As the normalization of telecommuting drives many out of offices, the City of Montreal wants to facilitate the conversion of downtown high-rise buildings to apartments to help alleviate the housing crisis.
Posted at 5:00 am
“The city center is changing, there are many vacancies. The high-quality buildings remain offices, but for the category C buildings, which need a little love, there is transformation potential for mixed use with commercial and residential,” explains Luc Rabouin, board member responsible for economic development, in an interview on the sidelines of the study of the municipal budget by the Commission for Finance and Administration.
According to data from the City of Montreal, the office vacancy rate in the CBD is currently 16% and has been rising steadily since 2020. Altus Group predicts it could reach 29% by 2027 as working in hybrid mode becomes the norm.
In comparison, the residential vacancy rate in Montreal is 3%. It is even lower for affordable housing, but higher for apartments with more expensive rents.
What can the city do about it? It could change its regulations to make it easier to convert offices into apartments and elected municipal officials are considering the issue, reveals Mr Rabouin. The zoning of certain plots of land currently prevents residential use.
“We are in the process of revising the city plan. We are working on a strategy downtown 2030, there were consultations on this topic, but also on the vision of the city. Over the next year and a half we will have more concrete guidance on what we can do and what we need to do,” he says, adding that it will likely take a number of years for such shifts to take place.
We’re already in talks with a few owners and developers, and there’s definitely interest.
Luc Rabouin, Head of Economic Development at the Executive Committee
The city itself might eventually buy office buildings in anticipation of their conversion into social or affordable housing, but these conversions are more likely to be undertaken by private developers due to the high cost of real estate.
The settlement of more residents in the city center means that the urban planning of the sector needs to be reviewed. “As soon as there is housing, there will be schools, grocery stores, green spaces,” recalls Luc Rabouin.
Not place Ville Marie
The President of the Montreal Chamber of Commerce, Michel Leblanc, is pleased that the local government wants to offer owners of office towers more flexibility, but does not expect a large wave of renovations.
“We’re not talking about prestigious buildings like Place Ville Marie,” he points out. Rather, it is about buildings of a certain age that need to be invested. Owners will wonder whether to renovate to remain offices or convert them into apartments. »
Demand for Class A buildings remains strong, he adds. Some companies are reducing the size of their offices but recommending higher quality buildings.
Mr. Leblanc points out that converting offices into apartments is complex and expensive. For example, he mentions the location of the sanitary facilities for the kitchen and bathroom, soundproofing, ceiling height, elevators, etc.
Such investments are not made in a few months. But by knowing the city’s willingness to allow conversions, office owners can begin their reflection and analysis, he says.
He notes that local business growth remains strong and that employers plan to hire even as they are constrained by labor shortages. But the next few years will show whether teleworking stabilizes and how many days a week employees will be able to do their work remotely.
In her budget presented in Spring 2021, Canada’s Finance Minister Chrystia Freeland announced a $300 million program to support the conversion of vacant office space into affordable housing that has sprung up in the country’s inner cities since the crisis began.
The government has indicated that this scheme is part of a new approach that aims to convert surplus commercial space into 800 rental units to meet strong demand.
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16% office vacancy rate in downtown Montreal
SOURCE: City of Montreal
3% vacancy rate in the metropolitan region
SOURCE: Canada Mortgage and Housing Corporation