Toronto could see empty office spaces converted into youth housing

A Canadian think tank has a plan to prevent young people from fleeing urban centres in search of more affordable accommodation.

As part of its Toboggan Flats project, Youthful Cities is working on a plan to convert vacant office spaces in Canada’s urban centres into co-living residential developments for young people struggling to pay rent in the country’s most expensive cities.

“City centers are starting to empty out because people aren’t going back to work,” Robert Barnard, co-founder of Youthful Cities, told CP24.com. “We have these empty office spaces that could actually be housing.”

Barnard said the current state of Toronto’s housing market means it’s nearly impossible for young people to afford to live downtown.

“Years ago, we were building condos so that young people could get to the city centre and with the intention that they would buy them. Now, young people can’t even afford to rent the condos that were built for the last generation of young people,” he said. “So the challenges are piling up.”

He said that while cities around the world have begun to build co-living spaces for young adults, it is a relatively new concept in Canada.

“We have students in dormitories. We have seniors in nursing homes. We have people who share houses and share bathrooms, kitchens and laundry rooms all the time. So it’s everywhere,” Barnard said.

“This conversion of office space to co-living space is a testament to the ingenuity that Toboggan Flats brings and has been done in other places around the world, particularly in Paris, France, but it is a first for Canada and we are excited to do it.”

Barnard said that while converting office space into residential units can be expensive, co-living models are more cost-effective and can be built more quickly.

“When you create a condo or an apartment, you have to put plumbing in every single one of those rooms and that is extremely expensive and time-consuming… That means that conversions struggle to create affordable housing, which is what we’re focused on at Toboggan Flats,” he said.

“If governments want to build housing in the city centre, this is one of the best ways to do it, it’s cost effective and it’s very well suited to getting those young workers to help boost the local economy as well.”

He said the cost to rent a unit in a Toboggan Flats building would be about $1,200 a month, including utilities. That would provide a young tenant with a private, furnished, 175-square-foot room with a shared bathroom, kitchen and laundry facilities.

Depending on the configuration of the office building, Barnard said some co-living spaces could include gyms or rooftop patios. Amenities such as housekeeping or fitness classes could also be included in the price, she said.

“Our goal is to have 100 percent of these spaces be affordable housing,” he said.

He noted that the average person between 25 and 34 years old in Canada earns a little more than $50,000 a year.

“If you take 30 per cent of income, which is what people say should be spent on housing… that’s 1,250 a month,” he said. “A one-bedroom apartment in downtown Toronto costs more than 2,500 a month.”

He said the think tank recently conducted a study to assess demand for such housing in Canada and found that about 30 per cent of respondents said they would be very interested in residing in a co-living space in a converted office building.

“It is of great interest,” he said.

He added that there are many social benefits to living in co-living spaces.

“It’s really about creating a community within those buildings. It’s a huge support network, and young people today in Canada are the most isolated group in society,” Barnard said. “So we want to create a solution for that as well.”

He said that while no projects have been completed to date, three buildings in Toronto are being considered, along with two in Hamilton and others in Calgary and Ottawa.

The goal for the first phase of the project is to complete around 2,000 units across Canada, with some of them operational by 2025.

Barnard added that while they initially plan to convert entire buildings, there is the possibility of converting certain floors of the buildings while other floors continue to function as offices.

Toronto’s office vacancy rate remains high

In recent years, discussions about office conversion have intensified in Toronto following a rise in office vacancies in the downtown core. The City of Toronto is also looking into allowing some office buildings to be converted into residential units in the wake of a housing affordability crisis.

According to a recent report released by real estate consultancy CBRE, the office vacancy rate in downtown Toronto reached 18.1 per cent in the first quarter of 2024, the highest level since the 1990s.

Office vacancies skyrocketed during the COVID-19 pandemic as remote work became the norm for many office workers.

While there has been a significant shift in the number of workers returning to city-centre offices following the pandemic, office buildings have not fully recovered as hybrid working models remain in place.

But the persistently high office vacancy rate in downtown Toronto may not be a cause for panic, as experts say they are optimistic the sector will recover, albeit slowly.

“I’m actually quite optimistic about Toronto… The office situation in Toronto is much better than in much of North America,” Karen Chapple, director of the School of Cities at the University of Toronto, told CP24.com.

“For example, even if we are approaching a 20 per cent vacancy rate in downtown Toronto, we have a situation in downtown San Francisco where there is a 36 per cent vacancy rate.”

He said that while office spaces in newer developments, such as The Well, have remarkably low vacancy rates, some older office spaces are having a hard time finding tenants.

Older office buildings that have been successful in securing tenants, he said, typically attract more traditional businesses, such as dental offices, where remote or hybrid work isn’t feasible.

“If you look at the bigger picture, if you look at the booms and busts in the office sector over the last century, and there have been many of them, this one is not as extreme as some of the ones we’ve had. It’s certainly nothing like what we’re seeing in some of the office markets south of the border,” Chapple said.

“I think we are in pretty good shape, but the change is slow and we are going to have to be very patient.”

Adam Jacobs, head of research at Colliers Canada, an investment management firm, said it’s probably too early to start thinking about widespread conversions right now.

“I think we’ll probably see more stability over the next year,” he said.

“There is no way the next five years will be that bad in terms of inflation, interest rates, working from home and new developments,” he said.

He noted that it would likely take a “longer, deeper period of vacancy,” like the one seen in Calgary, to begin a shift toward converting these spaces for other uses.

“We haven’t seen the wrecking balls in the centre yet,” he added.

Some offices are ‘ripe’ for reconversion

The city currently requires developers to replace any lost office space, but that policy is currently under review as part of its Office Space Needs Study.

“The city has been very cautious in some ways… and it should be cautious in that regard because it doesn’t want to undermine its economy in the long term,” Chapple said.

But he said there are a small number of office buildings in the city centre that are “ripe for renovation”.

Chapple called the Toboggan Flats project “a very exciting piece of work.”

“I think they are right about the market there, that there are people who cannot access the real estate market because of the prices,” he said.

“They just want to live in downtown Toronto for four or five years and then they’ll move to the suburbs. You can find them at this point in their life and a co-living situation with shared bathroom and kitchen is really perfect for them.”

Barnard said obtaining development approval in Toronto represents an additional hurdle for Toboggan Flats, given the city’s policies around protecting office space.

“That’s a unique challenge in Toronto. We don’t have that challenge in Hamilton, Ottawa, Calgary and other cities. So that could mean it moves faster (in other cities),” he said.

“It seems like a positive outcome is coming… It would make our lives a little bit easier if it is resolved sooner. So we are hopeful.”