Why businesses are trading suburban office parks for downtown highrises
IT TURNS OUT THAT PETER MENKES was onto something in 2005 when he bought a swath of deserted land south of Union Station with the kooky idea of developing office space. As early blueprints were being drafted, Telus signed on to be his anchor tenant. The telecommunications giant had been looking to consolidate its 15 GTA locations, preferably somewhere cool, and pushed for an edgy and eco-forward design. By 2009, Menkes’ 30-storey Telus House had surfaced and spurred a wave of office tower projects now rising from waterfront brownlands. Count them: PwC’s glass-encased building on York, the nearby Bremner Tower under construction, and, south of the Gardiner, RBC’s WaterPark Place III and another Menkes office building on lower York Street that will stretch the boundaries of the Financial District.
This south-end awakening is but one facet of Toronto’s larger office building spree. When you include the traditional downtown core and its east-west fringes, the tally is nine prime office towers currently under construction, adding 5.6 million square feet over the next three to four years.
It’s a level of activity not seen since the booming 1980s, back when Scotia Plaza rose up. Then the recession hit, employers took to the outer suburbs for cheaper rents and lower taxes, and downtown office construction pretty much came to a stop. Today’s soaring, glassy developments with their modern angles and eco-amenities give a much-needed lift to our aging stock of Class A office buildings, whose outdated systems are huffing and puffing to keep up with near-full occupancy. Now that employers are flocking downtown again, it’s a landlord’s market in which tenants are negotiating hefty lease prices within one of the lowest vacancy rates in the country.
For all this activity, we can thank the so-called echo boomers, those educated, childless 20- and 30-somethings who have chosen to live downtown next to their workplaces, rather than put up with interminable commutes. The condo boom attracted retailers, jobs and even more echo boomers, who are now luring upmarket employers seeking upmarket spaces. Those corporate employers vacating their suburban office-parks to chase a skilled workforce want buildings with rooftop gardens and recycled grey water—the badge of being a modern progressive company that attracts young talent. Coca-Cola recently moved its Canadian headquarters into a newly glass-topped building at 333 King Street East, while last fall Google’s sales and marketing team blinged up 58,000 square feet in the updated Richmond Adelaide Centre. Apple and Cisco are planning a move south of the tracks.
High demand for downtown workspace happens to align nicely with friendly financial conditions. Real estate investors are taking advantage of ultra-low borrowing rates to capitalize on juicy commercial property developments. (Recall the record-setting sale of Scotia Plaza last spring for $1.27 billion to the real estate investment trusts Dundee and H&R.) Meanwhile, big developers are keen to boost their portfolios with flashy high-profile projects, like Brookfield’s 44-storey east tower in the Bay Adelaide Centre or Oxford Properties’ 100 Adelaide West, a lofty, multi-faceted building that will incorporate the original 1928 art deco structure and its mosaics.
The surge in office real estate cements the broader health and vigour south of Bloor. Since the echo boomers began decamping for downtown seven years ago, the residential population grew by 16 per cent, while jobs have increased by 14 per cent—almost double the growth in the wider GTA. We’ve also recently supplanted Chicago as the fourth-biggest city in North America, a notable notch up in the city’s cred. And now we have the downtown to prove it.
Here’s the original link from Toronto Life.