Converting offices to residential space requires thinking different

Walking down Bay Street on a weekday morning, it can feel like the city is trying to regain what it lost during the pandemic. Yes, there are lineups at Starbucks, but it’s clear: remote work has cratered workplace norms, and buildings in downtowns across Canada are pockmarked by empty offices.
They are spaces that should be leveraged for residential use instead of accumulating dust, cobwebs and memories of forgotten office parties.
This in-with-the-new approach is already happening, albeit in small pockets of our major cities. In early September, Calgary announced plans to take down four abandoned buildings in the 600 block of Fourth Avenue S.W. to make space for more housing. These buildings have sat vacant for years.
There’s a lot more that can be done. A January 2024 report found that 20 per cent of Canadians work from home — down from the heights of the Covid-19 pandemic, but well up from pre-pandemic norms.
That’s why, according to commercial real estate firm CBRE, the share of offices available for lease in Canada reached 18.5 per cent in the second quarter of 2024, the highest level in three decades.
Property owners should shift their perspective on how to utilize buildings in desperate needs of tenants. With rent costs skyrocketing, and the market in dire need of more supply, it’s time to seriously consider the benefits of converting empty commercia real estate into residential properties.
Often, the key complaint against converting a commercial property is cost. Office spaces come with an array of problems: they may not have enough windows that can open, or there aren’t enough fire escapes, or their plumbing and wiring may not meet residential standards. For some developers and owners, it can be less expensive to just tear it all down and then rebuild it into an apartment building or condo.
But that tactic is stuck in our age-old view of what a residential building can be.
A recent study from commercial real estate firm Avison Young found that up to one third of office buildings in 14 major North American markets present “an opportunity for owners of older buildings to rethink their asset strategy and explore options,” whether that involves upgrading, repurposing, or redeveloping altogether. Toronto has 923 such buildings, and Vancouver’s figure is 548.
Imagine what thinking different might yield. Not enough toilets? Perhaps, if the costs aren’t too prohibitive, divide the floor into fewer apartments so that the number of toilets available will be enough. Not enough windows? Urge the province to tweak the Building Code to lessen the pressure on policy surrounding the tower’s windows.
The feds are already seeing the future: The Trudeau government announced in September a full GST rebate for the conversion of commercial buildings to residential rental units.
Stubbornly sticking to a business plan, like waiting for hybrid work to disappear or waiting for demand to rise again, is a fool’s game. It brings to mind the early days of the smartphone. Research in Motion, the company that created the Blackberry, believed its device could withstand the iPhone because it was for so-called “real work.” What Apple understood was that the world had changed, and they reimagined what a smartphone could both be and do.
Property owners are now in a similar situation: their buildings are sitting vacant, losing money day by day, due to a myopic strategy in which they wait for tenants or for demand to somehow rise again.
Changing that situation is doable, albeit with hefty investments. In Calgary, the $40-million project by Peoplefirst Developments has converted the SNC-Lavalin building at 909 5th Ave. S.W. into more than 100 apartments, with retail on the first floor.
Calgary’s long-term plan seeks to remove about an impressive six million square feet of unused office space from the downtown by 2031. Imagine what six million square feet of housing could do for the city.
Developers and owners across Canada should consider mimicking Calgary’s model. If that comes to pass, Bay Streets across Canada may sport less briefcases and more strollers, and show us how a revitalized downtown can be reshaped to how we live and work today.