Hamilton hopes new incentives will spur transformation of empty offices into homes

What would it take for vacant building owners in downtown Hamilton to shift from offering high rise offices to high rise homes? 

City of Hamilton staff are hoping a new grant pilot program will spur landlords to consider converting their buildings as the downtown office vacancy rate — currently about 18 per cent compared to the national average of 19.7 per cent, said Phil Caldwell, senior business development consultant with the city.

Hamilton's rate is expected to rise in the coming years, he said. 

"For the revitalization of downtown, time is of the essence," said Caldwell at a general issues committee meeting last month. "We want to support housing supply in the city and core." 

Councillors voted 14-1 in favour of the pilot, which will offer building owners grants to cover some conversion costs, according to a staff report. The economic development department plans to use $2.5 million from other programs to pay for the grants. 

The program also supports those wanting to convert to hotels, of which there's currently a shortage in downtown, especially of "luxury" boutique hotels, the report said. 

"Not only does this hamper the city from attracting larger, major events, but the demand and visitor spending spills over to neighbouring communities outside of the city," said the report.

Other cities offer incentives

The idea of turning offices into residences has gained traction in recent years as cities grapple with the lasting impacts of the COVID-19 pandemic when companies allowed employees to work from home. Those policies persist today, with fewer people using downtown cores. 

About 1,600 administration staff with the City of Hamilton, for example, currently work two days in person, three days virtually, Lora Fontana, executive director of human resources, told councillors. 

London, Ont., Ottawa, Calgary and Edmonton all offer office building owners incentives to convert to housing to tackle vacant buildings, and have seen some success, said the report.

WATCH | Transforming an office into 94 residential units:

Hamilton's rate is expected to increase as leases come to an end and businesses reconsider how much space they need, said Caldwell. Landlords may decide to hang on to their buildings, even if they're empty, and "wait and see" if the market improves. 

Hamilton Coun. Brad Clark, who voted against the pilot, asked staff why the city has to "bail out" businesses with too much office space.  

Caldwell said many landlords are reluctant to take on the challenge, leaning toward maintaining the status quo. 

"Many are legacy owners who aren't in the world of residential development and it's a bridge too far to a certain extent," he said. 

Others have told the city "the financial viability" of converting "is not quite there." 

"They're interested to see if this program comes online. It might be a deciding factor," Caldwell said. 

Grants up to $20K per unit

Converting offices to residence can be expensive and complicated, and cost between $200 and $300 per square foot, staff estimated in their report.

Work usually includes: 

• Upgrading and expanding electrical and plumbing.
• Reconfiguring floor plans. 
• Working within older buildings that may require asbestos removal.

The available grants scale up with the number of bedrooms to encourage the creation of larger units for families, the report said. Landlords would be eligible for up to $10,000 per studio unit or hotel room to $20,000 per three-bedroom unit. Grants will also help pay for feasibility studies. 

"I won't be supporting it," Clark said. "I don't think we have a demonstrated need yet, but I understand the desire." 

The West End Home Builders' Association (WE HBA) said it welcomes the intent of the grants, noting that landlords are currently facing difficulties finding office tenants and an "extremely difficult" new condo market.

However, the advocacy group for land developers in Hamilton, Burlington and Grimsby is concerned that the grant amounts won't be enough, WE HBA planner Anthony Salemi wrote in a letter to council. 

Staff said they'll evaluate the program, and any potential city barriers, and report back in the fall.