The Makes or Breaks of Adaptive Re-use to Rental Apartments

Fair Exchange of Rental Industry News | Special Edition 2024
Paul Fritze, BASc, P.Eng. | Principal

The return to in-office work following the COVID-19 pandemic is moving slower than the Canadian commercial real estate sector has hoped for. National commercial office vacancy rates are at an all-time high at 17.6% as of the end of 2023, according to Altus Group1. This trend has some owners and developers examining adaptive re-use of existing commercial office buildings to residential rental apartments.

While attractive at face value, when income statements yield dramatically lower revenues, the excitement to pivot and convert office space to residential apartments is not financially viable for every vacant office building. The following are some key considerations for developers to narrow their search to take advantage of this opportunity.

Zoning and permitting

The primary advantage of conversions is the advancement of construction in comparison to a site re-development (i.e., the ability to capitalize financially and environmentally on the existing shell and structure). This leg up can easily be lost in the process to comply with residential municipal zoning requirements through the site plan control process. If purchasing a commercial office building for adaptive re-use, performing a planning study in the due diligence phase to identify requirements to avoid or minimize zoning amendments is a must.

Fenestration and floor plate

Floor plate efficiency is paramount to a successful residential apartment complex. Office buildings so not have the same code requirements for natural light as residential buildings do. As such, fenestration – the layout of the windows – will dictate where bedrooms and living spaces go in a unit if you’re trying to work within the existing building shell and structure. In some buildings, the results in long, cavernous suites with wasted floor area on corridors or costly base building modifications.

Equally, the dimensions and shape of the building floor plate constrain efficiency. Square-shaped floor plates are common for offices, which lend to multiple corridors in converted residential apartment buildings.

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