[Opinion] The reconversion of office buildings, an opportunity to be seized

In the context of high office building vacancy rates; where telework seems to want to settle firmly for the next few years; where companies must rely on modern, high-quality workspaces to attract workers there; and where there is a real housing crisis, the conversion of certain office buildings seems to represent one of the preferred solutions.

To reinforce the dynamism of the city center and contribute to increasing the supply of housing, this is probably an additional tool, even if we are aware that this cannot be a panacea.

We can also formulate the hypothesis that workers living in the city center or its surroundings are likely to come to the office more often. In this sense, developing more housing there can thus strengthen office activity, while contributing to the commercial and cultural dynamism of the city centre.

On the subject of the conversion of office buildings into residential housing, in “Converting empty offices into housing, a fad? », Isabelle Porter points out: « For the moment, the phenomenon remains marginal, but the formula is undergoing its first tests. »

New York

New York is deploying a whole arsenal to revitalize, even reinvent, its business districts. In December 2022, a joint action plan (city-state), “New” New York: Making New York Work for Everyoneis unveiled, which defines 40 initiatives to be deployed, several of which concern business districts.

In addition, in 2022 the city council adopted a local law to set up a working group to study and make recommendations concerning the conversion of commercial spaces to other uses, in particular housing, including affordable housing. The working group began its work in July 2022.

On January 9, the mayor of New York unveiled the group’s report, presenting the recommendations as an effort by his administration to revitalize central business districts and increase the supply of housing. Let us underline the quality of this document, very interesting and instructive.

The task force’s recommendations essentially concern changes to be made to the regulations to make them more flexible, modernized and more consistent, as well as the implementation of financial incentives to support the insertion of affordable housing and daycare centres.

Their implementation could lead to the creation of 20,000 new homes over the next 10 years. The new rules, in particular the one making eligible buildings built before December 31, 1990, target a potential pool of approximately 136 million square feet. Over the past 10 years, without specific intervention, approximately 10 million square feet of office space would have been converted for residential use.

Montréal

In its spring 2022 study, the Chamber of Commerce of Metropolitan Montreal indicated that if recent trends continue, the vacancy rate downtown could reach 21%, an increase mainly affecting category B and C buildings.

However, the Chamber pointed out: “However, we anticipate that this shock will be less, partly mitigated by factors such as economic growth and businesses established downtown, the arrival of new players and the adoption of new requirements concerning the workspace per employee and the availability of collaborative spaces. »

In the fall of 2022, the Altus Group advanced that the vacancy rate downtown, for category A and B buildings, could reach between 21% and 29% in 2027, depending on the scenario considered.

According to CBRE’s most recent report, the vacancy rate in the Montreal area reached a new high at the end of the fourth quarter of 2022, at 17.0%. For the central business district, this rate is 16.0%. Data obtained from CBRE shows that the vacancy rate for Class A buildings in the central business district was 13.0%, down slightly from the previous quarter, compared to 20.2% for Class A buildings. B.

According to the authors of this report, “the scarcity of labour, telecommuting policies and the optimization of space continue to contribute to the contraction of the area occupied in Greater Montreal. This trend is especially evident in category B buildings”. A positive outlook for downtown Class A buildings is reported, but it is recalled that the downtown Montreal submarket is still in the throes of a potential recession and the repercussions of the pandemic.

Recall that there are approximately 55 million square feet of office space (categories A, B and C) downtown. It therefore seems likely, according to various scenarios, that a few million square feet will remain vacant over the next few years, especially since some spaces may be obsolete and therefore not meet the modern needs of companies seeking a central location. -city or to grow there.

All of the analyzes and initiatives implemented in other cities suggest that there is certainly potential for the adaptive reuse of certain downtown buildings. The technical, regulatory and financial feasibility of each of these buildings remains to be assessed, as well as the will of the owners.

In the various reflections carried out in Montreal on the reconversion of office buildings, New York can serve as inspiration, but it will be necessary to find solutions specific to the Montreal context and to the objectives pursued by the municipal administration.

The situation deserves special attention. However, Montreal has the advantage over many North American cities of having a downtown, including its business district, that is dynamic, diversified and inhabited. Unlike others, Montreal does not have to reinvent its downtown. Depending on the new realities, actions must however be deployed to strengthen its attractiveness and influence.

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