When the University of Toronto's Temerty Faculty of Medicine needed to expand its laboratory near its urban campus, the institution found that such space is at a premium in Canada's largest city. And having employees doing biotechnology work from home wasn't a viable option, so the school had to conduct a different type of lab experiment.

It turned to the design, engineering and management consulting firm Arcadis, charging it with figuring out how to convert two floors of a 1980s office building into labs. Arcadis has a distinct vision for making this type of space out of office floors in the historic downtown Toronto building.

"You cannot take your lab home; you cannot make that shift," said Jay Deshmukh, associate principal and practice lead within architecture at Arcadis, in an interview. When it comes to Toronto demand for lab space, she added, "it is only growing in terms of its presence within the global bioscience marketplace in terms of research and manufacturing."

Finding ways to repurpose underused office space has been attracting interest in the United States, the United Kingdom to other countries. The pandemic accelerated the trend of working outside the office, leaving some owners and landlords coping with low demand, particularly in buildings that are more than 20 years old. While office space has been converted to labs for decades, and more than 100 conversions are estimated to be underway at the moment in the United States, the Amsterdam-based design firm said what it's learning in its work with a portion of a tower in Toronto spanning 30 floors could influence its projects globally.

While office-to-residential conversions have drawn interest due to the surge in downtown office vacancies and the pressing need for housing, particularly across North America, the concept of converting office floors into laboratory space is a relatively new one in Canada.

Lab space availability in the Toronto and Hamilton Area is very low: Only 0.2% of the 12.3 million square feet of vacant inventory in the region, according to real estate brokerage CBRE.

The university was preparing a massive renovation and addition in 2020, and it needed to keep the research going while being close enough to campus, which is where the conversion of 777 Bay Street made sense.

Arcadis was engaged to explore the feasibility of converting space within a conventional 1980s office tower in downtown Toronto into a safe and functional biotech laboratory environment for potential tenants like the university.

In collaboration with property owner Canderel and the university, in 2020-21, Arcadis studied the multifaceted constraints and opportunities for converting 40,000 square feet of vacant office space on two floors into a wet and dry laboratory.

They quickly discovered how lab requirements differ from day-to-day office space.

"The simple issue that everyone starts with is the floor-to-floor height because the requirements are far more intensive, and it is a much more controlled environment," said Deshmukh. "You can imagine air changes, pressures, humidity, you name it. Everything around the conditioning of the air. You are bringing in air at a much higher volume."

Labs also need mechanical and electrical backups because if a device like a freezer goes down, it can mean months or years of lost research.

Also, labs generally require 15 feet of floor-to-floor space, but Arcadis only had 12 feet.

"My mechanical engineer likened it to designing a large Swiss Army knife because everything had to be just so. Stuff no one sees because it is behind the ceiling," said Deshmukh. "We had to be incredibly precise."

Labs also have unique problems, including security issues, and most need their own entrance, making a service elevator important.

"Can you imagine someone getting their coffee and doughnut and going up the same elevator with someone taking biowaste up," said Deshmukh. She added that equipment can be significantly heavier. "You may have to bolster some structures."

The Canderel building had a service elevator, making it attractive. It also had rooftop space above the podium that extended to the 10th floor.

"They thought they were putting all heat, ventilation and air conditioning on the roof, and they managed to find space for them on floors nine and 10 where the podium turns into the tower," said Deshmukh.

But the venting had to go above the building, so her group found a technical solution to avoid building a 25-floor chimney stack that would take expelled air above the building.

"We ultimately created a solution that could have gone into any floor," said Deshmukh. The solution was to install ductless fume hoods with filters that remove impurities.

The building also worked because the in-place zoning allowed for certain lab functions. Other buildings probably would have required some rezoning. Zoning rules for tenants handling infectious diseases would be even more stringent.

For the landlord, the advantage was the ability to charge a higher dollar per square foot. Lease terms were not disclosed on the deal at 777 Bay.

The University of Toronto had already taken advantage of the Canderel building's proximity for programs that may not be classic office uses, including a dental clinic on an upper floor — another type of use where staff have to come to the office for work.

The cost of fitting out the space varies on the use, but it could be two or three times the cost of a traditional office, with a longer time frame.

But that could work for a long-term tenant like the University of Toronto which is covered by a 10-year lease.

Mike Vilner, senior vice president of leasing and business development at Canderel, with more than 26 million square feet of commercial space across its portfolio, said filling the space was a primary issue.

"What we were thinking is adapt this space for different uses and help future-proof our real estate," said Vilner, in an interview. "It makes our building stay relevant in the changing economic landscape."

Canderel owns the property with TD Asset Management and with BIMCOR, a subsidiary of Bell Canada.

While vacancy rates in downtown Toronto offices continue to climb, 777 Bay St. was 95% occupied, so there was no urgency to lease to just any tenant.

"Is it a solution for every building? No. You can only have so many labs," said Vilner.

Those companies can include healthcare providers, medical device makers and clinical trial organizations, Vilner said. "You are creating an ecosystem within the area or within the district."

Canderel officials knew the broker representing the university, but its building was not on their list because they wanted one that could accommodate labs.

"We proved to them through a study that a standard office building could house a lab," said Vilner. He said this marked the first such conversion in Canada. "This was on our radar. We were watching what was going on in the United States."

The conversion of offices to lab space is more prevalent in the United States. About half of the more than 125 office conversions underway in the United States are to labs, according to recent comments from CBRE.

"We are studying even more," said Vilner. "We believe we can do it in Montreal. We studied it in Ottawa and in Western Canada."

Robin Buntain, a principal at Avison Young, said there haven't been many conversions but noted there was a project in Vancouver's False Creek Flats where lab space was converted back into conventional offices.

"But now Low Tide [Properties], which owns the asset, is looking at converting some of the floors back to lab because of some of the infrastructures in place," said Buntain. "There is basically no space now, but we have one anchor tenant building a lot of it, So there will be opportunities able to use some of the older stuff as they step into new" space.

Arcadis' Deshmukh said with the conversion fundamentals learned, tested and in place, another project would have a head start compared to where her group was three years ago.

The University of Toronto "ultimately found this solution was cheaper for them than building something new. The calculation for them was against building new space on new land," she said.