Hotel retrofits could be part of COVID-19’s legacy

by Neil Sharma on 12 Apr 2021

The hospitality industry has taken a beating during the COVID-19 pandemic and there’s sure to be a slew of hotels hitting the market either immediately or in the immediate aftermath of the global health crisis. However, in a city like Toronto, where available land is scarce, it could create unique opportunities to retrofit buildings that don’t survive the pandemic.

“Speculation is that these hotels are nowhere near a viable proposition and they’ll have to look at repurposing,” said John Miolla, vice president of operations at Koler Builders. “I’ve caught wind of a few of them. Owners/operators are sitting on assets that aren’t generating revenue. Repurposing them is one way to change that.”

Demolitions are expensive, but it’s entirely possible to salvage a building’s structure and gut the interior. In fact, The Britt by Lanterra Developments, a 41-storey, 727-unit luxury condo in Yorkville, used to be Sutton Place, one of Toronto’s most storied hotels that opened in 1967. Before that, the old Four Seasons on Avenue Rd., also in Yorkville, was successfully retrofitted.

“They took 35 storeys-worth of hotel and flipped it,” said Miolla. “They gutted the entire building and stripped the old electrical and mechanical systems, old drywall and partitions, so all that was left were vertical structural elements and horizontal floor plates, and they turned it into a viable alternative to a hotel. Obviously it’s been done and has merit.”

Miolla added that converting hotels into condos isn’t especially difficult considering that both are residential in nature. Demolitions are costly, but by retrofitting, the interior of the remaining structure can be tweaked.

“It’s like renovating a house—you have a box in which you can add on a few extra square feet to units if you want,” he said, “and include modern standards, like a new AC and heating systems.”

Hotels aren’t the only buildings suffering economically that could benefit from repurposing. Toronto’s office towers are largely barren again now that the city is in the third wave of the pandemic, and while most workers are expected to return to those offices permanently one day, not all of them will. Moreover, Toronto has over 27.5 million sq ft of office space in the development pipeline, and surplus space will doubtless reduce valuations, rents and general economic viability.

“Office space may have more significant impact because COVID has forced us into a situation we didn’t experience before, which is working remotely. Now people don’t need to go to offices, so there will be a glut of offices. The Bank of Nova Scotia dumped a bunch of floors because they don’t need the space,” said Miolla.

“Post-COVID, we have to look at ways to stagger business hours, do more remote work, or if you have an office, you have to provide larger, not smaller, spaces because we have to respect social distancing.”

According to Sunny Sharma, who uses his Certified Commercial Investment Member designation to determine best uses for properties, says building conversions are economically sound strategies for both hotels and disused office buildings.

“In light of higher and better uses to accommodate greater needs, sellers are taking advantage of their assets and maybe even reducing the cycle with conversions versus new builds. The timeline is shorter when buying and retrofitting a building, so there’s a lot of upside as long as the population keeps growing,” said the head of the Sunny Sharma Commercial Team and co-owner of Century 21 Leading Edge VIP Realty.

“There’s probably an environmental benefit by not having to tear down a building to deliver a product sooner. If the owner has dead use on their property and they found another use, it would benefit them too.”

But Miolla isn’t convinced retrofitting buildings for different uses is as easy as it sounds, adding that the brick and mortar component is the easy part.

“Swaying cities and politicians who say certain properties are zoned for different purposes will be difficult, because going through the rezoning process could be the hold up.”

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