The geographic divide in Toronto

[taal]

Thanks for the article. I quote from it:



In other words, Consumers road is an undesirable area of Toronto where costs are relatively cheap because it's an undesirable area. Therefore, you would lose money developing it.

Airport Rd. on the other hand is actually a relatively prestigious and socially acceptable place to work in Mississauga, preferred by many multinationals due to its proximity to Pearson, and by local companies due to its ease of access from most upper-middle-class suburbs in the GTA.

They are not equivalent to each other. That they are geographically close doesn't mean that they should be equally successful.

Airport Rd. is very cheap compared to equivalently desirable office locations in Toronto (closer to... things), and that's why many businesses locate there, in Vaughan, and in Markham. The reason why it's cheaper to build there than in desirable locations in Toronto is because demand for land is kept reasonably low through the externalisation of services.

Yes but why is the airport more desirable then consumers road (lets ignore NYCC as there are other issues there) ... lets consider the area around the consumers road, close to the 401 and 404 ... there is very affluent housing to the west (i.e. the Yonge -> Don Mills from Sheppard -> Eglinton ... yes there is a big mix of average household incomes in this tract ... I'd still consider it affluent) ... lots of shopping with Farview / Bayview Village / Shops at Don Mills / and of course way better transit then the airport (subway on Sheppard ... much better bus service along Sheppard / York Mills / Eglinton / ....).

Yet still you say its less desirable ? I will instead argue, the tax differential is one of the predominant reasons you do not see new commercial development.

 

[RC8]

I understand that even with taxes and all, you would still get more value for money in Consumers Rd. than by the airport.

The airport area for whatever reason (shorter trips to the airport, a very well organised suburban business district that spans miles, accessibility from wealthy areas in Toronto Mississauga Brampton and beyond, and the fact that everybody knows where it is) is a much more socially acceptable place to work in than little pieces of isolated wasteland like Consumers Rd.

I know people are cool with living in a super luxurious expensive downtown Oakville house while commuting to, say, Meadowvale to work for Microsoft or RBC.

The people of Rosedale, on the other hand, would most likely not be fine with working at Consumers Rd.

The fact that prestigious working places in Mississauga look a lot like our declining warehouse districts shouldn't fool you into thinking they are the same thing.

By and large the professional demographic who work in business districts in Mississauga, Vaughan, and Markham, would prefer working in downtown Toronto if they lived here.

 

[James]

I think there's a lot of assumptions in this thread and justifiably so because there aren't any hard facts or figures that can draw an unanimous decision. To say someone living in Rosedale doesn't want to work at Consumers Rd whereas they would commute to a business park in Markham is unsubstantiated. The DVP corridor all the way to Consumers Road is a prime location for everyone from Rosedale to Leaside to York Mills. What I do believe, however, is that aside from taxes, the buildings at Consumers Road just aren't suitable for many businesses, particularly in the tech manufacturing industries. Lots of office spaces but many of the buildings are old and need some updating whereas the business parks in Markham, Richmond Hill and Vaughan, for example, are all quite new and business tenants have a good shell to work with when they're doing their fit-out. I've always thought the DVP/401 area (not specifically Consumers Rd area) was a prime central location for a business headquarters.

 

[taal]

I think there's a lot of assumptions in this thread and justifiably so because there aren't any hard facts or figures that can draw an unanimous decision. To say someone living in Rosedale doesn't want to work at Consumers Rd whereas they would commute to a business park in Markham is unsubstantiated. The DVP corridor all the way to Consumers Road is a prime location for everyone from Rosedale to Leaside to York Mills. What I do believe, however, is that aside from taxes, the buildings at Consumers Road just aren't suitable for many businesses, particularly in the tech manufacturing industries. Lots of office spaces but many of the buildings are old and need some updating whereas the business parks in Markham, Richmond Hill and Vaughan, for example, are all quite new and business tenants have a good shell to work with when they're doing their fit-out. I've always thought the DVP/401 area (not specifically Consumers Rd area) was a prime central location for a business headquarters.

The argument that folks would prefer to work in Markham / Mississauga as somehow it is more acceptable / higher class then consumers road is absolutely ridiculous and based on nothing ... knowing many people who live in the area I've never heard that sentiment once ... if not the opposite ...

Now the statement in the post above is absolutely correct ... most office building in the outer 416 are older / less efficient / generally non class A (rather class B) offices. So yes, businesses would much rather not locate here !

But we're talking about cause and effect now ... why were no office buildings (equivalent to those Markham and the like) constructed in suburban 416 in the last decade or so ... due to this fact, of course now you won't see much demand. But the same factors leading to no new office constructions are clearly still at play today.

 

[RC8]

James, I didn't say someone in Rosedale would rather drive to Markham than Consumer Rd. Rather, I said someone in Rosedale would prefer downtown Toronto to suburban business parks. Someone living in Markham however, wouldn't see working in Markham as a bad thing.

I know at least 50 people who live in Oakville or Mississauga who happily work or aspire to work in a business park by the airport or in Meadowvale. Some of them wouldn't mind commuting downtown either. Everyone I know in the Rosedale/Mt. Pleasant area would much prefer to work in downtown Toronto given the choice. 70% of people commute as by car as drivers in downtown Oakville vs. 45% in Rosedale. In the area around Mississauga Rd. (where UTM is located) 72% commute by car as drivers. In Port Credit and surroundings, 75% commute by car as drivers.

If you are located within the city of Toronto and want to attract the best talent based on location: go as close to the core as possible! If you are in Mississauga: Meadowvale or the airport area will do the trick.

The fact is that if there was enough demand to work in Etobicoke from the right demographic you would see plenty of development going on there. The only thing in the way of its profitability is the lack of demand. Tax-wise and costs wise it is cheaper.

 

[taal]

James, I didn't say someone in Rosedale would rather drive to Markham than Consumer Rd. Rather, I said someone in Rosedale would prefer downtown Toronto to suburban business parks. Someone living in Markham however, wouldn't see working in Markham as a bad thing.

I know at least 50 people who live in Oakville or Mississauga who happily work or aspire to work in a business park by the airport or in Meadowvale. Some of them wouldn't mind commuting downtown either. Everyone I know in the Rosedale/Mt. Pleasant area would much prefer to work in downtown Toronto given the choice. 70% of people commute as by car as drivers in downtown Oakville vs. 45% in Rosedale. In the area around Mississauga Rd. (where UTM is located) 72% commute by car as drivers. In Port Credit and surroundings, 75% commute by car as drivers.

If you are located within the city of Toronto and want to attract the best talent based on location: go as close to the core as possible! If you are in Mississauga: Meadowvale or the airport area will do the trick.

The fact is that if there was enough demand to work in Etobicoke from the right demographic you would see plenty of development going on there. The only thing in the way of its profitability is the lack of demand. Tax-wise and costs wise it is cheaper.

I'm really not sure what you're attempting to prove at this point.

I believe the premise is simple ... folks would rather work at the airport then say consumers road ... I agree and the reason being the quality of office space !

My point centers around how does one explain the lack of quality (i.e. new office construction in the last decade) in describable parts of the outer 416 (sticking to the consummers road area ... again by all means this area should be just if not more desirable then the say Markham ... I'm not referring to Jane and Finch), the only conclusion that one can draw is the commercial tax rate difference.

It seems as if you're saying today, people would rather work in say Markham, due to higher quality office space, or even the concentration of services their now (though this doesn't really apply to the Airport area ... where there is very little in terms of restaurants and other services) ... again I won't argue that, the point is how did it get that way as 15 years or so everything (i.e. areas wise) was on a much more equal playing surface.

 

[Memph]

James, I didn't say someone in Rosedale would rather drive to Markham than Consumer Rd. Rather, I said someone in Rosedale would prefer downtown Toronto to suburban business parks. Someone living in Markham however, wouldn't see working in Markham as a bad thing.

I know at least 50 people who live in Oakville or Mississauga who happily work or aspire to work in a business park by the airport or in Meadowvale. Some of them wouldn't mind commuting downtown either. Everyone I know in the Rosedale/Mt. Pleasant area would much prefer to work in downtown Toronto given the choice. 70% of people commute as by car as drivers in downtown Oakville vs. 45% in Rosedale. In the area around Mississauga Rd. (where UTM is located) 72% commute by car as drivers. In Port Credit and surroundings, 75% commute by car as drivers.

If you are located within the city of Toronto and want to attract the best talent based on location: go as close to the core as possible! If you are in Mississauga: Meadowvale or the airport area will do the trick.

The fact is that if there was enough demand to work in Etobicoke from the right demographic you would see plenty of development going on there. The only thing in the way of its profitability is the lack of demand. Tax-wise and costs wise it is cheaper.

How about someone living in Central North York or Central Etobicoke? There's plenty of middle and upper-middle class people living in those areas who could work at a place like Consumers Rd. These areas have gotten more middle and upper middle class residents too, so you would think office space would increase accordingly in those areas.

 

[RC8]

I'm really not sure what you're attempting to prove at this point.

I believe the premise is simple ... folks would rather work at the airport then say consumers road ... I agree and the reason being the quality of office space !

My point centers around how does one explain the lack of quality (i.e. new office construction in the last decade) in describable parts of the outer 416 (sticking to the consummers road area ... again by all means this area should be just if not more desirable then the say Markham ... I'm not referring to Jane and Finch), the only conclusion that one can draw is the commercial tax rate difference.

It seems as if you're saying today, people would rather work in say Markham, due to higher quality office space, or even the concentration of services their now (though this doesn't really apply to the Airport area ... where there is very little in terms of restaurants and other services) ... again I won't argue that, the point is how did it get that way as 15 years or so everything (i.e. areas wise) was on a much more equal playing surface.

I'm not attempting to prove anything, I'm describing a phenomenon appears fairly straight-forward to me.

The reason why areas like Markham, Mississauga, and Vaughan had a massive advantage 15 years ago was because (as I said earlier) developers could transform mostly empty land into whatever they wanted very very cheaply. Since places like Markham, Oakville and Vaughan are still expanding over farmland, they can afford to this day to keep taxes artificially low. Add to that the fact that, geographically, the professional demographic in Mississauga, Vaughan and Markham would happily work in suburban business parks, and that's that. The effect is compounded by the convenience of the airport for international firms.

Etobicoke and North York were once upon a time identical to Mississauga, Vaughan, and Markham in many respects. They were very competitive because they could afford to keep taxes artificially low and had plenty of cheap developable fields - and could promise their residents a shiny most up-to-date version of the American dream. Etobicoke particularly (and Scarborough down the other end for similar reasons) would have needed massive provincial bail-outs due to their unsustainable built form. This is why they were amalgamated to Toronto. North York would have followed suit eventually.

What I genuinely don't understand is the shock at why places like consumers rd. are not attractive and haven't been attractive to offices in ages. It's not just down to taxes (though as I said the artificially low taxes of the suburbs do play a role), it's mostly down to the fact they are just not that attractive to developers from a strictly geographical perspective.

 

[James]

Off the top of my head, I believe there are a couple of fairly large businesses located in the Consumers Road business park area, like Universal Studios, Enbridge, CH2M Hill, TMP Consulting Engineers to name a few prominent residents, however, I believe each of them have been at that location for a while now. I'm not sure why there hasn't been any new major businesses setting up at this location either. As mentioned, I can only assume that taxes and/or lease rates may be the deciding factor.

As far as attracting the best talent, businesses like Coca-Cola is moving their HQ to King St E and, of course, Telus moving to Richmond & York. The best talent, especially the best young talent, really is in the downtown core. I simply can't see a young bright mind living in a condo at, say, Bay & College, making the commute up to Vaughan or out to Mississauga. Especially in this day & age, where a work-life balance is regarded as more critical than straight-out salary for recent grads (per surveys I've read). I know a number of "downtowners" and even an office up at Sheppard is considered a commute. That said, the Consumers Road business park is easily accessible by TTC whereas Meadowvale isn't exactly downtown TO friendly. IMO, it makes more sense to set up a business at Consumers Road than Argentia Road but only if it makes financial sense.

 

[RC8]

But the businesses in Meadowvale didn't really care about attracting downtowners. They didn't predict the dramatic resurgence of downtown as it happened, and they wanted to attract people in Oakville and 'Sauga! RBC are expanding their business operations downtown now to compete with the other banks.

You can tell places like Thorncliffe, Don Mills, and even North York City Centre were very desirable once upon a time. Most employment centres in Toronto are by all means active, still. But the conditions that made them attractive for big companies have long changed.

Personally, and I speak for many of my young professional friends in Toronto, I would rather leave the GTA altogether than work in a business park in the suburbs. I don't care if it's in North York, Markham, or Barrie, I'm not going there. When I lived in Mississauga most people drove everywhere and enjoyed their jobs at Winston Churchill, the airport, and Meadowvale.

 

[canarob]

What's particularly striking to me is the "appeal" of York Region. Thornhill and Richmond Hill in particular are very expensive (more than the generally more pleasant Oakville and Burlington!) Shows that the advantage of being in the Bathurst/Yonge/Bayview corridor, even that far north. (And presumably being closer in to the city center plays a role).

I'm biased, but aside from old Oakville and some of the areas along the lake, I would argue much of York is just as nice or nicer. Neighbourhoods and cities like Unionville and King City aren't on a major corridor like Yonge or Bayview and are still very expensive (especially compared to the neighbourhoods you'd find directly south of Steeles). As mentioned above, the strong local job market helps to support this, as well as decent GO and highway connections to Toronto.

 

[canarob]

The reason why areas like Markham, Mississauga, and Vaughan had a massive advantage 15 years ago was because (as I said earlier) developers could transform mostly empty land into whatever they wanted very very cheaply. Since places like Markham, Oakville and Vaughan are still expanding over farmland, they can afford to this day to keep taxes artificially low. Add to that the fact that, geographically, the professional demographic in Mississauga, Vaughan and Markham would happily work in suburban business parks, and that's that. The effect is compounded by the convenience of the airport for international firms.

They also made a conscious decision to keep commercial taxes lower while keeping residential property taxes higher. I'm not sure land at the 404/Highway 7 was any cheaper 15 years ago than at Consumers Road or STC. It might have been 30 years ago though.

 

[Glen]

I'm not attempting to prove anything, I'm describing a phenomenon appears fairly straight-forward to me.

The reason why areas like Markham, Mississauga, and Vaughan had a massive advantage 15 years ago was because (as I said earlier) developers could transform mostly empty land into whatever they wanted very very cheaply. Since places like Markham, Oakville and Vaughan are still expanding over farmland, they can afford to this day to keep taxes artificially low. Add to that the fact that, geographically, the professional demographic in Mississauga, Vaughan and Markham would happily work in suburban business parks, and that's that. The effect is compounded by the convenience of the airport for international firms.

Etobicoke and North York were once upon a time identical to Mississauga, Vaughan, and Markham in many respects. They were very competitive because they could afford to keep taxes artificially low and had plenty of cheap developable fields - and could promise their residents a shiny most up-to-date version of the American dream. Etobicoke particularly (and Scarborough down the other end for similar reasons) would have needed massive provincial bail-outs due to their unsustainable built form. This is why they were amalgamated to Toronto. North York would have followed suit eventually.

What I genuinely don't understand is the shock at why places like consumers rd. are not attractive and haven't been attractive to offices in ages. It's not just down to taxes (though as I said the artificially low taxes of the suburbs do play a role), it's mostly down to the fact they are just not that attractive to developers from a strictly geographical perspective.

Once again you are wrong. The developers who built the office space in Mississauga, Vaughan, Markham, etc. paid more for the land and much higher developments fees than they would have in Toronto's suburbs. These areas generated a similar amount of gross rent per sq. ft. (which is the best proxy for demand) but higher net rent (due to lower property taxes).

It was not empty fields, cheap land and low taxes. As I and others have stated, and reports like the Hemson one shows, land and fees were more expensive outside Toronto than inside the suburbs. Despite all this it was profitable to build, so much so that it was done on spec, unlike in the city.

 

[TrickyRicky]

"Once again you are wrong. The developers who built the office space in Mississauga, Vaughan, Markham, etc. paid more for the land and much higher developments fees than they would have in Toronto's suburbs. These areas generated a similar amount of gross rent per sq. ft. (which is the best proxy for demand) but higher net rent (due to lower property taxes)."

The developers made money but if I was the commercial building owner in some of these areas and loaded up on debt, I would not be sleeping soundly right now. History can reward us with the satisfaction of knowing who is right or wrong but forward looking trends make us money.

 

[RC8]

Once again you are wrong. The developers who built the office space in Mississauga, Vaughan, Markham, etc. paid more for the land and much higher developments fees than they would have in Toronto's suburbs. These areas generated a similar amount of gross rent per sq. ft. (which is the best proxy for demand) but higher net rent (due to lower property taxes).

It was not empty fields, cheap land and low taxes. As I and others have stated, and reports like the Hemson one shows, land and fees were more expensive outside Toronto than inside the suburbs. Despite all this it was profitable to build, so much so that it was done on spec, unlike in the city.

It was significantly cheaper than any desirable location in Toronto, and had much lower taxes (making it more profitable per square foot - i.e. cheaper).

What you don't seem to grasp is that the only reason taxes were and remain so low, and thus one of the reasons Mississauga was and remains more profitable than the inner suburbs is because of the externalisation of costs that is made possible by a city under continuous expansion.

Mississauga can keep residential taxes higher than commercial taxes because residential property values in Mississauga still remain low. They remain low because the built form encourages the externalisation of land costs onto energy for transportation.

canarob, you are right, 30 years ago is much more accurate. It's incredible that 15 years ago was only in the late-90s! I'm getting old.