Summary: The challenge of converting office space into housing

Written by davidgargaro

In the December 2023/January 2024 issue of RHB Magazine, I wrote an article titled “The challenge of converting office space into housing.” The article, as indicated by the title, is about converting office space into rental property and affordable housing. Given the shortage of rental housing in big cities, and the high vacancies in office buildings due to people working from home, there is an opportunity to address both issues. However, there are challenges in doing so.

Here are a few topics I covered in the article:

  • Conversion costs
    • Building a new condominium or purpose-built rental property involves relatively set costs…
    • …once an office conversion passes $200 to $300 per square foot, it stops making financial sense as an affordable rental property. 
  • Obstacles to adaptive reuse
    • Many factors besides building age and floor plate size help to determine the feasibility of converting office buildings… costs, location, specific building elements, and neighbourhood amenities. 
    • “Anything built from 1975 to the mid-1980s would be a bad candidate for conversion…”
  • Location and zoning
    • Office tower neighbourhoods tend to lack certain amenities, like schools, parks, community centres, entertainment, and shopping.
    • You can’t simply convert a commercial property into a residential property if it has strictly commercial zoning. 
  • Building design and features
    • Purpose-built office buildings tend to have different floor plans and layouts than apartment buildings… Residential buildings require more interior walls to separate individual units, as well as their own kitchens and bathrooms. 
    • Office and residential buildings have different mechanical, electrical, and plumbing requirements, loading and parking setups, window-to-wall ratios, and building envelopes. 
  • What about tearing it down?
    • …demolition is not always the solution. Building owners are often reluctant to lose the sunk costs from demolishing an office tower, and might want to lower rents, find new tenants or adapt it for other uses. 
    • “Both new construction and adaptive reuse of existing properties will require excess soils management…” 
  • What are the numbers?
    • An Avison Young survey indicates up to 34 per cent of office buildings in 14 major North American markets have potential for conversion. 
    • Calgary has had success in office-to-residential conversions due to its Downtown Calgary Development Incentive Program, which provides up to $75 per square foot in financial incentives. 

Check out the article online if you want to read more.

David