Converting Empty Offices into Housing: Challenges, Costs, and Potential Solutions
Major cities across North America face a significant office vacancy problem as remote work becomes more prevalent. With nearly 20% of office space sitting empty, there is a clear need to find new uses for these underutilized buildings. One potential solution is converting vacant offices into residential units. While conversion projects present various challenges, they offer environmental and economic benefits if undertaken successfully.
The Office Vacancy Crisis
The COVID-19 pandemic accelerated long-term shifts like remote work, leaving many offices without occupants. Cities like Calgary, Edmonton, Halifax, and London, Ontario, struggle with sky-high vacancy rates above 20%. Calgary has an estimated 32.6% of its downtown office space vacant.
Several factors drive this trend, including the collapse of oil prices, reduced energy sector investment, and a rise in post-pandemic remote and hybrid work models. With remote options becoming more permanent, the supply of empty offices looks unlikely to diminish anytime soon.
The Appeal of Office Conversions
Converting vacant offices to residential use presents an appealing solution with multiple advantages. It can help address the surging demand for urban housing and the glut of empty office buildings straining local economies. While not all office designs naturally lend themselves to housing, some buildings may prove well-suited with modifications. If conversions can be incentivized and costs controlled, this approach offers environmental and housing benefits cities are eager to realize.
Woolworth Building set the case examples before the trend had even started. In the early 2000s, as modern offices were changing into open layout plans, the historic design of Woolworth offices fell out of fashion. Due to this, the upper-floor tenants vacated the buildings around 2010, leaving them dormant. This is where an investment group bought the top 30 floors of the skyscraper and started a conversion of this historic building. Today, this project is known as Woolworth Building Residences and is home to 34 luxury condos (33 of which are already occupied).
Structural and Design Challenges
However, significant challenges also exist. Not every office is a viable conversion candidate due to size, layout, age, or location. Extensive renovations are usually required to reconfigure office floor plans, mechanical systems, and amenities into residential-ready units with adequate size, light, and living functionality. Retrofitting buildings with new plumbing and electrical infrastructure to serve individual apartments can drive costs over $300 per square foot, threatening project viability. Office buildings also tend to use more centralized designs poorly suited for multi-unit living. Overcoming these physical limitations often demands costly structural changes or sacrifices the amount of convertible space.
Case Studies in Calgary, Toronto and more
Calgary has pursued office conversions aggressively to address local market challenges. The city has set aside $153 million for its office-to-residential conversion program. By stripping the building down to concrete, developers optimized each floor for residential living with new systems, layouts, and exterior finishes. Despite municipal support, the project required extensive renovations to account for the building’s dated design.
“A transformation is taking place in a majority of Western cities and their downtowns, respectively, (The) City of Calgary is at the forefront of this transformation, and people are starting to notice.”
— Maxim Olshevsky, the Managing Director for Peoplefirst Developments; the firm getting millions of dollars in incentives from the City of Calgary to convert a downtown office tower into residential space.
In Toronto, an Avison Young study identified 30% of office buildings, or around 900 structures, with potential for housing conversions. Candidates tended to be pre-1990 buildings under 15,000 square feet with higher vacancy rates. However, estimates suggest conversions may redevelop only half of these due to cost barriers. Conversion costs commonly range from $375–450 per square foot, while suitable floor plates, mechanical capacities, and economic feasibility further restrict viable buildings.
Another fact: CBRE, a commercial real estate firm, has reported that there is currently 13 million square feet of vacant office space in Toronto. If all this space were to be converted, it could create around 13,000 new condos or apartments, each measuring 1,000 square feet. However, it is essential to note that the average size of a Toronto condo is only 700 square feet, which has decreased from an average of 1,100 square feet 25 years ago. Therefore, any initiative to convert office space into residential units should also address the shortage of larger units. Urban areas must offer new housing and a diverse range of housing sizes.
The Canadian Urbanism Institute recently analyzed the potential of converting older class-B and class-C commercial office spaces in six smaller Canadian cities, including Victoria, Regina, Winnipeg, Ottawa, Moncton, and Halifax. The institute selected these types of buildings due to the need for renovation to keep up with newer class-A commercial real estate and the high vacancy rates in these buildings. During the analysis, approximately 60 buildings were identified in these cities, totalling about 6 million square feet of space. It was found that these buildings have the potential to accommodate as many as 8,000 new housing units, making them ideal for immediate conversion.
Lessons from Engineering Assessments
While converting office buildings to multi-family residential involves many considerations, including zoning codes, real estate values, and structural issues, certain buildings may be good candidates for this type of conversion. Here’s what it would take to remodel these spaces. Engineering assessments reveal conversion complexities. Office electrical, HVAC, and plumbing systems are not easily adapted for individual residential units. Extensive renovations are needed, like adding metering, subpanels, and upgraded hardware in each unit, renovating ductwork, and enlarging water/sewer utilities. Buildings also require upgraded or relocated amenities per unit, like kitchens and bathrooms. Mechanical retrofits alone can amount to over 20% of project costs. Structural constraints also complicate plumbing revisions, like adding vertical piping chases for multi-level homes.
Mr. Drewniak, the president of CLV Group told Gobal Mail, demolishing and rebuilding the structure would have been easier and cost “pretty much the same.” However, by choosing to reuse the existing structure, the saved costs were instead spent on the extensive preparation work required for its new use. This included completely removing everything inside, leaving no pipes untouched. Implementing these new systems involved drilling a staggering 1,700 holes through eight-inch concrete for all the new system. Mr. Drewniak describes this process as a tremendous amount of drilling that took weeks to complete.
You should also consider the floor plan and lighting. Because not all office spaces are directly attached to a window, you must be creative in your floor plan redesign to incorporate windows for daylight into every apartment. You don’t want to be in Munger Dorm.
Counter: Start from Scratch!
Some may argue that it is easier to demolish old buildings and start over, but we must not overlook the negative environmental impact of new construction. With few exceptions, renovating old buildings for new purposes is the best option during the climate emergency. Concerns about the housing and climate crises should drive any effort to convert unused office space into usable residential housing.
Some major obstacles could arise if this idea were implemented on a large scale, such as municipal zoning regulations and financing. Nevertheless, Canadian cities are already taking steps toward implementing similar projects on a smaller scale. For instance, Toronto is reducing its property holdings and using the additional space to build residential housing. Calgary has also launched the Downtown Calgary Development Incentive Program. The Mayor of London has been influenced by Calgary's successful initiative and started his own initiative.
London Mayor Josh Morgan wants city staff to look at a model Calgary used to help landowners convert empty office buildings into residential spaces. ‘There’s no reason why it can’t work in London,’ he said.
Although these efforts at the municipal level have yielded positive results, they may not be sufficient to end the country’s current housing shortage. The federal government must lead in organizing a more comprehensive action plan to address this problem. Even though this potential conversion project appears enormous, it is comparable to the Canada Mortgage and Housing Corporation's sizable Second World War housing initiative. Planning and funding from the government were crucial in developing modern Canadian cities 70 years ago, and they remain so today.
“We’re definitely getting close to running out of money. That’s why we do have requests to the provincial government and we’re working with the federal government on other avenues for funding,” said Thom Mahler, the Director of the City of Calgary Downtown strategy.
By Devesh Vaswani, Content Strategist for 1UP Youth City Builders
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