe than new development would take.”

The CUI report findings

The Canadian Urban Institute, a not-for-profit based in Toronto, is a national organization devoted to urban issues and city building — bringing policymakers, urban professionals, civic and business leaders, community activists and academics together to share best practices, learn and collaborate.

The report identified 4,400 to 5,600 vacant office units suitable for conversion in Calgary, followed by 2,300-2,900 in Toronto, 1,900-2,400 in Montreal, 1,400-1,800 in Edmonton, but just 270-350 in Vancouver.

In other major Canadian cities, the report found:

• 1,500-4,200 units in Ottawa;
• 320-1,350 in Regina;
• 450-1,200 in Winnipeg
• 625-840 in Halifax;
• 500-600 in Moncton.
• 320-390 Victoria.

Across all 11 cities, the report said roughly 18,000 to 22,000 office units, spanning 16 million square feet, could be converted to residential uses.

More apartments could also help retailers

Alleviating pressure in supply-constrained big city housing markets isn’t the only benefit to conversions, Barrett said, noting retailers could also reap the rewards.

Struggles for some retail sectors began at least half a decade before the COVID-19 pandemic as a consequence – at least in part – of a growing number of Canadians shopping online. 

However, on the retail front, Barrett said, North American cities with diverse downtowns have fared better since March 2020 than urban cores that normally went dormant after office workers departed at the end of their workday.

“Similarly, neighbourhoods with large numbers of people working from home are doing probably as well as they were even pre-pandemic - in some cases, even better,” she said.

“But the downtowns, or portions of downtowns, that were really focused on single-use — that being office use — are really the ones where you're seeing less foot traffic and, therefore, businesses are being impacted by it. 

“I would say there's also a shift in the times during which people are going downtown, so they may not be there for morning coffee and lunch hours, but maybe they're going in the evening to do something or they're going on weekends.”

A call for support to encourage conversions

The Canadian Urban Institute isn’t alone in making the case for office-to-residential conversions.

Avison Young data revealed that up to 34 per cent of office buildings across major North American cities could be converted, although factors such as feasibility studies, costs, location and nearby amenities must be considered.

Although conversions won’t solve the housing crisis in cities like Toronto and Vancouver, any and all new supply is precious, Barrett said.

The report proposed solutions that could eventually encourage the conversions.

One of these is through federal and municipal tax rebates and capital grants to reduce the overall costs of converting largely vacant buildings into apartments.

Additionally, conversions could be incentivized through municipal governments waiving development fees, while all three levels of government could create financial incentives that concurrently achieve climate objectives – by encouraging retrofits to modernize the buildings and mechanical systems.

Conversions also present ample opportunity for non-profit housing, which would be popular in cities with housing affordability woes.

The report also recommended an office vacancy tax in an effort to dissuade building owners from deliberately removing office space from the market or keeping buildings vacant for extended periods.

The right communities for conversions

Amenities like grocery stores, schools and day cares will play outsized roles in choosing conversion candidates, as will discretion, Barrett said.

“An important note is that we don't want to go to a point in which there's an over-correction, in which so much office space is removed from the market, that either office space increases in value exponentially or that offices are pushed out of our downtowns or need to be built in other parts of the city,” she said. 

“It’s really about striking that balance between ensuring that there is a healthy amount of office space available, but that there isn't an overabundance to create all of the other effects that I mentioned.”