There’s a new kind of real estate on the block or perhaps more accurately, a re-invigoration of a lifestyle that’s existed all over the world at some point in the last century and is now finally entering a renaissance of its own.
Live-work spaces are exactly as they sound; a single space that serves as both a residential living area and a place to work. These properties have taken many forms over the years, from the ancient artisan storefronts of the ‘Machiya’ in Japan, combining places of trade with residences, to the warehouse-style loft living of downtown Toronto with office space enough to run a small business or startup.
Working and living in the same building was once reserved for the arty and creative, those wanting a contemporary area with high ceilings, natural light and interesting architecture. Now, as remote work becomes the new standard, everyone is wanting a piece of the live-work pie.
The Live-Work Revival
There’s always been a need for dedicated live-work properties but expansion in this area of real estate has been suppressed by companies’ misconceptions that attending a place of work every day was better for business and an intrinsic cultural expectation that has, at least since the 1960’s, promoted a complete distinction between home and work.
The trend towards working from home has been growing steadily over the past 30 years or so as digital technologies matured. Enhanced internet connectivity and video-conferencing solutions along with increasingly unpleasant commutes and an inclination to help the environment, have all coincided with a pandemic to result in a pent-up demand for mixed-use properties.
As of March 2021, around 32% of Canadian employees worked most of their hours from home, compared to just 4% in 2016. Of those employees new to work-from-home, 80% stated their preference to work at least half of their hours from home once the pandemic subsides. Even if they were to return with a degree of flexibility, the office towers once inhabited by these businesses are no longer fit for purpose. Offices will by no means disappear, however we’re likely to see a transition from a single centralized office to a more distributed model of office use.
For some the virus has done much more than just force them to work from home. Whilst initially fear of the unknown could have taken hold, as time went on, it spurred the examination of other aspects of life, challenging the status-quo that was pre-pandemic life and prompting decisions for the future with a sense of entrepreneurial spirit. More and more people are looking to continue with their new-found work-life balance by starting up their own small enterprises from home. For professionals a live-work space is a very attractive alternative to commercial space because you only need to purchase one bit of real estate and it can be financed at residential rates with taxes often lower. Likewise there’s a boom in business owners who prefer hiring contractors that come without the additional expense of permanent employees.
Meeting demand for new live-work spaces
Small businesses, defined as those which have up to 99 employees, comprise over 97% of all Canada’s businesses and micro-businesses, those with between 1 and 4 employees are an astounding 56% of this category. You might typically require around 900 square feet of space to accommodate 4 employees in a combined live-work space and business owners can see the appeal of ditching their dedicated office space for the financial and other benefits.
Unfortunately, suitable sites for live-work projects are few and far between in downtown Toronto. You’re not technically allowed to operate a business with employees at a strictly residential location and appropriate properties with mixed-use zoning very rarely come to market. Planning policy which has developed over time to completely segregate our homes from the noise and grime of industry is going to need to become much more progressive to free-up real estate in more commercial areas and meet the growing demand for live-work space. Many factories and warehouses were redeveloped for purely residential purposes decades ago and any rights for commercial usage removed at that time.
Whilst single-zone planning policy made sense when cities were home to polluting factories, policies now need to move with the times, not least because without the land to build on, cities are in dire need of redevelopment in industrial areas to provide much needed housing to professionals who are unable and unwilling to fund the high cost of Toronto office space as well as a place to live. Attracting this kind of buyer also has a multiplication effect for the local economy too as other businesses move into the area to serve these up-and-coming communities.
A lucrative but rare investment option
If you can secure the right one, redevelopment of an older building into a live-work space generally comes with a lower construction cost than other buildings as by their very nature they’re open plan and minimal with many ‘industrial’ characteristics remaining exposed which means less materials and labor straight off the bat. Property management costs are reduced for similar reasons, there’s simply less to go wrong and the diverse range of tenants attracted to this type of property compared to a standard residential condo means that income streams are much more predictable and longer-term.
Successful live-work developments such as the ‘Mission Lofts’, feature communal facilities such as co-working spaces, laundry and dry-cleaning facilities, parking spaces and fitness centers that appeal to both residential and commercial tenants or owners.
City planners are likely to be increasingly in favor of this type of development as an effective route to revitalizing downtown space in the aftermath of COVID and investors can maximize returns by taking advantage of the various heritage grants and tax rebates that may be available to help with the conservation of eligible properties.
Exclusive live-work development opportunity
We’re privileged to soon be offering for sale a new listing South of King St West, in Liberty Village that has the coveted triple-winning formula of location, mixed-use zoning requirements and an ideal physical layout that is virtually non-existent in Toronto now. If you’re interested in finding out more about this property, ripe for live-work development, please reach out today.