Risky to build & costly to buy — loft conversions keep their value
Buyers attracted by historic buildings, but developers face the challenge of structural ‘surprises’ that often lead to cost overruns
By Derek Raymaker – The Globe and Mail
They only account for 5% of the overall condominium market, but Toronto’s lofts have gained a disproportionate amount of influence over the marketing and consumer preferences.
The exposed brick walls and vents, polished-concrete or distressed-wood floors, lack of walls, half walls, sliding barn doors, metallic finishes, multipaned floor-to-ceiling windows — these have become popular features in many new condominium towers. But they trickled down from the first wave of loft conversions in the mid-1990s that transformed some of Toronto’s warehouse and factory landmarks.
Before that, few developers and even fewer consumers saw past the traditional condominium design, says Barry Lyon, one of the leading high-rise marketing consultants in Canada and principal of N. Barry Lyon and Associates.
“Lofts told us that a lot of conventional apartments could benefit from loft-like elements,” he says.
Developing “hard lofts” (converting older buildings into residences) has never been easy. For builders, a conversion is fraught with expensive surprises, not unlike the renovation of an old house, and construction difficulties and added costs are not exceptions but rules. It is also why lofts cost in the neighbourhood of 10% more than traditional condominiums of equal square footage.
But even with those risks, loft conversions have added value as spectacular landmarks. For example, the Tip Top Lofts across Lake Shore Boulevard from the Canadian National Exhibition grounds, resurrected from the hulk of a former textile factory, has served as a memorable brand for Context Developments for the past four years of sales and construction.
Construction of the Tip Top Lofts went fairly smoothly, all things considered, according to marketing director Craig Taylor. “There was nothing drastic, but there’s always surprises,” he said.
The project has a wide range of prices and sizes, from $234,990 to $1.4-million, so owners come from a wide range of backgrounds, age groups and income brackets.
The target market for hard lofts is made up of people who are attracted to unique design and historic structures. “It’s mostly people who really want to live in an iconic building,” Mr. Taylor says. “Traditionally, you would think of really creative people.”
After a large number of loft conversions in the 1990s, loft builders (a special breed in any event), are having trouble finding appropriate sites to take on.
Some have done conversions of churches, and while the spaces that can take shape are dramatic and unique, they are difficult ones in which to create living quarters.
“They’re extremely expensive spaces to work with, and when they’re finished, they’re very attractive,” Mr. Lyon says.
“But you rarely see a developer do a second one. You always face cost overruns and structural problems, and they don’t yield much in terms of parking.”
Another challenge facing hard loft developers is the competition for downtown office space. It turns out loft conversions are also popular with commercial real estate developers, and for their purposes, often easier to do.
They’re aided greatly by the city of Toronto’s zoning gods, who have faced intense competition from the suburbs in efforts to retain jobs in the city’s core. Toronto will often designate derelict buildings for commercial use, with the knowledge that exposed wood beams and brick walls are just as popular as business headquarters, particularly for creative, technology savvy companies, as they are for loft buyers.
The sum of these market forces adds up to a brisk and positive resale market for loft owners, which is not likely to peter out any time soon.
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