Ottawa wooing developers to turn offices into homes in ailing downtown

UPDATE | Members of the planning and housing committee supported the recommendations from staff on Tuesday, and carried a motion to pilot a financial incentive program that would allow developers in a limited area of downtown to pay less in lieu of creating new parkland. The recommendations go to council next week.

Turning empty workspaces into downtown housing could be a remedy for what ails Ottawa, but getting developers to take on the expensive projects may require more than what city staff have on the table.

Somerset Coun. Ariel Troster understands both the rewards and the scope of the challenge.

"It's no secret that downtown Ottawa has changed a lot. It's changed during the pandemic and I don't think we're ever going to see it go back to the way it was," Troster said.

"The existing residents that live in downtown Ottawa, they want more services, they want a hardware store, they want more grocery stores. What we need for all of those things and for downtown to thrive is more people living in the core."

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Empty towers give a derelict appearance to the area, Troster said, but also represent an opportunity that some developers are already seizing.

CLV Group and InterRent Real Estate Investment Trust purchased 473 Albert St. in 2019, tore out everything but the concrete skeleton and elevators and rebuilt the post-war era office tower as a luxury apartment building.

Now, The Slayte's 158 units are nearly full.

"You build as if you're building from scratch," said John Cosentino, a regional property manager with InterRent. "We're just thrilled and happy that we're doing our part."

Office vacancies high, available rentals low

Six recommended changes going to the city's planning and housing committee Wednesday include waiving a fee and asking the province to make rule changes of its own, part of a plan to build 151,000 units by 2031.

City staff cited the Canadian Urban Institute in a report making the case for a conversion program, saying a 10 per cent office vacancy rate and three per cent housing vacancy rate are "healthy."

With higher office vacancy and lower housing vacancy, Ottawa's downtown is far from healthy.

"It's just sad to drive around and see empty buildings not being used," said Cosentino, who suggested most of Ottawa's empty towers are roughly the same age have potential.

Yet, they pose challenges as well.

Cosentino described how having elevators and stairs at the Albert Street building's centre forced designers to be creative with unit layouts and how a mechanical room on the roof had to be raised a storey to allow for amenities like barbecues, fire pits and a year-round hot tub.

In an interview from her home, Troster noted the more costly but less glamorous task of redoing all the plumbing.

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"What I did hear from housing developers that are interested in doing conversions of this nature is that they're very expensive and it is very tough to make them affordable," she said.

"What I heard from the public is we need more affordable housing downtown."

Merging those realities would be difficult, she said.

The Slayte has 10 affordable units in the range of $1,500, with other suites costing as much as $3,600.

Finding the 'sweet spot'

Years before the pandemic turned business districts into ghost towns, the City of Calgary was already facing the challenge of revitalizing its downtown. 

Its incentive program, which provided millions of dollars of funding to developers, proved popular.

Troster doesn't think that would fly in sprawling Ottawa.

"We have a ton of infrastructure, thousands of kilometres of roads that we need to maintain," she said. "It's hard to find that sweet spot in terms of the value proposition … The bang for our buck is still investing in nonprofit, deeply affordable housing development."

Troster also noted council's recent concerns about providing city dollars to developments that would go ahead with or without the city's financial support, pointing to the rejected tax break for the airport hotel.

She said she's also contemplating further amendments to the city's proposal, raising the possibility of providing flexibility on fees to developers who convert buildings — if there's evidence the property has already made a payment to the city in lieu of creating new parkland.

Troster said changes the city is proposing will speed up the development process and could save developers hundreds of thousands of dollars. Combining their work with initiatives from the provincial and federal governments, including a recently announced GST rebate, could prove a more sustainable financing method.

Cosentino's top priority was removing bureaucratic obstacles.

As councillors at city hall debate the proposal on Wednesday, construction crews just blocks away will be gutting an office tower that's destined to became his team's next residential project.