Office Space

By Kristen Frisa

Flexibility, pre-planning and early collaboration keys to office-to-residential conversions

Among the many things that the COVID pandemic has changed forever is the way we work. Employees in many industries have returned to the workplace, but even as the pandemic protocols relax, some office employees are still operating from home for at least part of the time.

Studies say this may not change, with the post-pandemic world likely seeing a hybrid model for white-collar work. So while the office is not entirely a thing of the past, many companies will require much less space.

All this means that older B- and C-rated office buildings —those lacking amenities or in a poor location—are near empty, and are likely to remain so. Colliers Canada reports that office vacancies across the country reached double digits late last year, with a high of 10.8% by the end of the final quarter. That’s a far cry from the 3% vacancy rates Canada boasted just a few years back. Toronto’s vacancy rates were lower than the national average, sitting around 6.2%, up from 4% in the first quarter of 2020. 

Increasingly, owners, developers and city planners are mulling over the idea of transitioning these buildings into residential spaces. Unlike office space, housing needs are high, and cities are keen to bring some vibrancy into downtown spaces by filling them with people.

While it’s still a relatively new practice in Canada, there are obvious advantages where the potential exists. For owners, it’s a way to make good use of assets without demolishing the building and starting again. An office-to-residential conversion can be ready for market in less than half the time of a traditional build, according to Steven Paynter, principal at architecture, design, planning and consulting firm Gensler. And estimates put the cost at about half, too.

Another advantage is that interior work can take place on every floor of the building simultaneously, allowing crews to flood the building and work on multiple elements at one time. And not only do these projects turn around quickly, but more safely, too, since they don’t involve working at heights or in severe weather, and there’s additionally no craning required of very heavy objects. 

Environmentally, recycling buildings is about as sustainable as you can get in the built world. Reusing office space has saved 60,000 tons of waste from the dump over Strategic Group’s past four projects, estimates Ken Toews, Senior V.P. of Development at the Alberta-based firm. “The  most environmentally friendly building you can build is the one you don’t build,” he says, noting that buildings are also made far more efficient during the conversion process. 

Strategic has already completed three office-to-residential conversions in Calgary and Edmonton, along with other projects that have repurposed office buildings to other uses, including a farmers’ market and a self-storage unit.

Its most notable may be its Cube project, a seven-storey Calgary building that was remodelled into 65 one- and two-bedroom apartments at a cost of $25 million.

In Ontario, SerCo Realty Group is in the early stages of its first repurposing project, having just received rezoning approval from the City of Ottawa for its Cooper Street office building to be tranformed into apartments. 

Loredana Porcari, managing director at SerCo, says they were having difficulty renting the spaces at the site after the pandemic began. Dating back to the 1960s, the building once housed 20 office suites in seven storeys. SerCo opted to add an eighth storey, which will house amenity space for residents of the 45 new units.

“Its structure, layout, shape and size were all major reasons why it was a good candidate for a conversion of this nature,” Porcari says. “It gave way to good-sized units with unique layouts. The property is also located in an area that would really benefit from this type of housing.”

EVALUATING OPTIONS

Not all buildings would stand up to these same tests. Gensler has created a rating system to help developers determine which buildings are a good fit for conversion to residential units, and which aren’t. “The structure has to be right. The floor-to-floor height has to work, the number of elevators has to work and the rise of the floors for running servicing has to work,” Paynter says. And that’s just a baseline. The system also gives points for facades that can be morphed into residential-looking buildings versus ones that have to be completely removed and rebuilt. Windows are also a consideration, as are floor plate sizes.

Toews says if the team can’t work out an appropriate design for a building—for instance, if elevator placement won’t mesh with the size of units they’re looking to build—they move on to a different one. “Big units don’t sell very well or rent very well, so you have to come up with a plan that works,” he says.

In the Washington Post (“Following Pandemic, Converting Office Buildings into Housing May Become New Normal”), retired architect Richard K. Lewis writes of some of the structural challenges—and opportunities—of such a transformation. “Because much office building square footage is far from exterior walls, conversion to housing may require modifying the basic building structure,” Lewis notes. “For example, parts of the roof and floor plates on upper levels might be cut open to create interior, skylit, mini-courtyards to bring light into habitable and interior rooms. And unique apartment layouts are often needed to effectively use available floor space.”

While “new roofing, windows, exterior cladding and insulation are usually necessary, office building floor-to-floor dimensions typically exceed apartment building floor-to-floor dimensions,” Lewis adds. “Increased room heights augment the sense of space and openness, while allowing natural light farther into the apartment. And the extra dimension enables provision of space between the hung apartment ceiling and floor structure above for sprinkler pipes, electrical conduits, light fixtures and air ducts.”

External factors like parking availability can also play a role in a building’s suitability. Toews says when Strategic revamped a heritage building in Calgary, it wound up with 110 units, but there was zero underground parking at the site. Because it was a heritage building and was expected to attract discerning residents, Strategic had to offer better options. “In that case, we are digging out the basement and converting the basement to a parkade,” Toews notes.

Parking requirements vary from city to city. In Toronto, the requirements are low, and if the building happens to be near transit the city will approve an even lower threshold. Some areas in Ottawa, meanwhile, require no parking at all for residential buildings.

However, there is a requirement for the amount of shared and personal amenity space available per residential unit, cites Douglas James, Manager of Development Review at the City of Ottawa. While buildings in residential areas of the city often have greenspace built into their surroundings, not all neighbourhoods share this trait. In that case, amenity space needs to be included in the project design. 

“We’ve created amenity decks and reorganized our mechanical on the rooftop to make a really nice amenity deck,” Toews explains. 

In other cases, the original construction of the building can be reworked into amenity decks on lower levels, such as a large ground floor or second floor that isn’t suitable for retail. “It’s being selective about the design,” Paynter says.

HIDDEN OBSTACLES

Some of the elements that make building conversion tougher aren’t always visible, and that’s part of what makes these projects so different from traditional construction. “It’s like a home renovation—you start getting into it and you find things that you don’t really expect,” Toews says. “Having a good contractor is really important.”

That means a contractor who does a lot of preconstruction research up front, but can still roll with the punches once the project begins, Paynter says, “because part of the appeal of doing these projects is the speed of getting them to market.”  

Often there is plenty of available information to facilitate this learning process, if the preconstruction team is willing to do the work. Cities often archive original plans and permit drawings for buildings for decades after the build is complete. Paynter’s team pores over the drawings, creating digital reproductions so they intimately understand what’s going on in the building’s structure, as well as what the original architectural engineer was thinking and what materials they were likely to have used, such as asbestos for buildings erected in the 1960s and 1970s. 

“You can’t afford big delays based on unforeseen circumstances when you have the chance to foresee them,” Paynter says.

The contractor can often help in this fact-finding process, sometimes by opening up a section of wall to see what lies behind it. Contractors who put themselves up front as an integral part of the design team and who learn some of the special skills required in controlled demolition are poised to take advantage of what could be a very big niche as these projects gain popularity.

“We, as architects and designers, will be really relying on the builders to help understand the existing conditions and get in there and do little bits of demolition to keep the project moving,” Paynter says. 

Knowledgeable contractors can also assist in scheduling, planning and pricing a project in a much more integrated approach than is often used in projects that involve ground-up construction.

“A lot of times development and construction are silos and it doesn’t work out really well,” Toews says. “If you can get your company as integrated as possible, it takes some extra time, but it really adds value.”

OPPORTUNITY KNOCKS

While the crystal ball still appears murky as the pandemic smoke clears, many players in the development industry expect more office conversions as time goes on. Older, lower-rated buildings don’t meet the needs of employee-centric companies anymore, says Simon O’Byrne, Senior V.P. of Community Development at engineering services company Stantec. While amenities like EV charging stations, workout facilities and showers are now the norm in today’s office space, older buildings don’t offer them. Ventilation systems also don’t live up to contemporary demands, as the density standard for people-to-office-space has increased, and companies want higher ceilings and larger floor plates to house their open-concept layouts.

With the current vacancy rate being what it is, O’Byrne suspects there will be a “flight to quality,” during which companies that were occupying lower quality space will realize that their operational costs at a newer building will offset the increased leasing costs and will move up, leaving even more B and C buildings empty.

Converting some of those to new purposes and removing them from the roster of vacant offices decreases the overall vacancy rate, thus spurring creation of newer, more suitable office towers. Of course, it has the dual purpose of creating more residential space, whether it be apartment units or condos, or student or supportive housing. 

Cities like London and Ottawa haven’t seen many proposals from developers yet. Calgary, though, is actively encouraging conversions. And Toews says the city has been supportive when they come up against snags in building codes. 

Further, high tax rates on office buildings are a great incentive for cities to see newer office buildings go up and be occupied, which is only likely to occur once older buildings are off the market. 

Teamwork will occur on all fronts, Paynter predicts. “We’re going to see a lot of design-build versions of these projects with an integrated design and construction team,” he says. “And we’ll see a lot of construction manager work early on that will allow the developers to hit the ground running. 

“It’s going to be a different process for people who’ve typically done ground-up construction.” 

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