Can this unused office space become badly needed housing?

Empty offices, commuting chaos, impossibly pricey real estate. Can the post-pandemic downtown be saved? In this ongoing series, we examine the fate of the ailing city core and what it will take to thrive again.

Once the tallest building in the British Empire, the stately former home of the Canadian Pacific Railway has slumped into its second century, struggling to find tenants for its office spaces.

The Beaux Arts-style tower at the corner of Yonge and King streets was languishing even before the pandemic rearranged the rhythms of work in Toronto’s Financial District. Its small, dated floor plans were a hard sell compared to the sleeker, expansive offices emerging nearby.

Now, on a good day, 11 per cent of office users are swiping their cards to enter, said Matthew Kingston, an executive with the real estate investment trust that has owned the property for decades.

On quieter days, it’s closer to four per cent, he said. And he’s not expecting a renaissance any time soon. “In the last 100 years, what people are looking for has just changed dramatically,” Kingston said.

So, the owners are proposing a major change of their own.

The pitch is a conversion from office space to housing, which would also see five stores added to the existing 15, with commercial space remaining at the tower’s base.

It’s a concept that seems to be picking up steam in a post-pandemic Toronto, informally if not yet officially, as offices have struggled to lure workers back full-time. Could some of these underused offices be reformed into homes, particularly as the Toronto battles a housing crisis?

What looks like an elegant fix for two problems at once does, however, poses some thorny engineering and political problems. Few existing offices are easily convertible, planners and architects point out.

For example, larger floor plans are hard to carve up in a way that offers window access in each unit without veering into impossibly skinny layouts. And city policy currently dictates that any lost office space in areas like the Financial District must be replaced.

That last point is something of a deal-breaker, Kingston and others are working on the 69 Yonge St. project say. They argue that the cost of converting a heritage site is just too steep to consider also building office space elsewhere, or keeping space underused in a new design.

“A lot of the discussions that we have are around that one piece,” said Alex Savanyu, an associate with the planning firm Bousfields working on proposals for Kingston’s team, H&R REIT.

It’s not impossible to get an exemption, Savanyu said, pointing to 1255 Bay St. — where lost office space was recently waved off for a 35-storey mixed-use building. But it would be the exception rather than the rule.

For now, Savanyu said they’re trying to work with city hall’s planners to reach some kind of agreement before trying to push the proposal ahead, leaving its timelines yet unclear. “This has been such an amazing building for the past hundred-plus years — and what we’re trying to do is ensure its longevity.”

The conversion vision

While Kingston rhapsodizes about the early life of the old Canadian Pacific Railway headquarters — after its construction in 1913, he conjures an image of travelers crossing its marble lobby to the ticket office to arrange rail or steamship journeys — that former sheen has faded.

Its modest floor plans couldn’t compete with the tens of thousands of square feet per floor that were built nearby. The ceilings and floors of the building were made of fragile terracotta, Kingston said, which made it harder to update its information technology infrastructure or its mechanical systems to improve air filtration. It didn’t offer many other amenities.

Just because a building is struggling to attract office tenants doesn’t mean it would work as housing instead — but Kingston thinks they’re in a decent position with 69 Yonge.

While the tower’s small floor plate made it hard to compete as an office, it made it easier to turn into housing. When considering a conversion, planners will look at the distance between a building’s windows and the center of the building. The closer the distance, the more light will be able to reach the ends of an apartment. The larger the office space you’re working with, the skinnier any unit resulting would need to be to ensure each one had window access.

It’s a challenge that doesn’t exist with office design in the same way, because offices can include areas like boardrooms or mechanical rooms in the middle that don’t need natural light. For housing, Kingston says the ideal distance from windows to interior walls is about 30 feet.

Even starting with that smaller floor plate, the REIT will need to make major changes. All the windows, currently single-paned, will have to be replaced in order to meet the Toronto Green Standard’s requirements around energy efficiency, Kingston said, since the current ones are “leaky.” The three thinner existing elevators would also be swapped for two wider ones, since the smaller lifts are seen as dated.

The trust is promising a heritage restoration at the same time, vowing to repair the building’s granite and limestone cladding, and restore the old metal Canadian Pacific Railway lettering on the outside, the outline of which is still visible today.

Parking will be a question, with the trust currently proposing none for the new development.

Then there is the host of plumbing, mechanical and electrical overhauls required to go from shared office amenities to bathrooms and kitchens in each of the 127 proposed homes.

It’s a costly proposal, Kingston said, though he declined to specify the price tag — or the expected price for each unit. Documents filed so far do not indicate plans for affordable units, and Kingston emphasizes a conversion of this scale and vintage comes at a premium.

It’s all a non-starter, though, if they can’t get an exemption to the office replacement rule.

The planning problem

Under Toronto’s Downtown Plan, any development in the Financial District — as well as some surrounding areas like the Bloor-Bay office corridor — should provide a “net gain” of floor area for office use, and ensure no “net loss” of other non -residential space.

It’s a policy that Toronto’s chief planner, Gregg Lintern, said was established to recognize how businesses in the Financial District contribute to the local and national economy. He recognizes that the office vacancy rate has been rising, but notes that it was higher in the 1990s.

His team often speaks with developers about pursuing designs that integrate existing office space into a mixed-use design with a housing component. He noted that 69 Yonge St. was already zoned to allow this kind of mix. Right now, he said the conversion proposal was under review — but concerned the office space wasn’t “as well designed” as others.

“It’s one of those B or C office buildings. And that’s typically, in the past, where we’ve seen pressure to convert,” he said. “The lower tier, or the more aged-out office buildings.”

Bousfields, in materials submitted to city hall, also described the tower as a “class B” office — and in doing so, argued that boosting Toronto’s housing supply and restoring a heritage property were “more critical” motivations than retaining office space no longer in its prime.

The stakes

As H&R’s case moves ahead, some others are keeping a close eye.

Steven Paynter, principal at the design and architecture firm Gensler, said interest in converting commercial spaces into housing seems to have “exploded” since the pandemic.

“It’s really taken off in the last six months, and that’s literally because people have started losing money on their office buildings,” Paynter said. “They thought that people would come back more, and that rents would start going up again — and they haven’t.”

Paynter sees 69 Yonge as a test for the city’s decades-old office replacement policies, and the priorities of city hall — as well as potentially the Ontario Land Tribunal. “The city will have to give them an answer,” he said.

The city has pursued some of its own conversion projects in recent years, since the federal government launched a new program in 2020 that funds conversions and certain kinds of new construction for affordable housing. But city hall has turned to a wider variety of properties than its limping office spaces, including hotels and a former seniors residence.

As the conversation about office conversions is percolating through major cities around the world, Kingston and Savanyu don’t believe that overhauling 69 Yonge will trigger a sudden surge of similar projects — noting the century-old structure’s downtown’s uniqueness.

But Savanyu does see interest in conversions picking up steam. As for the CPR building, he sees the housing as the tower’s second wind. “We are bringing this site back to life,” he said.

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