A Halifax developer says his company’s plans to convert a 1970s office tower into residential units are on schedule and should be ready for occupancy in two years.
Elliot MacNeil of Sidewalk Real Estate Development acquired the Centennial building in August 2021. Today, 12 of the building’s 14 floors are largely gutted and workers have converted the former office space into one-, two- and three-bedroom rental apartments.
“We love transforming old buildings into something new and exciting,” says MacNeil. “We take what’s there and work with the existing challenges. Call us crazy, but we’re excited about it and happier with the end product than with generic new builds.”
This type of conversion is likely to become more common in the commercial real estate industry, experts say. Residential vacancy rates are at a record low in the city, while commercial vacancy rates are rising.
Elliot MacNeil is president of Halifax’s Sidewalk Real Estate Development. (Preston Mulligan/CBC)
A recent report from Remax puts the vacancy rate for commercial properties in Halifax at 18 to 20 percent. Bill MacAvoy, managing director of Cushman and Wakefield Atlantic, says the vacancy rate has less to do with the increasing number of people working from home than with the appeal of shiny new buildings downtown.
“Probably the biggest driver is the addition of new supply to the market over the last half decade, and generally, renters are gravitating toward new products because they offer new features and amenities,” says MacAvoy.
The completion of the Nova Centre, Queen’s Marque and Waterside Centre forced a change in Halifax’s commercial tenant profile. MacAvoy says when leases expired in older buildings like Purdy’s Wharf and the Centennial Building, these businesses moved to one of three new locations.
“So you have these kinds of abandoned buildings with very limited parking,” MacAvoy says. “And buildings that were built for previous generations don’t have the same quality of building systems. So the air quality isn’t as good. They’re more expensive to heat.”
According to an industry analyst, many companies have left the Centennial Building over the years to move to new office space. (Craig Paisley/CBC)
This is where Sidewalk Real Estate comes into play.
MacNeil says when his team acquired the 56-year-old Centennial Building, they knew there would be surprises – expensive surprises. That’s to be expected when you convert an office tower into an apartment building.
Before the renovation, the building had two bathrooms per floor. The challenge now is to redesign the plumbing so that there are multiple bathrooms and kitchens on each floor for each apartment.
And then there is the issue that MacNeil calls “eviction.”
“Imagine you have 100 leases for existing offices,” he says. “You have to negotiate and wait for the leases to expire.”
Although the renovation is well underway, two floors of the building remain untouched as they await the expiration of leases. One of those tenants happens to be the Progressive Conservative Party of Nova Scotia.
MacNeil says all three levels of government are desperately trying to get new housing projects started, but the Centennial redevelopment is, at least so far, a private endeavor. He says he and his team at Sidewalk 2021 applied for and were approved for affordable housing funding through Housing Nova Scotia.
The street view from one of the 14 floors of the 56-year-old Centennial Building. (Preston Mulligan/CBC)
“But we haven’t finalized the terms of the grant or received any money yet,” MacNeil says. “We’ve just started construction and will decide how that funding pans out in the coming months.” MacNeil says there is currently no plan or commitment to classify any of the future housing units as affordable.
“Construction costs are enormous today. And you see rents rising to justify the increased costs. So that’s actually what we’re seeing.”
MacNeil says he would like to see incentives for converting office buildings into housing. One such program exists in Calgary, where the city has launched a program to encourage developers to convert office buildings into housing. Under the program, eligible applicants could receive up to $75 per square foot.
“A per square foot incentive would certainly lead to more conversion in our city, meaning more products get to market faster,” says MacNeil.
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