The City of Toronto is turning to the public for guidance on what to do with its empty office space as vacancies continue to rise.
He percentage of vacant office space in the city increased throughout each quarter last year, closing 2023 with 17.5 percent, a three percent increase over the same period in 2022 and a 13.6 percent increase over the fourth quarter of 2019.
The city’s call for input is part of a study it is conducting on office conversions amid an ongoing housing crisis that has “raised the pressure” for residential intensification, it said in a notice in its website.
“In part, this increase in pressure has led to development applications that propose adding residential uses on top of existing office buildings, converting offices to residential uses, or demolishing office buildings entirely,” the city said.
“The loss of office space is typically a permanent result that cannot be reversed later if market conditions change.”
‘Higher quality, well-located’ offices continue to perform well: report
in a Preliminary report Prepared for the city by outside experts, Toronto’s office market has “certainly softened” in the wake of the COVID-19 pandemic.
However, signs of resilience are emerging, he said.
“Well-located, higher quality office spaces continue to perform well and remain favorable in periods of reduced demand such as this. “This highlights the resilience of Toronto’s financial core and the city center as a whole,” he said.
“Significant differentiation has been observed in the office uses market across all key reporting metrics, including based on location, space class, building age, and industry positioning/tenant, among others.” factors”.
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The report added that the distinction emphasizes the need to maintain and improve the supply of premium office space in Toronto and potentially reassess the future prospects of other spaces.
Central Canada office vacancy rate hits record high by end of 2023
Millions of Canadians left their office workspace at the start of the COVID-19 pandemic in 2020, which started the trend of rising vacancies.
In fact, by the end of 2023, the office vacancy rate in central Canada hit a record 19.4 per cent, data from commercial real estate and investment firm CBRE showed. For context, a “healthy” office vacancy rate would fall between 10 and 12 percent.
Maria Benavente, vice president and real estate-focused portfolio manager at Dynamic Funds, told Global News in January that between 10 and 15 percent of office demand has been “permanently destroyed.”
Remote work, the decline of the technology sector, new office supply and recession fears have contributed to the rise in office vacancies, said Marc Meehan, managing director of research at CBRE Canada.
The real estate crisis makes politicians look for solutions
Canada’s housing crisis has politicians at all levels looking for solutions.
In October 2023, Toronto’s planning and housing committee directed staff to investigate what it would take to convert offices into housing units, using Calgary as an example.
An oil and gas crisis nearly a decade ago forced Alberta’s most populous city to begin exploring converting offices to housing.
Calgary currently has more than a dozen buildings under construction or in other stages of the planning process, enough to create 2,300 homes.
Calgary’s grant program proved so popular that it recently halted the process because funding ran out.
“If you look at the time to do a new build, compared to a conversion, with conversions we have seen that once the building permit is obtained, it takes between 12 and 18 months to complete the conversion and have occupancy,” said. said Sheryl McMullen with the City of Calgary in October.
“It is a quick way to face the real estate crisis.”
How you can help the city
As part of its study, the City of Toronto is hosting a virtual community consultation meeting from 6:30 to 8:30 p.m. on May 15.
At the meeting, city staff will provide information on their study and findings, and seek feedback on recommended policy options before presenting their final report to the planning and housing committee.
“Given Toronto’s important economic role as the largest concentration of office jobs and corporate headquarters in Canada, any resulting policy decisions must be based on thorough analysis,” the city said.
“The Office Space Needs Study will include an analysis of the office market, weigh the benefits and risks of converting office space, and explore policy options that balance short- and long-term office needs.”
The report is due this summer.
– with files from Jacquelyn LeBel and Matthew Bingley
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