A Toronto office building at 250 Ferrand Dr. is being converted into a residential apartment building with 331 loft-style units. The structure, spanning 15 floors, first opened in 1976, but it’s currently 80 per cent vacant.Supplied/Amexon Development Corp.
A Toronto office building near Eglinton Avenue and Don Mills Road that had been fully leased for more than 40 years is 80-per-cent vacant since the pandemic, which catalyzed work-from-home options and tenants’ flight to newer, more modern spaces.
To keep up with the times, the owner of 250 Ferrand Dr., which first opened in 1976, now plans to convert the 15-floor building into 331 loft-style rental apartments.
Ashling Evans, general manager of development at Amexon Development Corp., the building’s owner and developer, says the property has “the right bones” and strong potential for a solid return on investment through conversion into residential lofts. Plans envision up to 21 loft-style units per floor, with most designed as spacious, family-sized apartments featuring two to three bedrooms.
Toronto’s North York area, where 250 Ferrand Dr. is located, has a growing need for residential rentals. The district is surrounded by parkland along the Don River and near major transit, including the new Crosstown LRT on Eglinton Avenue and the coming Ontario Line subway to downtown.
Ms. Evans says the redevelopment will maintain the building’s existing structure and be environmentally friendly by reducing the carbon footprint and amount of waste that’s needed to build anew.
A shift driven by vacancy
Office-to-residential conversions are a relatively new phenomenon in Canada and were largely uncommon in most cities before 2020. But since then, office vacancy rates have soared, with 20.5 per cent of Toronto office space currently being available, according to commercial real estate firm Avison Young.
Calgary is the city that everyone is watching, says Walsh Mannas, principal in Avison Young’s Calgary office. In 2015, the city experienced a downturn owing to a decline in the oil industry and an oversupply of office space, resulting in vacancy rates climbing close to 30 per cent.
To support its growing population, the City of Calgary launched the Downtown Calgary Development Incentive Program in 2021, providing developers with $75 a square foot that is converted into housing. So far, 1.9 million square feet of office space in 14 older buildings has been converted or are under development. In March, the city announced additional funding for its program.
A similar trend is happening in Ottawa, where developers have acquired about 850,000 square feet of space in older office buildings with high vacancy, with the intent to convert them, Mr. Mannas notes.
A former office building located at 665 8 Street SW in Calgary was recently transformed into a residential structure. The building is just one of many office conversions made possible by the city’s development incentive program.Supplied/Colliers
Federal funding fuels momentum
Canada’s office conversion craze is bolstered by the federal Liberal government, which recently doubled its 2021 budget commitment to support the transformation of empty office and retail spaces into market-based housing nationwide. The $600-million plan involves converting space in the federal portfolio, as well as privately owned commercial buildings. It also includes a pledge to work with municipalities to create a fast-track permit system to speed up the process.
Despite the adaptive-reuse boom, only about 25 per cent of office buildings score as ideal conversion candidates in an analytical program developed by Steven Paynter, Toronto-based principal of urban design firm Gensler.
Since 2019, the global firm has reviewed the potential of more than 1,600 conversions internationally. Many of them are in the U.S., where new office buildings hitting the market were luring tenants out of older, less desirable office buildings, he explains.
Details of the Gensler analytical program are proprietary, but finding the sweet spot starts with physical factors, such as the size of the building and ease of dividing floors into residences.
“There are some things that just disqualify straight away,” says Deni Poletti, principal at Core Architects, the firm planning the conversion of 250 Ferrand Dr., which will feature interior design by Toronto’s II by IV Design. “A big one is how far it is from the elevators at the core to the windows.”
The building’s location is another set of scores, with the neighbourhood’s walkability and nearby retail and green spaces making it more attractive for residential tenants. However, scores for some features vary by market.
“If it’s a building with no parking in Calgary, it’s going to be a no-go,” Mr. Paynter says. “If it’s in Toronto or Vancouver, which are more transit-oriented, then not as much.”
The interior design of the lofts at 250 Ferrand Dr. will be completed by Toronto-based firm II by IV Design. The building’s electrical and mechanical systems already have the capacity to support the residential units without major upgrades.Supplied/II by IV Design
Checking the right boxes
Amexon’s planned conversion of 250 Ferrand Dr. ticks the right boxes, Mr. Poletti says.
Since the building is open-concept with no interior walls, it allows the developer to easily divide its 300,000 square feet into 331 apartments. Smaller office buildings under 200,000 square feet lack the potential rental revenue necessary to make conversion profitable, according to Mr. Poletti.
The building’s electrical and mechanical systems already have the capacity to support the residential units without major upgrades, and the four elevators were recently upgraded.
The building will also get a glass façade that will create floor-to-ceiling views. The glass will be a combination of clear panels and copper-coloured photovoltaic glass that can provide up to 15 per cent of the building’s electrical needs.
After the most recent zoning change is approved, the conversion is estimated to take about 18 months, compared to the many more months and up to $50-million in additional costs that would be required to demolish and replace the building, Mr. Poletti estimates.
But when it comes to the vacant offices not prime for conversion, hope may not all be lost. CBRE Canada’s Alberta executive chair, Greg Kwong, predicts office real estate will likely rebound.
“I’ve been in real estate for 40 years, and every decade something happens and optimism falls, but then recovers,” Mr. Kwong says. “This downturn looks like it’s going to be longer than we’d like, but long-term, I still have optimism for the office sector.”