Toronto's Top 10 CRE Stories Of 2017
In 2017, Toronto's commercial real estate news was largely positive and at times record-breaking and transformative.
The GTA’s burgeoning tech market continued to move up the global charts, as even Google saw fit to bring its smart city plan to the waterfront. Housing sales heated up, buildings got taller, the subway stepped outside the city and industrial, office and retail real estate demand threatened to exceed supply.
Supply and vacancy remained growing problems in the GTA in all markets, despite robust construction. Another growing problem was housing affordability: The average single-family home price topped $900K at one point in 2017.
Here are the top 10 Toronto CRE stories of 2017 (in no particular order):
Google Comes To The GTA
Google came calling with an agreement to invest $50M to explore the development of Quayside, a 12-acre district of Toronto’s waterfront.
But that was just the tip of the high-tech iceberg. If the yearlong study goes well, Sidewalk Labs, a division of Google’s parent company, Alphabet, has plans to expand the project to create Sidewalk Toronto, an 800-acre, 3.3M SF smart city community.
“Sidewalk Labs scoured the globe for the perfect place to create a district focused on solutions to these pressing challenges, and we found it on Toronto’s Eastern Waterfront — along with the perfect public sector partner, Waterfront Toronto,” Sidewalk Labs CEO Dan Doctoroff said at a Toronto news conference attended by dignitaries including Prime Minister Justin Trudeau.
Sidewalk’s innovative plan for a new community includes pedestrian-friendly streets served by self-driving vehicles as freight robots move along underground tunnels. The digitally integrated community would feature quicker-to-build modular housing and 14-hour monitoring that would deal with everything from weather, traffic lights, power usage and waste management. It would also create 5,500 jobs with Google moving its Toronto headquarters to the community.
Or so goes the plan. Right now, it remains a plan to be explored, studied and debated.
Canada Tops In U.S. Investment
Canada became the top global investor in U.S. property. And it is not the first time it has happened.
A September report from JLL found Canadian investment in U.S. real estate amounted to $5.2B in the first half of 2017, or 30% of total global foreign investment. By comparison, China came in second with $3.6B (21%) in U.S. acquisitions.
So how does a country with a population barely larger than Morocco invest more than China and its 1.4 billion population? Canadians just do not have that many properties in Canada to invest in.
“The Canadian market just doesn’t have the same opportunities for investment," JLL Canada CEO Brett Miller said. "There’s just not enough in Canada. There’s just simply a large amount of competition in Canada and limited opportunities.”
Add to that a good economy, little residual blowback from the 2008 financial crisis and a familiarity and trust in the U.S. market, and Canadians just cannot get enough of that southern real estate.
Downtown Meets The Burbs
The six-stop, $3.2B subway extension to Vaughan that opened in December was notable for several reasons. It not only marked Toronto’s first subway extension in 15 years, it also was the first time a subway link ventured beyond Toronto’s city borders.
Instead of a car trip from Vaughan to Union Station that can take up to an hour and a half, commuters can now make the full trip in just over 40 minutes. TTC estimates the University Line extension will add 36 million additional transit trips a year, and mean 30 million fewer car trips.
Vaughan appears ready for the changes the 8.6 kilometre line might bring. Just outside the Vaughan Metropolitan Centre station a new community is being built.
SmartREIT’s massive 100-acre, 17M SF SmartREIT Place is well on the way. And while the three-tower condo complex known as Transit City has yet to break ground, its 1,700 units are already sold out. More buildings are on the way, as are more subway extensions throughout the GTA.
Toronto Gets Taller
Construction continued in the downtown, reshaping the skyline. The mixed-use The One, which officially broke ground at One Bloor West in October, will rise above them all. At a planned 85-plus storeys (1,005 feet), it will eventually surpass Toronto’s First Canadian Place as the country’s tallest building.
The One is being billed as the city’s first billion-dollar condo project. Retail, restaurants and a 175-room hotel will make up the first seven floors. Condos will number 416 units ranging from 591 SF to 8K SF.
“The One is a testament to our growing city. This development represents Toronto — we are a booming city and we are ambitious and bold,” Mayor John Tory said.
Sears Succumbs To Retail Stress
The closing of department store institution Sears was years in the making and largely expected. In February, the chain announced the closing of 180 stores, reducing its total to 1,200 in Canada. In June, another 66 store closings were announced and even more in August. The death knell was finally struck in October, leaving malls and Canadian REITs struggling to fill the empty space left by Sears.
A research report from the Bank of Montreal found the closing of Sears might not have a major or lasting effect on REITs.
“REITs that have the retailer as a tenant typically only have low single-digit exposure on a revenue basis. We expect 12-24 months of downtime before the space is fully leased and $50-$175 per square foot of costs to refit spaces,” the report notes.
Cadillac Fairview Executive Vice President Wayne Barwise echoed those conclusions in describing his company’s redevelopment of a closed Sears store in Vancouver.
“We converted the first two floors to retail and then we put in four levels of office,” Barwise said at a Bisnow event on the office of the future.
“We put Microsoft in there. And Sony moved their worldwide animation there as well. People want it because of the quality of space — the large floor plates, the high ceilings, the light. But they also want it because of the amenity-rich environment. You walk downstairs … anything you want is available.”
CIBC Square To Shake Up Skyline
CIBC Square got much of the downtown attention in 2017 with its planned twin towers of 49 and 50 storeys and 2.9M SF. Adjacent to Union Station, the downtown office and retail towers are expected to set a new, international standard for office space, including amenities such as first-class fitness, bicycle-parking facilities and an elevated park.
“CIBC Square is a visionary example of what government can achieve in partnership with the private sector,” Ontario Minister of Transportation Steven Del Duca said at the June groundbreaking.
Beyond anchor tenant CIBC, which plans to move its headquarters and 15,000 employees to the project, the site has added the Boston Consulting Group as a major tenant.
The first CIBC Square building at 81 Bay St. is scheduled to be completed in 2020. The second structure at 141 Bay St. and the elevated park are scheduled for completion in 2023.
Toronto's Trump Tower Sold, Rebranded
The troubled, 65-storey Trump Hotel and Tower, which features both residential and hotel suites, was sold to JCF Capital, which rebranded the 211 hotel suites as the Adelaide Hotel. In March, JCF launched its campaign to sell 73 condo units.
President Donald Trump broke ground on the Bay/Adelaide building in 2007. The building, which opened in 2012, was plagued by issues including construction delays, unsold condos, falling glass and investor lawsuits.
The building’s name is scheduled to change to St. Regis in 2019 following $20M in renovations.
Toronto The Place For Tech
Tech in Toronto was the talk of the town in 2017 as the industry continued to grow in leaps and bounds. Several reports offered some perspective. CBRE’s 2017 Scoring Tech Talent Report found Toronto ranked sixth among 50 North American tech markets, and No. 1 in Canada.
In 2015-16, the city added 22,500 new tech jobs. Overall, there are 212,400 tech jobs in the city, up 32% over the last five years and representing 27.5% of all tech jobs in the country.
On the world scale, Savills’ Tech Cities 2017: The Cities At The Forefront of Global Tech report, Toronto ranks sixth out of 22 cities around the world based on business environment, tech environment, city buzz and wellness, talent pool and real estate costs.
Toronto Housing Boom Peaks
Toronto’s housing boom switched into high gear in the early part of 2017, as the average home price began to flirt with $1M. With home prices rising more than 33% in just a year, the Ontario government stepped up in May with a 16-part Fair Housing Plan that sought to cool out-of-control housing and rental rates.
Many in real estate were skeptical about the plan, which included a 15% foreign speculators tax. While the plan was aimed squarely at helping first-time homebuyers and renters, there were concerns that any new tax or rent controls might affect the economy negatively.
What effect the plan had is debatable. The housing boom did cool slightly, though it was not the crash many expected. Toronto remains largely unaffordable for most first-time homebuyers. Meanwhile, a report from the Canada Mortgage and Housing Corp. found rental vacancy rates in the GTA had hit a 16-year low of 1.1%.
CN Tower Gets Its Props
The iconic CN Tower — built in 1976 — has changed the way people look at the city. It is difficult to take a picture of the skyline without its familiar shape intruding somewhere.
In 2017, the 553-metre tower was honoured with the Prix du XXe siècle for its significance to Canada at the RAIC/OAA Festival of Architecture in Ottawa.
The festival jury referred to the structure as “an incredible achievement of Canadian engineering and construction that pushed the boundaries of concrete technology.”
The CN Tower joined a list of 17 Canadian structures that have received the honour, including Toronto’s Massey College and Nathan Phillips Square.