Ontario is not ready for a large office-conversion program, says the president and CEO of Colliers Canada.

“We’re not there in my mind, yet,” Brian Rosen, who is based in Toronto, told Connect in an interview.

High office vacancies in other major Canadian markets have prompted several investors and developers to contemplate and, in several cases, launch conversions to other uses, particularly rental housing. Vacancy has largely resulted from changing work patterns and employees’ increased desire for hybrid workplaces.

Cost-reduction efforts in the post-pandemic era and demand for more rental housing in urban cores have also influenced developer and investor sentiment.

Office conversions became highly popular in Calgary, where city hall has paused the Downtown Development Incentive Program after exhausting the $150-million budget for it. But Rosen said Ontario is a different market and has “a ways to go” before conversions can occur on a large scale.

“The general thought process is that the conversion from office to residential is expensive,” he said. “It’s not often feasible. Calgary has had the most success in terms of driving some of those conversions, and the [municipal] government has been an important partner in facilitating that. That’s due to the fact that it is not easy to convert from one from one asset class to the other.”

Government support overcomes barriers to conversion, making the investment worth the outcome and the return worth the investment. He said government needs to find a way through tax reductions, subsidies or other mechanisms to make conversions work.

“I don’t have a specific point of view on the policy,” he said. “I don’t have enough depth on this particular policy to want to comment on that. But the overarching support from a government for a conversion is likely going to be required to to do enough of them where it will matter.”

In Calgary, the “calculus” for conversions reached the point where government intervention was required, but Ontario office vacancy has not become a massive problem that needs to be addressed, he added.

“Just given where we’re at in the marketplace to supply [office demand], the job-growth forecasts over the future, there’s a very realistic possibility that the vacancy turns the other direction over time,” said Rosen.

“And then, we won’t be in a situation where we’re oversupplied.”