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The Petro Fina Building office tower in Calgary’s downtown core is being converted to approximately 150 residential units.SUPPLIED

With more people working from home either full or part time, the idea of converting empty office space into housing is drawing increasing interest across Canada.

Conversion to housing is a persistent trend that is picking up in cities and among building owners, investors and governments both in Canada and abroad. Experts warn that while converting cubicles to cozy, comfortable homes can work, it’s important to understand the challenges, potential pitfalls and costs as well as the benefits.

In one of the latest moves, the federal government announced on Nov. 7 that it’s unlocking six surplus federal properties to provide more than 2,800 homes in Calgary, Edmonton, St. John’s and Ottawa. With the office vacancy rate in the National Capital Region hovering around 15 per cent, more public servants working from home, and the need for affordable housing constantly going up, the federal government is getting rid of 10 of its office buildings in the Ottawa area.

Converting offices requires careful planning and attention every step of the way, from the financing and taxation structure to the redesign.

Calgary has been a leader in encouraging the conversion of office space to residential. “Our work on converting offices to homes goes back to 2014,” says Sheryl McMullen, manager of investment and marketing for the City of Calgary’s Downtown Strategy.

The city was a relatively early adopter of the move to repurpose offices, when the energy industry that was a major white-collar employer in the city tanked.

“Our core was eroding. Over five years our assessment base in the downtown area dropped from $26-billion down to $9-billion,” says Ms. McMullen. “We started to address this with tax relief, but realized we needed to do something more long term about the office vacancy problem. We looked at adaptive reuse.”

In 2021, Calgary launched a Downtown Development Incentive Program (DDIP) aimed at seeing six million square feet of vacant office space converted mostly to residential by 2031, and boosting the number of downtown residents by up to 20 per cent.

“We were largely a work-downtown-and-drive-home-to-the-suburbs city, but that’s changing,” Ms. McMullen says.

According to a recent report for this year’s third quarter from JLL real estate analysts, Calgary is starting to see its office vacancy rate go down as workplaces are converted to homes. One side effect is that the city’s downtown is more lively, as retail, entertainment and neighbourhood life take hold in the core, JLL says.

“Calgary’s vibrancy throughout downtown is expected to continue as residential conversions continue to be announced … retailers are extending their hours throughout the downtown core,” the report says.

The Calgary program provides grants to owners and developers of $75 per square foot of space converted from office to residential. It also aims to speed up conversions by waiving development permits for developers who qualify, which can shave off six months in the process and save as much as $500,000 for lawyers, consultants and drawings.

In addition, Calgary offers grants of $60 per foot for hotel conversions and $50 per foot for postsecondary institutions.

“We’re now getting a growing postsecondary community life in our downtown core,” Ms. McMullen says.

The challenges of converting from office to residential cannot be understated – this is not like renovating a private home.

Benjamin Shinewald, president and CEO, BOMA Canada

On Nov. 8, Calgary announced three new conversion projects, which will remove 675,000 square feet of surplus office space from the city’s downtown core. Four additional projects are in the pipeline for approval.

Calgary “is positioned to provide over 2,300 new housing units to more than 3,500 residents and will inject $567-million in partner investment into downtown revitalization,” the city said in a statement. The new housing includes a percentage of affordable rental units.

Many other cities in Canada and internationally have been toying with or trying out office conversions, though few have as comprehensive a program as Calgary does. In Toronto, City Councillor Brad Bradford recently brought forward a motion for the city to look for ways to make it easier to convert offices, and Ms. McMullen says she and her Calgary team are frequently tapped for advice from other cities.

Calgary also commissioned research firm Gensler to study how effective conversion is for revitalizing downtown areas, removing excess office space and providing badly needed housing. Gensler built an algorithm to compare existing office buildings with hypothetically ideal buildings that could be converted to housing.

After looking at more than 1,000 buildings across North America, the research found that only 25 per cent scored as good candidates for conversion. Real estate firm Cushman & Wakefield notes that “conversion can be complicated,” and has developed a step-by-step process for evaluating what will work well.

Conversion to residential is tied in with a “flight to quality” among businesses – companies are seeking office space that is accessible and amenable to workers, and having workplaces close to home is a plus.

“Our research found that almost 75 per cent of folks we asked cite the commute as the deterrent to returning to the office,” says Samantha Sannella, senior managing director, total workplace at Cushman & Wakefield in Toronto.

Still, “the challenges of converting from office to residential cannot be understated – this is not like renovating a private home,” says Benjamin Shinewald, president and chief executive officer of BOMA Canada, umbrella group for building owners, operators and managers.

“Nearly everything in the design and construction of an office building differs from how you would do it in a residential building.”

A potential conversion can involve reconfiguring everything from HVAC systems to plumbing layout – many offices have long, skinny corridors with a washroom at either end of the hall, so the whole building might need a redesign, he explains.

“There’s also elevator capacity, the depth of space from windows to the interior, windows that may or may not be openable, a lack of balconies and more issues to consider,” he says. “Yet despite the challenges, it is not impossible. We’ve all been learning a lot about how to do conversions since the pandemic began in 2020.”

Converting offices can be a cost-effective and carbon-efficient way to repurpose end-of-life buildings while also revitalizing downtown cores and providing housing, Mr. Shinewald explains, adding: “Calgary is the leader so far – their record is impressive – and other cities are beginning to take note, too.”

Advertising feature produced by Globe Content Studio. The Globe’s editorial department was not involved.

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