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As major markets across Canada continue to grow, so too does the need for housing. For some communities, this might mean the construction of a new subdivision or even the construction of an entirely new residential development. Unfortunately, many communities struggle to build sufficient new units to accommodate their growing housing needs.
This results in a growing number of families lacking affordable housing, and a dwindling number of housing options available to them. This most often happens in larger cities that have the highest cost of construction and the greatest need for homes. An often overlooked solution is office-to-residential conversions.
With the rise in remote and hybrid work, many of the employers who once took up large downtown office spaces have begun to downsize. This has resulted in business districts that are for the most part devoid of daily life, with few people working in them, and even fewer going out for lunch. Hurting local businesses, and those once tasked with maintaining office properties.
Residential conversions create new opportunities by breathing new life into these neighborhoods which will only further attract new businesses and further revitalize local economies. Unlike office leases which move with economic tides, residential space is always in demand which in turn generates more stable income by reducing vacancy rates in commercial buildings. Additionally, these conversions contribute to a much-needed consumer base for the surrounding businesses, ensuring a consistent flow of customers and support for the local economy.
Historically these projects were considered unviable, with the cost of converting an existing structure being equal to if not greater than the cost of new construction. Older, under-utilized office buildings would either sit vacant or be demolished and replaced. The additional complexities of redesigning the large floor plates of commercial buildings to accommodate the regulations and policies for residential interiors requires units to either take on awkward layouts or allocate space in less efficient ways leaving a significant amount of underutilized space in the core.
These factors are gradually fading from view as the cost of real estate in major markets continues to drive upwards. Further pushed by the high cost of construction; suddenly converting existing structures if done efficiently becomes more cost-effective. Further, by reusing existing structures these projects have a lower carbon footprint than new construction, and can allow for the revitalization of downtown neighborhoods which are heavily office weighted and suffering through the highest vacancy rates of the past 30 years.
It must be noted that while many of these spaces are still too big, too small, or too technically complex to convert, there is a ‘sweet spot’ for conversion. Those that fall into this ideal “goldilocks zone” are typically low to mid-rise, pre-war construction, brick clad, with dual frontage. When a building has two or more complete sides facing an open space along a street, it enables light and air to enter more efficiently compared to a situation where one side is overshadowed and constrained by nearby structures.
Unlike new construction which requires long and drawn-out review, consultation, and comment periods before designs can even be approved let alone construction begun; converting existing structures requires a more straightforward approval process and limited community involvement given that the structure already exists. Instead, developers would need to make the case to the municipality that they've done their due diligence, and that their new project would offer greater utility as a residential property than its currently likely underutilized commercial purpose.
The Canadian government plays a significant role in office-to-residential housing conversions through various policies and initiatives. One example of a government initiative assisting these conversions is Calgary’s ‘Downtown Development Incentive Program’ and office conversion programs which seek to support the revitalization of the downtown area by encouraging the conversion of underused office spaces into residential units, post-secondary institutions, and other active uses. The broader downtown development incentive program seeks to remove six million square feet of underused office space from the city's core - reducing urban sprawl and promoting the intensification of underutilized communities.
Office-to-residential conversions have the potential to play a crucial role in addressing Canada's housing crisis. With the rise of remote work and the downsizing of office spaces, vacant offices can be transformed into much-needed housing, revitalizing neighborhoods and supporting local economies. While historically seen as financially unviable, the increasing cost of real estate and construction, coupled with the sustainability benefits of reusing existing structures, make conversions more cost-effective and environmentally friendly.
While not all office buildings are suitable for conversion, those in the ideal "goldilocks zone" can offer great potential. The Canadian government, through various initiatives, is actively supporting these conversions, recognizing their value in reducing urban sprawl and intensifying underutilized communities. By embracing office-to-residential conversions, Canada can take a significant step towards alleviating its housing crisis and creating vibrant, sustainable communities.
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