The Office-to-Residential Trend in Canadian Cities

February 06, 2023

Rise and shine! It's a new day and The Shaker is here to serve you the best mix of residential real estate news. Yummy yummy.

What you should know:

Canadian cities are facing high office vacancy rates, with some city centers as high as 30%.
The trend of turning empty offices into apartments or condos is becoming more popular due to the shortage of housing and increasing residential rents.
There is government funding available for renovating offices into residential use and projects are underway or being planned in cities like Calgary, Halifax, Toronto, London, and Yellowknife.
The conversion of offices into residential properties is not a quick or easy process and requires buildings to score at least 80 out of 100 on the "conversion calculator." Only 25% of assessed offices make the cut.
Successful conversions also require government buy-in and support, with some governments turning their own excess space into housing and investing in developers to convert office space into new rental housing.

Manhattan Real Estate Market Takes a Hit

The Manhattan condo and co-op markets experienced a sluggish January 2023, down 51.2% and 49% YoY respectively.
The slowdown is due to a supply shortage and the economic climate caused by increased interest rates to combat lingering inflation.
The situation is similar in Brooklyn, where co-op contracts were down 55.8% and condo contracts were down 63.6% compared to January 2022.
Despite the slowdown, the median sales price of a Manhattan flat has gone up by $340,000 since 2013 and the average time a Manhattan apartment lingers on the market has decreased by over a month from 121 days in 2013 to 76 days in 2022.
The market may not adjust sharply, and prices are unlikely to drop.

U.S. home prices are down 2.5% between June and November and might see a negative year-over-year value for the first time since the housing crash of 2012.
The reasons behind this trend are the mad rush of demand during the Pandemic Housing Boom, which made U.S. home prices soar 41% between March 2020 and June 2022, and the historic mortgage shock.
CoreLogic, a real estate research firm, analyzed the likelihood of home prices declining in different regions, based on factors like income growth projections, unemployment forecasts, consumer confidence, debt-to-income ratios, affordability, mortgage rates, and inventory levels.
Of the 392 regional housing markets measured, there are no markets with "very low" or "low" odds of falling home prices between November 2022 and November 2023, 53 markets have "high" odds, and 338 markets have "very high" odds.
Although these odds don't guarantee a fall in home prices, the odds have been rising steadily over the past year, and the January assessment shows that 391 markets have a greater than 50% chance of notching a negative year-over-year home price reading in November 2023.

Senate President Kathleen Passidomo has proposed the "Live Local Act" (SB 102) to address housing affordability in Florida.
The proposal aims to incentivize private investment in affordable housing, offer flexible housing regulations for mixed-use development, and prevent local rent controls.
The "Live Local Act" includes $150 million a year from documentary-stamp tax revenues for the State Housing Trust Fund, with 70% of the money going to "attainable" housing and 30% going to housing for seniors and young adults.
Another $252 million will be moved into the State Housing Initiatives Partnership (SHIP) program, $259 million into the State Apartment Incentive Loan (SAIL) program, and $100 million into the Hometown Heroes program.
The proposal also offers tax exemptions, property-tax discounts, and eases local regulations to help clear the way for multi-family developments in commercial areas.

Send us your feedback, ideas, love at [email protected]