The recovery in Canada’s office market is being led by newer, well-located properties, leaving landlords of aging buildings to choose between costly renovations, conversion and redevelopment.

That divide is apparent in Toronto, where Fiera Real Estate plans to demolish a 13-storey office property at 1075 Bay St. and replace it with a 62-storey tower containing 738 homes.

Toronto council approved changes to the proposal in July that reduce the minimum non-residential space to 1,815 square metres from 12,100 square metres, an 85% cut. The period for appealing the zoning bylaw ended Sept. 1.

The decision comes as Toronto posts some of the strongest office results in the country. The market recorded more than 523,000 SF of positive absorption in the second quarter, lowering overall vacancy to 10.6%, according to Colliers. Vacancy in the downtown and midtown core fell below 10% for the first time since 2022.

Companies are competing for modern offices close to transit, but the improvement has not removed the difficulties facing older properties. Their owners must determine whether renovations can command enough rent to justify the investment—or whether the land and structure are more valuable in another use.

Fiera’s building was completed in 1976 and is 70% vacant, according to the planning rationale filed with the city. The company previously secured approval for a 59-storey development that included considerably more commercial space.

Its revised plan replaces most of that office component with housing. The remaining non-residential requirement can be met with commercial space, affordable rental housing or a combination of the two.

Another 1970s office building is facing a less certain future at 85 Albert St. in Ottawa.

Metcalfe Realty has applied to convert the 16-storey building into 107 apartments while retaining its structural frame. The landlord has not committed to proceeding and could instead renovate the 89,000-SF property for office tenants.

Metcalfe president Jen Arbuckle told the Ottawa Business Journal that the company is seriously considering the conversion. OBJ reported that 85 Albert and nearby 116 Albert St. are each about 50% vacant, and that Metcalfe has stopped signing or renewing leases while moving tenants to other buildings in its portfolio.

Pictured: The office tower at 85 Albert St. in Ottawa, left, could be converted into apartments, while the building at 1075 Bay St. in Toronto is slated for demolition and redevelopment.