Housing | The million dollar promise

There is no shortage of depressing housing figures these days.

There are vacancy rates, which are tiny. Construction starts, starving. Rents are skyrocketing. Evicted families, ever more numerous. I could throw entire paragraphs at you…

I will focus on one number today. A seemingly abstract number, but also full of promise: 1 million.

More precisely: 1 million square feet.

That’s the amount of office space that could be converted into housing in downtown Montreal. Conversion projects are underway or under consideration in at least four buildings, I’ve learned, and a half-dozen more, or even more, could follow.

The potential is great, if the right conditions are met. It’s been seen elsewhere and there’s no reason why it shouldn’t work here.

I traveled to Calgary last year to look into the conversion phenomenon. This city has become, despite itself, the North American epicenter for this type of project.^⁠1.

The drop in oil prices in 2014 and then the COVID-19 pandemic caused the office vacancy rate to jump to more than 30%. The exodus of tenants has reduced their property value by $16 billion. This decline, in turn, has eaten into the City’s tax revenues.

A vicious spiral that the Alberta metropolis has managed to transform into an opportunity.

How? With a generous subsidy program for private developers. And bureaucracy reduced to its bare minimum, to speed up construction sites.

It worked like a charm. Over the past three years, 13 conversion projects have been launched and four others are under study. These transformations will add 2,300 housing units in the heart of the city. Winner all round.

Downtown Montreal is in a better position than that of Calgary. It is more inhabited. More diverse.

But a very real danger looms. The vacancy rate for office buildings has doubled since the pandemic, to 18.5%. Working in hybrid mode is not about to disappear, which leaves a significant number of towers to be requalified.

I’ve been interested in a project that’s quietly taking place on Sherbrooke Street West, near McGill University. A Halifax company, NexArm Investments, bought the former Standard Life building a year ago for $50 million with a view to transforming it.

The 21-story tower will be converted into 209 rental apartments. The project is progressing smoothly, George Armoyan Jr., who manages the Quebec real estate projects of this family business, confirmed to me in an interview.

In fact, the borough of Ville-Marie and the City of Montreal have shown surprising speed in this matter.

The transaction was concluded in June 2023 and the transformation permit, which allowed the interior of the building to be demolished, was issued in September.

The final permit for the conversion, which will involve, among other things, replacing all the windows, was issued recently, so in less than a year.

It should be noted that the project benefits from a major advantage: the zoning is mixed in this sector of the city centre. It allows for residential and commercial use. A request for change would have added considerable delays.

But the fact of converting an existing building, rather than demolishing it and rebuilding anew, adds enormous “speed of execution” to the project, George Armoyan Jr. told me. “We inherit starting from the structure and from the facade, everything is there. »

He expects the apartments to be delivered in less than a year. The total bill – as well as the amount of rent – ​​remains unknown.

According to real estate firm Avison Young, at least three other conversion projects are at different stages of progress in the city center: René-Lévesque Boulevard West, Sainte-Catherine Street West and in the former CN head office, Rue De La Gauchetière West.

If completed, they will total more than one million square feet. These transformations would reduce the office vacancy rate in the city centre by 1% to 1.5%, in addition to creating hundreds of housing units.

The conversion potential is great in Montreal, but the complexity of the projects is just as great, two experts from Avison Young reminded me.

Buildings, for example, must have a fairly limited floor area so that all apartments have access to windows. There are often zoning changes to be made, or floors to be added, which can add major delays. They hope that the City will show more “flexibility” by allowing densification when necessary.

The Plante administration says it is “very favorable” to this type of project. But for the moment there is no question of following in Calgary’s footsteps with a subsidy program.

Expect growing debates in this regard. The pressure will increase for the City to be less passive in this matter. The Urban Development Institute of Quebec, which represents developers, notably requested property tax credits or subsidies a few weeks ago.

Justified requests, in my opinion.

We agree: these conversions will not solve the housing crisis. The apartments that will be delivered, like those on Sherbrooke Street West, will be far from being affordable for everyone.

But it has been said over and over again: we need to increase supply in all price ranges. The Canada Mortgage and Housing Corporation confirmed this again in a recent study. Building more units, even more expensive ones, creates a ripple effect that frees up more affordable apartments.^⁠2.

There is a large pool of buildings to convert, in Montreal and elsewhere in Quebec. Let us facilitate these transformations at all costs. In addition to being ecological, it simply makes sense.

1. Read “Save a city center, instructions for use”

2. Check out research from Canada Mortgage and Housing Corporation