Toronto playing catch-up on office-conversion policy: panel – Daily Commercial News

Panellists addressing the need for office conversions to boost housing supply during a recent webinar agreed Toronto is lagging in policy and incentives and needs to up its game urgently.

The event was hosted by the StrategyCorp Institute and billed as Trading Space: Can Real Estate Conversion Help Boost Housing Supply?

The panellists noted Toronto is in the midst of a review of the issue, with staff having recently issued an Office Replacement Policies Proposals Report that is the first step in a two-phased approach to bringing forward official plan amendments.

The report indicated from Q3 2023 to Q2 2024 staff have tracked over 35 development proposals involving office space.

The city currently has an office vacancy rate of 18 per cent and as StrategyCorp vice-president Aidan Grove-White, the panel moderator, noted, things could get a lot worse given the federal government has indicated it is looking to reduce its real estate portfolio significantly.

Panellist Ana Bailao, a former Toronto city councillor who is now head of affordable housing at Dream, pointedly noted the City of Calgary has made a major investment on office conversions to housing through policy, resources and investment — in contrast to Toronto. Dream is working on a conversion project in Calgary.

“I will be interested to see how much resources and incentives the City of Toronto will (commit) going forward, but the fact that they’re opening it up to…look at the conversions, you can see a good step forward,” said Bailao. “You just need to move ahead and take advantage of the opportunity, given that CMHC told us that housing starts are 60 per cent down in Toronto compared to last June.”

‘Urgency to act quickly’

“So I think there’s an urgency here to act quickly across the country, and in particular in major appropriate centres like Toronto.”

The impetus for the discussion is the realization the office sector has settled into a new normal post-pandemic, combined with Canada’s housing crisis.

Steven Paynter, building transformation leader from Gensler, said his firm has developed an algorithm to answer the questions of which buildings work and which don’t for conversions, assessing about 1,400 buildings since 2020 and deriving 150 factors to consider.

“It really comes down to the nuance of each of the individual buildings, what you could do with them to get the best value out of them,” he said.

Toronto is being cautious studying the matter in part because it wants to ensure the new mix of uses in the downtown is right, the panellists said, but meanwhile as Calgary advances quickly, Toronto falls further behind, Paynter said.

He said Toronto’s office needs study is a step in the right direction but, “it’s kind of ridiculous that we’re still talking about policy, and they’re still talking at council about adding riders to that policy of 25 per cent affordability.”

Toronto would be wise to allow conversions as of right, Paynter said, confirm the conversion policy and “let the market take it from there.”

Allowing them as of right, he said, would cut a year-and-a-half off the timeline.

Creating a downtown recovery

Bailao, however, said the careful consideration is essential.

“How do you bring the people, the vibrancy, downtown, so we can have a downtown recovery?” she asked. “This is much more than just office conversions…it’s just about creating that balance.”

Paynter said the actual number of conversions will not be exorbitant.

If Toronto has an 18-per-cent office vacancy, “we should be getting that down so maybe 10 per cent of the offices in a city convert. That’s not going to change the city in a massive way.”

Asked what the federal and provincial governments can do, Paynter said the federal government should think very carefully about letting too many of its buildings back into the market. Releasing 30 million square feet could result in another “Detroit.”

Panellist Mary Ellen Bench, senior adviser with StrategyCorp, said senior levels of government must come forward with the infrastructure needed to support any new housing, and they also need to contribute financially.

Bailao added a generation ago, the mantra was that development had to pay for itself, and during recent decades homeowners have benefited from that arrangement while younger generations have lost out.

Given 25 to 30 per cent of the cost of producing housing is taxes and fees, she said, maybe it’s time “that we do something different on how to pay for this infrastructure.”

Follow the author on X/Twitter @DonWall_DCN.