Office Conversions to Residential Apartments: A New Avenue for Commercial Real Estate

Although unsurprising, the return to in-office work post-COVID-19 has progressed slower than the Canadian commercial real estate sector had hoped. With national office vacancy rates reaching a record high of 17.6% in 2023, many owners and developers are now considering adaptive re-use of vacant office spaces into residential use. 

In this article, we focus on three main considerations for developers:

1. Essential zoning and permitting considerations for office-to-residential conversions
2. The impact of fenestration and floor plate efficiency on conversion success
3. How government incentives can make conversion projects viable

Read on as RJC Engineers explain how smart office-to-residential conversions can address housing shortages and revitalize urban centres.

Zoning, Permitting & The Legal Landscape

One of the main benefits of converting office buildings into residential apartments is the potential cost and time savings compared to new developments. However, these advantages can be negated if developers encounter significant hurdles in meeting residential municipal zoning requirements.

Conducting a thorough planning study during the due diligence phase will identify zoning and permitting requirements early. A proactive approach helps avoid, or at least minimize, the need for zoning amendments, which can save time and resources.

Typical Residential Requirements vs. Commercial

When converting commercial spaces to residential use, developers must address several key differences in building requirements:

Natural Light and Ventilation

Residential buildings typically require more natural light and ventilation compared to commercial spaces. This means that window placement (fenestration) and ventilation systems must be carefully planned to meet residential standards.

Fire Safety and Egress

Fire safety standards are generally more stringent for residential buildings. This includes requirements for fire-rated walls, floors, and doors, as well as multiple egress routes from each unit.

Plumbing and Electrical Systems

The plumbing and electrical demands of residential units differ significantly from those of office spaces. Residential buildings require more extensive plumbing for kitchens and bathrooms, and electrical systems must be designed to handle higher loads due to appliances and lighting.

Sound Insulation

Residential buildings require effective sound insulation between units to ensure privacy and comfort for residents. Commercial buildings often have different acoustic requirements, so additional soundproofing measures may be necessary during the conversion.

For example, the City of Toronto has specific regulations for adaptive re-use projects that developers must comply with. Understanding local regulations can streamline the approval process and ensure that projects remain feasible.

Fenestration and Floor Plate Efficiency

The design and layout of a building significantly impact the success of an office-to-residential conversion. As mentioned above, office buildings typically have different requirements for natural light compared to residential buildings. This difference means that the placement of windows (fenestration) will largely determine where bedrooms and living areas can be located within the converted units.

Importance of Natural Light

Natural light is a key factor in residential design that influences the livability of a space. Office buildings do not adhere to the same requirements for natural light as residential buildings. Therefore, the arrangement of windows will dictate the positioning of bedrooms and living spaces. In some cases, this can lead to inefficient layouts with long corridors and dark, unusable areas.

Efficient Use of Floor Space

Efficient use of floor space can't be overlooked. Office buildings often have square floor plates, which can result in inefficient layouts with excessively sized corridors and wasted space in residential conversions. Rectangular buildings with shallower depths are generally more suitable for conversion, as they allow for a better use of space and improved natural light distribution.

To summarize, developers should prioritize buildings with floor plates that lend themselves to residential use. Targeting underutilized Class B or C office spaces can be a good starting point, as these buildings often offer the flexibility needed for successful conversions.

Using Existing Infrastructure

Utilizing existing infrastructure in office-to-residential conversions offers significant sustainability benefits by reducing demolition waste and conserving resources. By reusing structural elements like foundations and beams, preserving the building envelope, upgrading rather than replacing mechanical, electrical, and plumbing systems, and repurposing interior finishes, developers can minimize environmental impact and reduce costs.

A sustainability-centered approach aligns with urban development goals and appeals to eco-conscious residents. These buildings should be both environmentally friendly and economically viable.

Government Incentives: Financial Support for Conversions

Financial incentives from government programs can be the deciding factor in the feasibility of an office-to-residential conversion project. The City of Calgary, for instance, has introduced a successful incentive program offering $75 per square foot for conversions, along with fast-tracked approvals. This initiative aims to revitalize the downtown area, and it has been so popular that applications are temporarily paused while additional funding is secured.

Why Conversions Matter to Governments (and Citizens)

Office-to-residential conversions help address Canada's housing crisis by quickly increasing housing supply without extensive new construction. These projects mitigate soaring housing prices and rental rates, promote sustainability by reducing waste and resource use, and revitalize urban cores as workforces shift away from traditional offices. By supporting these conversions, governments can effectively tackle multiple problems at once while creating vibrant, dynamic urban areas.

Additional Examples of Successful Incentive Programs

Similarly, the City of Edmonton and the City of Toronto are exploring incentive programs to address their housing shortages. The Canadian Mortgage and Housing Corporation (CMHC) has been supporting conversions through its Rapid Housing Initiative since 2020, highlighting the role of conversions in meeting affordable housing needs.

In the United States, the federal government is also encouraging commercial-to-residential conversions by proposing the sale of government building stock and offering various financial incentives. These initiatives can make previously unviable projects financially feasible, providing a crucial boost to developers considering conversions.

Work With Leading Engineers Today

Converting office buildings into residential apartments presents a unique opportunity for developers, especially in light of high office vacancy rates and increasing demand for housing. By carefully considering zoning and permitting requirements, optimizing building design for residential use, and leveraging available government incentives, developers can successfully overcome conversion challenges and capitalize on this growing trend.

For more insights, contact RJC Engineers to discuss adaptive re-use projects. Our team is ready to work with you on sustainable building practices to enhance your next development project.