Cities around Canada can learn a few things from Calgary about how to seamlessly convert underused office buildings into rental towers, some industry professionals say.
Neither of Canada’s two largest cities offers financial incentives to fund office-to-residential conversion projects, unlike Calgary, a city that’s emerged as a North American leader in the space largely because of its subsidy and grant programs.
“If government comes along and kicks in some funding, landlords in Toronto and Montreal would be all over it. It’d be an exit strategy for them on an asset declining in value and becoming obsolete,” Keith Reading, senior director of research at Morguard, told CoStar News.
Although trophy towers in Canada’s two largest cities have rebounded from their pandemic-induced nadirs, the same cannot be said for Class B and C buildings, Reading said.
“Funding drives everything, so if private landlords get incentives and funding, they’d be all over [conversions] to increase the value of their property,” Reading said. “Some will retain the asset after conversion if they have experience in residential, but they may look at it and decide to sell the building. That’s what happened in Calgary with some of those projects — sell and get out of the asset.”
Geoff Kallweit, an engineer and principal in RJC Engineers’ Calgary office, credits the city’s funding mechanisms, including grants of $75 per square foot, for establishing it as a model city for office-to-residential conversions.
In fact, Calgary has set aside $153 million for its downtown office-to-residential conversion program, which pays developers up to $15 million per building to make conversions feasible. That funding is now supporting nine new projects that will turn almost 1 million square feet of empty offices into 972 homes.
“The city of Calgary itself has been incentivizing this kind of development through grant funding, and that’s a big part of the equation of what made these conversions happen so quickly in Calgary,” said Kallweit.
At least one other local municipality has decided to offer incentives to developers who convert office buildings into residences. In July 2025, the London, Ontario, City Council approved the Mobility Master Plan that included a mandate to increase residential and commercial density around public transit stops.
As part of that plan, the city offers developers grants of $35,000 per unit for office-to-apartment conversions.
The city of Toronto recently told CoStar via email that it was conducting an Office Space Needs Study to determine the feasibility of office-to-residential conversions, and had “adopted policy directions to reduce requirements to replace office space within new development” that entail working with applicants on a case-by-case basis.
“City staff continues to work with applicants interested in office-to-residential conversion and has a record of approvals for these proposals,” the city said. “Note that most parts of the City do not have in-force planning policies requiring office replacement in new development. Applicants and landowners interested in pursuing office-to-residential conversion should reach out to City staff to assess the types of approvals that may be needed for their proposal.”
Conversion process holds surprises
But the office-to-residential conversion process can be rife with surprises, according to George Armoyan Jr., the son of a veteran Canadian real estate investor who oversaw the transformation of a former Standard Life Insurance office building on Sherbrooke Street into what is now Le Samuel.
Speaking in February at the Quebec Apartment Investment Conference in Montreal, Armoyan said the project moved forward quickly, even without full due diligence, as his team leaned on instinct and experience.
“We didn’t have a whole lot of time to [conduct] diligence on the project,” he said. “We liked the location, the building had good bones… and we took a chance for sure.” That early decision set the tone for a conversion that required constant adjustments. “New conditions appear on-site every single day,” he said, adding that the compressed timelines left little room for fully coordinated plans. “You don’t have the luxury of time.”
Montreal doesn’t fund office-to-residential conversion projects. But there are other ways to optimize every dollar spent redeveloping disused office towers. RJC Engineers has worked on six conversions in Calgary alone, and Kallweit said they present an opportunity to introduce deep energy retrofits that augment a building’s performance while reducing operating expenses.
RJC’s role in these projects is assessing the structural conversion process, changing the mechanical systems, determining how to run plumbing through floors, and much more, but it has to determine how to do so efficiently so as not to fight against the structure, and incur more cost, Kallweit said.
“There’s a logical opportunity to go to a modern energy-efficient mechanical system, which then pays off through lower operating costs for the owner and reduced environmental impact from use of the building systems,” Kallweit said in an interview. “There’s a mixture of strategies for addressing the building envelope. While it’s more costly to reskin a building, there are some reasons to do that as well."
For instance, he said, "When you get into a conversion, where now we’ve got some operable windows for residential units, there’s often a desire to dress that building up and bring it into the modern age in terms of its aesthetic, so there’s a good reason to consider changing the envelope from that perspective too. Maybe a third to half of the time, we’ll see an owner who does a reclad. That also improves the inner performance of the envelope and creates a building that requires less air and heat and gains less heat."
Looking back at the development of Le Samuel, Armoyan said the team’s biggest misstep was trying to preserve too much of the existing structure. “We were trying to be a little cute with what we were trying to demolish,” he said. “In the end, we demolished everything.” That approach forced the team to redo work and absorb added costs. His advice now is blunt: “For anyone looking to do a conversion, just demolish everything on the inside. It’ll save time… it’ll save you money."
Despite the hurdles, Armoyan said the conversion delivered value beyond returns.
“It’s not going to be our highest return on a project for sure,” he said. “But there’s a lot of intangibles… it’s a legacy asset.” The experience has already shaped how the firm approaches similar deals, he added, noting that “your first one’s always going to be the hardest,” but future conversions benefit directly from those lessons.