Could Toronto’s Empty Offices Become New Homes?

While vacancy rates for Toronto offices remain way above pre-pandemic levels, some see potential to create more homes in empty workplaces.

By Josh Sherman | 4 minute read

As millions of square feet of office space sits empty in Toronto due to remote- and hybrid-employment arrangements in the post-pandemic era, some in the real estate industry are speculating that the city’s vacant workplaces could be transformed into much-needed apartments.

Now, more research is highlighting the idea’s potential — as well as its very real limitations.

“This provides an opportunity for change and transformation,” says Sheila Botting, president of Americas professional services at Avison Young, a commercial real estate company, noting the upsides of office-to-residential conversions which have become more commonplace in cities like New York City and Chicago. 

To gauge conversion potential, Botting, together with Scott Pickles, principal and senior vice-president for consulting services in Canada at Avison Young, recently took stock of more than 26,000 office buildings across 14 major North American cities, including Toronto. The criteria for flagging possible conversion candidates was simple. First, the buildings had to have footprints of less than 15,000 square feet. “It allows you to have decent depth between the core where the elevators are and the windows so you don’t have buildings where you’re living in a tube — that’s one big consideration,” Botting tells Wahi. And second, they needed to be built before 1990: “Those that are older than 1990 typically would be ready for somebody to take a look at them,” she adds. 

Some Toronto Office Buildings Are Ripe for Conversion — but Most Aren’t  

Although the proposal may inspire enthusiasm for not only putting neglected space to better use but also potentially boosting Toronto’s housing supply — and doing so amid an ongoing affordability crisis — the Avison Young research, published in a recent report, provides something of a reality check. According to the researchers’ findings, roughly one third (923) of the city’s office buildings meet the bare minimum criteria for conversion, but the true share of conversion-appropriate sites is very likely lower. 

That’s because the right size and age are just starting points on the path to a conversion project, the researchers are quick to point out. “Perhaps the most important — certainly for our real estate community — is the financial feasibility,” Pickles tells Wahi. Costs can quickly add up depending on factors like electrical systems and plumbing. Unlike an office, which may have a kitchen or bathrooms on certain floors, an apartment building requires these amenities in each dwelling.

Given the potential costs involved, sometimes it makes more sense to demolish the entire building and start from scratch, Raymond Wong, vice president of data solutions at Altus Group, a real estate consultancy, tells Wahi. “The economics have to make sense,” he says, noting some issues might not be apparent until contractors start working on the building. “There are surprises on the site,” he adds.

Zoning also plays a role. It has historically been difficult to convert what are deemed employment areas in the City of Toronto’s official plan, experts say. And don’t forget the old real estate phrase: location, location, location. Where these buildings are factors into how convertible they are. “Those locations that are in the city that are on high-volume corridors that have public transit and/or neighbourhoods with amenities like retail and all of the great things you’d want to live in as a community — that would be another key criteria,” Pickles continues.

Timing is a factor, too, Botting adds. After all, some buildings that could be repurposed might be leased out currently, even if only partially. “It’s also pretty soon after the pandemic. If you think about [how] the average lease is 10 years, it’s going to take a while for those to roll over and provide the opportunity for the building,” says Botting. “So this is not an overnight thing that’s going to happen; this is more of a decade type of play.”

Despite Challenges, Office Conversions Have “Tonnes of Upside” 

Don’t expect the vast majority of Toronto office buildings to have second lives as apartments. However, regardless of the difficulties and limitations, the co-authors of the Avison Young report still see lots to get excited about around office-to-residential conversions, which are a form of what is known in planning circles as adaptive reuse. “There’s tons of upside for this,” says Pickles. Office-to-residential conversions increase housing choice and options, he explains.

And while such projects have yet to take off in Toronto, the co-authors say they’ve already been approached by local clients interested in exploring what’s possible for their own commercial properties. Pickles also notes that office conversions have been a success story elsewhere in Canada: namely, Calgary, where Avison Young earmarked an additional 521 buildings for possible adaptive reuse. “In Canada, they certainly have had that leadership role that they’ve seen a lot of these conversions happen,” he says. One thing that has helped usher in change? The Albertan city’s Downtown Calgary Development Incentive Program, which provides subsidies for office conversions. 

Past waves of conversion have also shown what kind of transformation is possible. For instance, many brick-and-beam office buildings clustered in and around Toronto’s Fashion and Entertainment Districts were once factories or warehouses. “The whole notion of adapting infrastructure, adapting buildings, has happened for a long period of time,” says Pickles. “There’s a great opportunity in the marketplace.”