Analyst warns more effort needed to avoid city core wastelands
Company execs are determined to get more people back to work full time, leading international real estate expert Andrew Dinsmore, chief financial officer at Engel & Völkers Americas Inc., to see a trend: people and businesses are returning to the downtown cores.
In Nova Scotia, that means workers are looking to live in Halifax Regional Municipality. In Toronto, office occupancy has risen to 72 per cent of pre-COVID-19 levels, according to the Strategic Regional Resource Alliance.
But cities are still struggling to recover from the pandemic exodus.
There has been a real hollowing out of some downtown cores, Dinsmore said. Part of the solution is for employers to make office life more appealing, but all levels of government have to make city cores more desirable places to live and work.
“The sooner you address (the problems), the better chance you have of fixing it,” he said.
Toronto City Council also approved a plan earlier this year to convert the former Canadian Pacific Building in the downtown core into 127 condos, plus retail and restaurant space.
Dinsmore said he would like to see governments offer more incentives for office conversions and take a more methodical approach to identifying projects that could work. That might include being flexible on zoning bylaws.
Halifax, for one, is developing a pilot program that provides grants to convert some downtown office buildings into housing. Calgary has had a boom in office conversions and the city in September allocated $153 million to its office-to-residential conversion program.
Toronto City Council is looking seriously at a similar idea, but it recently released a report that suggested converting empty office space into housing will not be a straightforward process and may not even be feasible in some cases.
Dinsmore also said cities need to deal with homeless encampments by augmenting their services to provide a more holistic approach to support and deal with the issue. That also involves a strong support network.
He’s worried inaction could leave some cities looking like St. Louis: hollow at the core.
“It becomes almost a death spiral,” he said.
Dinsmore said remote working isn’t going away and businesses play an obviously important role in getting people back into the office, but a top-down edict isn’t the best approach. There has to be a better discussion between employees and leaders on how to balance the need to get back to the office and the benefits of working from home, he said.
Neil Lovitt, vice-president at Turner Drake & Partners Ltd., a real estate consulting company in Halifax, said more housing in downtown cores is needed to help address the growing return to the office, and office conversions are a worthwhile idea to achieve that. But not all office real estate, particularly newer buildings, is suitable for conversion.
“Overall, I think downtowns are still desirable, important locations,” he said. “The question is: do you spend resources or money trying to get back to an older model, or do you find a new model?”
People wanting to work from home in the outlying regions and the corresponding number of vacancies downtown might mean those who couldn’t afford to live downtown in the past now can.
“It’s just a very complicated issue and it’s very hard to say with any certainty how it’s going to play out,” he said. “We could end up spending a lot of money where, at the end of the day, those subsidies are helping a property owner with what would have been their loss and turning it into a subsidized investment risk. You end up with housing supply that isn’t necessarily cheap and not necessarily desirable.”