London's empty offices are ripe to convert into housing, but not all buildings are created equal

On its face, the desire to convert London's empty downtown office buildings into apartments and condos seems like an obvious move. 

The city's downtown office vacancy rate is 28.5 per cent, the highest in Ontario. Meanwhile, London is mired in a stubborn housing crisis that's pushing home prices and rental rates out of reach for many people.

This week in his state-of-the-city address, Mayor Josh Morgan announced early details of a plan that would provide per-unit of incentives for developers willing to covert office buildings. This comes on the heels of a Calgary program that used $100 million of city money to underwrite conversions in 11 downtown buildings. 

A recent study of office conversions in six Canadian cities shows that it takes a complex mix of factors, everything from the right market conditions to a favourable building layout, to make conversions work.

 "We know that only 20 to 30 per cent of the building stock is feasible for conversion," said Jennifer Barrett, managing director of planning and policy at the Canadian Urban Institute (CUI), which conducted the study. 

• Read the study here.

They looked at six Canadian cities: Victoria, Regina, Winnipeg, Moncton, Halifax and Ottawa, evaluating the ability of each to support office-to-residential conversions based on everything from the regulatory climate, to market conditions, to the building stock available.  

Barrett said it boils down to whether or not the venture makes financial sense. 

"One architect said to me that any building is convertible, it just depends on how much effort it would require and whether that makes it financially possible."

Based on a ranking system used in the study, only 30 buildings in the six cities they looked were considered viable. 

In an interview with CBC News, Barrett laid out some of the factors 

Market conditions: Here London would outperform the six cities studied. They all had downtown office vacancy rates ranging from 6.2 per cent (Victoria) up to a high of 17.5 per cent (Halifax). A downtown office vacancy rate of 10 per cent is considered healthy. Residential rental vacancies in all the six cities studied were below three per cent, London is below two per cent, based on October 2022 data from CMHC.

Building inventory: The layout and footprint of available buildings is a big factor in whether or not they can be converted. Buildings with rectangular footprints work better than large, square-shaped office buildings. Alex Wray is a PhD candidate at Western University's department of geography and environment who studies urban issues. He said many London buildings aren't good conversion candidates. 

"Most of London's office buildings were built at the height of modernist office development in the 60s and 70s with large floorplates that limit window access in all but the largest size of units, but also have much lower ceiling heights than modern residential buildings," he said. The state of internal systems such as plumbing and ventilation lines are also factors.

Contractor knowledge Not all developers have relationships with contractors who know their way around converting buildings: "The cities with the most success with conversions, it was often attributed to a small amount of developers who were interested in, or had experience in, adaptive re-use," said Barrett. 

Incentives While Morgan didn't offer many details of the incentive plan in Monday's speech, he did lay out in broad strokes a city grant program to entice property owners: $28,000 for a two-bedroom apartment, $20,000 for a one-bedroom apartment. More details are expected when the full plan is presented at the Feb. 21 committee meeting. Calgary's plan started with a $100-million fund and offered developers $75 a square foot. 

Wray is sceptical London's program will be enough to spur conversions. "Calgary's offices are generally much newer, built during the 80s and 90s, so were easier to convert," he said. "These incentives are nowhere near the costs associated with most buildings." 

CBC News reached out to developers for comment. A spokesperson for Shmuel Farhi, one of London's largest landowners, said he will be providing a written response to the city's proposed program "in due course."