Commercial property sits empty and available for lease at the corner of Ouellette Ave. and Wyandotte St. West in downtown Windsor, Ont. on May 23.Dax Melmer /The Globe and Mail
Cities across Canada may be struggling with the same problem of empty downtown office buildings, but Windsor, Ont., stands far apart with the country’s highest commercial vacancy rate – and it has now embarked on an ambitious plan to reverse the fortunes of its blighted core.
Windsor City Council is betting that a combination of safety and security measures, tougher enforcement of property standards and improved homelessness services will be enough to lure tenants and residents back, and rectify the sheer scale of its office space glut.
Downtown Windsor’s office vacancy rate hit 41.6 per cent in the most recent quarter, according to commercial real estate firm CBRE. It’s far above the national average of 18.4 per cent, and much higher than comparable markets in southwestern Ontario such as London, at 28.1 per cent, or the Waterloo region, at 22.5 per cent.
As Brad Collins, a vice-president with CBRE, put it in a recent letter to Windsor’s city council, the downtown commercial property market “is in a crisis state.”
Windsor would seem to have many of the ingredients in place to thrive. There’s been an unprecedented influx of investment into the city, including the $5-billion NextStar Energy electric-vehicle battery plant and the Gordie Howe International Bridge to Detroit across the border. The city’s population growth is outpacing the province.
What’s more, Windsor has the third-fastest rate of growth in the number of active businesses in Ontario over the past two years, according to Statistics Canada, showing there has been robust business creation.
It’s just that none of those businesses want to be downtown, and the ones that were there have been leaving.
“There’s been a precipitous decline of interest by office tenants in the downtown core,” says Brook Handysides, senior vice-president with CBRE. He says the trend began in the 1990s, as the city opened up commercial development in the suburbs, but accelerated during the COVID-19 pandemic.
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Since 2019, Windsor’s downtown office vacancy rate has more than doubled. Earlier this year, Sutherland Global Services, one of the largest downtown tenants, with roughly 1,000 employees, moved its call centre out of the core to the city’s Walkerville neighbourhood, four kilometres to the east.
Indeed, Windsor’s vacancy crisis is largely contained within the downtown core, where the office sector is relatively small, at just 850,000 square feet. Office buildings in other areas of the city have held up far better, with vacancy rates in the suburbs largely unchanged since 2019, while rates in the inner city area have nearly recovered to pre-pandemic levels.
The problem for Windsor’s downtown is that residents and businesses don’t feel safe, according to a report prepared for the city by StrategyCorp Inc., a consulting firm Windsor hired last year. The consultants heard concerns about petty crime, property damage and social disorder, as well as widespread perceptions that the core is unsafe.
Renaldo Agostino, a Windsor councillor who represents the downtown community, traces many of the area’s problems to the decision to concentrate so many of the city’s social services, such as homeless shelters and harm reduction pharmacies, in one area of downtown.
“Windsor is a small city with such a small downtown that one or two wrong moves can have a very adverse effect,” he said. “But it’s also an opportunity, because one or two right moves could bring things back real fast.”
In April, Windsor’s city council revealed a plan to jumpstart the downtown area, and after a marathon seven-hour meeting on May 13, the council unanimously approved putting $3.2-million toward its “Strengthen the Core” plan.
That includes spending $1.3-million to add 12 more police officers serving downtown, $1.4-million to extend service hours at its Homelessness and Housing Help Hub (H4) program, and hiring a dedicated bylaw officer to enforce existing property standards, while the city looks to strengthen bylaws to deal with vacant and dilapidated commercial properties.
The new investment in safety and security “is probably the best return on investment for municipal dollars if you want to attract and retain office users in the downtown core,” CBRE’s Mr. Handysides said.
At the same time, Windsor recently selected a permanent location for its H4 program that is on the edge of the city centre, compared with its temporary location in the heart of downtown. Shortly after that announcement, the Downtown Mission of Windsor, a Christian charity that provides shelter and food services to homeless people, said it plans to move from its current location on the main street of Ouellette Ave. to be closer to the future H4 site.
However, some homeless advocates worry that the city’s downtown renewal plan relies too heavily on increased policing.
“Police are certainly partners in this, but policing should not be a solution in and of itself,” said Shelley Gilbert, co-ordinator of social work for Legal Assistance of Windsor.
Canada’s office vacancy crisis is also an incredible real estate opportunity
And while she welcomed the additional investment in the H4 program, she said she has yet to see evidence of an integrated care approach that helps Windsor’s large homeless population and “isn’t just about ensuring people who are experiencing this sort of trauma are moving out of the downtown core.”
The city’s downtown revival plan also calls for the installation of more security cameras, building on a pilot project launched last August that saw four live cameras installed outside private businesses. The surveillance program is based on Project Green Light in Detroit, a massive network of more than 900 live cameras installed in that city’s downtown core over the past decade.
Indeed, Detroit’s experience looms large in every facet of Windsor’s revival scheme. A little over a decade after Motor City declared bankruptcy, the downtown has been revitalized with an influx of new people and businesses.
“If you give people the feeling of safety to come back downtown, they will. You just look across the river and see it right there,” Mr. Agostino said about Detroit’s resurgence.
What Detroit’s downtown had that Windsor doesn’t is billionaire Dan Gilbert, a native of the city who funnelled a swath of his Rocket Mortgage fortune into reviving the core. He adopted what he’s described as a “big bang approach” to solve one of the biggest challenges of urban renewal: the chicken-and-egg problem of how to lure people downtown to eat and shop, when retailers and restaurants are hesitant to open up unless there are already people to cater to.
To solve that, Mr. Gilbert embarked on a massive acquisition spree, buying more than 100 properties, and simultaneously redeveloping apartments, offices, retail and restaurant spaces.
For downtown Windsor, a more piecemeal approach will be needed, and some look to nearby Walkerville for inspiration. The inner-city community has undergone a dramatic revival of its own over the past decade, with new restaurants and businesses opening as older, run-down buildings were eventually redeveloped.
Today, Walkerville has an office vacancy rate of just 1.7 per cent, and it never rose above 5 per cent during the pandemic.
“If you go back more than 10 years ago, Walkerville was an area people viewed as undesirable, and it turned things around,” CBRE’s Mr. Collins said. “And that’s what gives us hope that downtown can turn around quickly as perceptions change, and it becomes trendy and cool again.”
Yet, the scale of the vacancy problem downtown is much greater than in Walkerville, and past efforts to address empty buildings have yet to bear fruit.
The bridge to Windsor’s revitalized future
In the years before the pandemic, the city launched a push to redevelop some empty office buildings into residential apartments. Since then, the demand for housing has only grown more acute. For Rhys Trenhaile, a Windsor investor and developer who has been on the forefront of that effort, the process has at times been maddeningly slow.
Mr. Trenhaile has four projects underway, the most high-profile being the conversion of the 14-storey Canada Building on Ouellette Ave., a 1930s Art Deco–style structure, into 80 residential units. While that project was unveiled in 2020, it has yet to receive approval from the city, something he hopes will come in the next few weeks.
“The bureaucracy is shackled by its own regulations, and that’s what the housing crisis really is – a struggle to get through the bureaucracy to get building and get developing,” he said, adding that he welcomes the city’s latest plan to rejuvenate the downtown core.
“This is making it easier for me as a developer not just to finish these buildings, but once we’ve exhausted this stock, to start building from scratch.”
If that works, and people do begin to move back downtown, maybe jobs – and new office tenants – will follow.