A city staff report calling for a more streamlined approval process and lower fees for office-to-residential conversions is “a step in the right direction” but doesn’t go far enough, prominent local developers say. With office vacancies soaring in the downtown core and rental housing in short supply, the document slated to go to the planning […]
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A city staff report calling for a more streamlined approval process and lower fees for office-to-residential conversions is “a step in the right direction” but doesn’t go far enough, prominent local developers say.
With office vacancies soaring in the downtown core and rental housing in short supply, the document slated to go to the planning and housing committee next week is recommending a number of measures aimed at smoothing the path for builders to convert aging office towers into apartments.
They include reducing application fees for procedures such as Official Plan amendments and other items that typically amount to tens of thousands of dollars per building – in some cases, as much as $54,000 just for complex site plan controls.
Staff also suggest ways to cut red tape in the application process, including waiving items like transportation impact assessments and urban design review panel reports and broadening exemptions for developers to file records of site condition.
In another move aimed at saving real estate firms time and money, the report recommends that conversions be exempt from zoning amendments for things like setbacks, as long as the size of the building envelope remains unchanged.
CLV Group president Oz Drewniak, whose company has already completed one downtown office conversion project and has another in the works, praises city staff for their willingness to work with developers to ease the conversion process.
While he’s on board with the changes proposed in the report, he is urging the city to go further in its push to encourage such projects.
“I think it’s a step in the right direction, but it’s not far enough,” Drewniak says of the report. “I think council needs to take courage to be able to pull all the right levers that they have at their disposal – and I don’t think they’re pulling all the levers to their full capacity.”
Even if all of the current application fees for conversions were dropped, Drewniak says, the total savings would be just a drop in the bucket for projects that often run well past $100 million in construction costs, or virtually as much as brand-new builds.
“If you were to break that down in terms of rent (savings for tenants), we’re talking about pennies,” he says. “There’s no significant value to that.”
Kelly Rhodenizer, vice-president of commercial and multi-family development at Regional Group, agrees.
Estimating that construction costs have skyrocketed more than 50 per cent since before the pandemic, she says her firm has looked at transforming an office building that’s been vacant for five years into a residential complex, but concluded the margins on the project would be “borderline” at best.
“Conversions are really tough from a constructability standpoint,” Rhodenizer says. “There are all sorts of structural issues, and when you pull everything down, you don’t know what’s there. (City staff) have tried to make the process easier from a planning approval standpoint, which I think is fantastic, but the cost of developing has gone up so much in the last couple of years, and my pro formas don’t work right now.
“This new (report) doesn’t push me to pull the trigger to say yes.”