As a resident of this neighbourhood, I'm all for this. Sure, it's not three stories, but the previous building was a stucco/fake stone nightmare and funeral homes do not add to street life. Parkdale is not bursting with developments - there are several empty lots that could be turned into condos tomorrow, but I'm guessing Parkdale is still a tough sell for developers - or for partners for the LCBO. And Parkdale's density is pretty high already.
More selfishly: it's closer to me!
The biggest downside is traffic: Queen Street in Parkdale is a nightmare already. The LCBO obviously chose the spot because of the parking, but the funeral home's parking lot was rarely used. I suspect that this will not be the case with the LCBO. Also, I'm not sure how I feel about an expanded liquor supply store in an area filled with addicts, or what fancy new LCBOs say about the gentrification happening in one of the last really mixed income neighbourhoods downtown.