Barren space to happening place

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This article was published 09/10/2023 (727 days ago), so information in it may no longer be current.

Flipping barren office spaces to residential units has become an all-too-popular trend in Winnipeg’s downtown — and across the country — in a post-pandemic world.

A century-old Sterling Building at 283 Portage Ave. was the first to see a major conversion to 64 suites in 2018. Then the upper 10 floors of 433 Main St., where the federal passport office lives, was transformed. The most recent sizable makeover came in the Medical Arts Building, which was retrofitted into 104 apartment units in 2021.

Should there be more?

Winnipeg’s office vacancy rate climbed to 17.4 per cent in the third quarter, according to a recent report from CBRE, a worldwide commercial real estate firm. The jump in available space is largely owing to the two towers at 333 Main St. branded with the BellMTS logo, which hit the market for a cool $34 million in August and sit mostly empty.

Still, any concern around the 10.2 million square feet of net rentable area downtown is warranted.

Aside from the persistent hope among commercial real estate firms that more people will return to work downtown, there isn’t much to suggest that vacancy rates will drop any time soon.

That is unless developers believe more of these spaces are equipped for an alternative use.

That’s what Bryce Alston of Alston Properties saw in 175 Carlton Ave., a tired six-storey office building that was begging for a change.

Alston, who began the conversion last summer, anticipates the $4.5-million retrofit of the top five floors will be completed in February. The building will house 35 rental units, ranging from one to two-bedroom options, above the retail tenants on the ground floor.

“We really like the office building conversion because you just have so much to work with, so much infrastructure that is there to work with,” said Alston, who is responsible for the new look at 433 Main St. “So we actually find those projects less risky, less difficult, faster and easier to execute on than a new build.

“At the end of the day, you have a full concrete asset in a phenomenal location downtown and your redevelopment costs on that is definitely a discount to building an equivalent new building.”

Existing foundation and mechanical systems in place can make building conversions up to one-third less costly than new construction. Perhaps these retrofits can also help slowly ease the housing shortage that continues to plague the city, and pull more residents downtown, an area the city is still trying to re-establish following the pandemic.

“If history has any trajectory on the future, the redevelopment of existing buildings has been more important in the revitalization of the downtown than new builds have, in my opinion,” Alston said.

“But at the end of the day, we do not build enough housing in Winnipeg. People get excited about the concept of building 300 new rental units in all of downtown — like that’s a joke compared to other cities across North America. We should be delivering a lot more units in downtown — 500-plus units — to really turn the page on some of these issues that we have downtown and unlock the opportunity that exists.”

In May, the city unveiled CentrePlan 2050, its latest plan aimed at revitalizing downtown. The plan outlines at least 350 new residential units being added to the city’s core each year until 2030, followed by 500 annually after that. There are is also a plan for the Sports Hospitality Entertainment District, which was halted by the pandemic, but has yet to announce whether it will resume. Stantec, which manages the SHED project, could not be reached for comment.

But Alston believes developers can help beyond those projects, they just need a carrot to chase.

The Downtown Rental Development Grant Program was an incentive for Winnipeggers to move to the city’s core in the past. The program, cost-shared by the city and the province, was launched in 2010 and offered affordable monthly rents to more than 700 units. Developers jumped on the opportunity to build a space that would offer affordable rates — the first being The Avenue on Portage — and the city and province re-upped with another $20 million in funding for developers over three years, beginning in 2011.

“Without a system downtown, it’s going to suffer in the next few years I think,” Alston said. “You look at it from a point of view of, there’s just not going to be a lot happening unless the city and province do something. Because you look at all these projects that are just wrapping up, they were almost all funded through the Rental Development Grant Program.

“Now, you look at the development pipeline for downtown and it’s stark. There’s next to nothing.”

So what can the city and province do?

Take Calgary’s Downtown Development Incentive Program, for example. Launched in 2021, the city provides grants of $75 per square foot (up to $15 million) for the converted space, waives the need for a development permit and expedites its approval process. The result is a full cupboard of residential development in the city’s core, with Calgary projected to convert six million square feet of office space — more than 1,200 units — over the next decade and increasing its downtown population by an estimated 20 per cent.

But it could take more than that in a place such as Winnipeg, according to Phillipe Cyrenne, an economics professor at the University of Winnipeg.

“I think the first thing that you would need to do is get some more services for people who want to live downtown,” he said.

“It’s kind of a multi-pronged thing. You have to make downtown safer, you’ve got to concentrate the activities or attractions and you have to make attractions — you’ve got to make attractions. You gotta have a reason for people being down there. Unless you do all those things, you’re going to have trouble.”

Cyrenne acknowledged that True North Square and True North’s $500-million plan to revitalize Portage Place into a campus that will feature health care, housing and a grocery store is a good start.

Safety in the area has been an ongoing issue that appears to only get worse as each year passes. In July, the province announced a $10-million investment over the next two years to improve safety measures through the Downtown Community Safety Partnership and Winnipeg Police Service, expand its CCTV network and add more lighting.

Whether it’s enough to persuade more Winnipeggers to call downtown home, remains to be seen. One thing Cyrenne said he expects, however, is for office-to-residential conversions to keep coming.

“I think in the short term, there’s probably going to be some more of this just because if people are trying to rent these office spaces and they’re not finding much interest, then they’re going to have to find something for those buildings,” he said.

jfreysam@freepress.mb.ca