Once theoretical, the idea of converting empty offices into apartments is beginning to be tested in Montreal and the Ottawa region. But despite the growing interest of promoters, only one project of this type has materialized since the pandemic in Quebec.
For the Mach real estate group, the conversion remains a “plan B”. This was explained by the group’s first vice-president, Pierre-Jacques Lefaivre, during a conference on the subject organized in October by the Urban Development Institute (IDU).
Plan A, he explained, is to give the office market time to reposition itself. “The watchword is patience. […] We believe in start-up. We believe in new companies, which will come from Boston or Longueuil, which will come and occupy spaces in the city center. »
As for plans B, their fate depends in particular on the weight of conversion costs on the financial package. A weight whose effect can be reduced by adding a large number of floors. “Give me permission to climb, I will not go higher than Mount Royal,” Mr. Lefaivre joked, adding that this “room for maneuver” could allow the inclusion of affordable housing .
Thus, in Montreal as elsewhere, the idea is certainly much talked about, but its empirical translation remains discreet.
In Quebec, the only completed conversion project is in L’Île-des-Soeurs and belongs to the Solidarité FTQ real estate fund. With its ten floors, 16, place du Commerce is a former Yellow Pages office building. Today it has 132 luxury three and a half room apartments for rent.
“There is room for certain conversion projects,” according to Eric Deschênes, vice-president of real estate asset management for the Fund who took part in the IDU conference. But “it’s not simple. If it were simple, there would be several already in operation.”
Give me permission to climb, I will not go higher than Mount Royal
The project at 16, Place du Commerce has also experienced its share of pitfalls, he admitted, citing cost overruns and major delays in the schedule.
As for the technical challenges, they often make it simpler to demolish the building and start from scratch. But Olivier Laurent Cazaban, vice-president, partner at BC2, pointed out to the members of the IDU that this option is set to disappear. “In Montreal, it is increasingly difficult to carry out basic demolition for reasons of ecological transition. »
Ottawa launches
Meanwhile, there is activity in Ottawa, where the government wants to offload numerous unused land and office buildings. No less than 30,000 new housing units could be added to the stock by 2029, said Deputy Prime Minister Chrystia Freeland.
Six conversion projects have just been launched in Ottawa, Calgary, Edmonton and St. John’s. The equivalent of 2,800 additional housing units. However, the process promises to be very long: the buildings must be sold and consultations held.
There is also no assurance that all will be used for housing. But “there are significant possibilities,” the office of the Minister of Supply, Jean-Yves Duclos, indicated this week.
Furthermore, this momentum transcends political allegiances, since the Conservative leader, Pierre Poilievre, also wants to focus on federal land to counter the housing shortage. “I am going to cede 6,000 buildings and thousands of acres from federal lands so that we can build, build, build,” he declared in his speech at the Party convention in Quebec this fall.
In this context, analysts expect Ottawa to become a “hot spot” for building conversions. This is the case, among others, of Duanne Render, senior partner at the consulting firm Gensler, who has developed expertise in conversion. According to him, “in Ottawa there is an alignment of the stars between the availability of office buildings and the need for new housing.”
Vacancy rate down in Calgary
The other city that everyone is talking about in terms of conversions is Calgary, where around fifteen projects have been completed or are in the process of being completed. A shift propelled by the extent of the disarray in which the city center has found itself in recent years.
The office vacancy rate in Calgary reached 30% in 2021, double what we saw in Montreal at the same time. But Calgary’s problems dated well before the pandemic. “It started in 2015, when hydrocarbon prices crashed,” explains Duanne Render.
After the pandemic hit, Calgary commissioned Gensler to assess the conversion potential of 65 buildings, he says. “After that, they very quickly used our analytics to set up conversion incentives. » Subsidies of up to $75 per square foot were offered. “They estimated they could recoup the investment in five years with future tax revenues. »
The municipality has also deregulated massively, systematically authorizing zoning changes, among other things. And it produced results. “To my knowledge, Calgary is the only city in North America where the vacancy rate is decreasing,” underlines the consultant.
So Calgary would be a special case? Maybe, but not necessarily forever, Mr. Render suggests. “Many cities around the world have approached the city for inspiration. »
However, for the moment, Toronto and Vancouver are taking their time. “Their vacancy rate isn’t as dramatic,” Render says, because the value of office buildings hasn’t fallen enough to make conversion projects attractive.
To my knowledge, Calgary is the only city in North America where the vacancy rate is decreasing
No incentives in Quebec
However, another variable comes into play: the housing shortage. Could it push cities and the government to create incentives like in Calgary?
“We want to be part of the solution to help,” argued Eric Deschênes, of the Solidarité FTQ Real Estate Fund, during the aforementioned conference, referring to the need to house immigrants.
The CAQ government has legislated in recent months to give cities more flexibility in terms of housing construction (with Bill 39, for example). But no measures specifically targeted conversions.
On its website, the Economy Ministry even published a note in June on a Brookings Institution report urging governments not to get too involved. “Governments that rush to provide financial support for conversions may inadvertently be subsidizing bad behavior. »
The City of Quebec’s most recent housing plan provides that it “financially supports the start-up of projects and the conversion of buildings (offices, churches, etc.) into housing” through changes to regulations and “new funds ”, but it does not come with a timetable.