Could converting empty office space help curb Toronto’s housing crisis? One councillor thinks so

A Toronto councillor is pushing to convert older and under-used office buildings into apartments or condos in a bid to fight the city’s housing crisis.

Coun. Brad Bradford has introduced a motion to be debated at next week’s planning and housing committee meeting asking the city take a closer look at the possibility of converting some such buildings into residential housing. He also wants Toronto to drop restrictions requiring developers to replace converted office buildings with equivalent space for businesses elsewhere.

“It’s never been more difficult and more expensive to live in the city of Toronto,” Bradford said. “And we need to take advantage of every opportunity to deliver more housing supply for people who want to call Toronto home.”

Bradford says office vacancy rates within the downtown core remain at approximately 50 percent of pre-pandemic levels. With many employees working from home, employers are shifting their office space to have smaller footprints, he said.

“The reality is, the nature of work has changed,” he said. “We will see people returning to the office, but they are going to return in a different format. There’s a lot more hybrid work. And as a result, companies don’t need the same amount of space.”

But converting an older office building into residential housing isn’t easy. Offices designs make ensuring all of the apartment units have access to windows, that water pipes are in the right space a challenge. Some older buildings have hazardous materials, like asbestos, which need to be removed.

Conversion not a one-size-fits-all solution: Bradford

Not every building is right for a conversion, Bradford acknowledges, but city rules around office stock replacement are often the final roadblock that prevents developers from re-purposing a site.

Bradford would like city staff to incorporate his request into an analysis of office space that is already underway. 

“I think those policies were written in a different era, when there was a different market environment, and frankly, different challenges around the office context and the housing context,” he said. “Right now we need to focus on housing.”

Michael Case, managing director of CBRE’s downtown Toronto office leasing team, says that commercial real estate services firm puts vacancy rates at just over 15 per cent. That’s up from an all-time low of two per cent in the city before the pandemic.

But Case says there are a few distinctions to make in those figures. 

High-end, so-called “Class A” buildings, which are often new and offer better amenities, have low vacancy in the Toronto. It’s the “Class B or Class C” properties that are decades old and offer less to businesses that are struggling to attract tenants, he said.

“That’s where we’re seeing a lot more vacancy and landlords getting more aggressive on the types of deals that they’ll do,” he said.

Case said there is a better balance to be struck between the high vacancy rate today and very low rate pre-pandemic and residential conversion could help address that. Neither level is healthy for the commercial real estate market, he said.

“Getting to that healthy equilibrium will be better,” Case said. “So, I think it’s highly unlikely we’ll ever get closer to that two per cent vacancy that we’re at.”

“If we can … convert a handful of buildings and get close to that eight per cent vacancy, [it’s] a good place for everybody,” he added.

New policy could strike a better balance, lower barriers

Matti Siemiatycki, the director of the Infrastructure Institute at the University of Toronto, said historically cities have guarded their employment lands and resisted conversions. 

“As residential has become the most profitable form of development and office has struggled in many markets, cities have tried to make sure that they don’t lose their office locations,” he said. “We don’t want to have just resort towns as our urban cores. They need to be both live, work and play type of environments.”

Siemiatycki said a conversion policy that strikes a balance and lowers the barriers to conversion is the right approach. But barring government incentives, even dropping prohibitive zoning rules may not help, he added.

“The market is going to drive on this one,” he said. “And I think what we’ve already seen is that without significant subsidies, it will be a relatively small number of buildings that get converted. … This will be one part of addressing the housing crisis.”

Architect Steven Paynter has done extensive work on office conversions to residential and is currently the global practice area leader for building transformation for the firm Gensler. There are opportunities in Toronto to shift the use of aging offices and bolster the city’s valuable apartment rental stock, he said.

“The vast majority that we’re working on right now are becoming rental, because the people that own those office buildings are long-term holders or they want to remain long-term holders, so they’re producing high quality rental stock instead,” he said.

Paynter says the firm has done work in Calgary, where a city incentive program saw more than a dozen buildings convert to residential. 

The projects are better for the environment and, when building is the right fit, require less investment to convert than starting construction on a new building from scratch.

“You can go straight from design to construction in about a month,” Paynter said. “And then you can get it done a hell of a lot quicker, because you’re not digging that hole, you’re not putting up the concrete. All of that already exists.”