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From The Star
905 building boom
Suburban development has far outpaced that of downtown as lower costs and lower taxes draw businesses and residents
Sep. 8, 2006. 06:04 AM
TONY WONG
BUSINESS REPORTER
Most area residents wouldn't know it to look at it, but in a few months, the first phase of the tallest office complex in York Region will be ready for occupancy.
At five and 12 storeys, the anonymous steel and glass buildings of Liberty Square, Markham's newest class A office "towers" built on former farmers' fields in the city's downtown don't exactly exude the marble and limestone-lined prestige of say, a First Canadian Place. But it is representative of a quiet revolution that has taken a decade to happen, transforming the 905 region.
While much of the attention lately has been on the three skyscrapers announced for downtown Toronto this year, dozens of significant projects such as Liberty Square have slipped by unnoticed. But their cumulative effect on development in the Greater Toronto Area has been arguably much more profound.
"There is so much focus on the downtown core that I think the general public really hasn't noticed what's going on," Keith Reading, vice-president of research for Colliers International, said in an interview. "But what's going on is huge."
According to a study by Colliers, since 2000 there has been about a million square feet of office space built in downtown Toronto. In that same period, the suburbs saw a staggering nine times as much, or 9.4 million square feet of space being built.
Toronto is just starting to catch up. In the next two years, 19 office buildings will be completed in the 905 region versus a confirmed three in the downtown core.
The three are massive, totalling more than 3 million square feet. They are the first skyscrapers to be built downtown since BCE Place in 1992.
In July, Brookfield Properties Corp. said it would restart building the moribund Bay Adelaide Centre project, a 1.1 million square foot project with KPMG LLP as the lead tenant.
That announcement followed on the heels of Menkes Developments saying it would be building adjacent to Union Station with Telus Corp. as its tenant. And earlier this year RBC Financial Group and RBC Dexia Investor Services said they would move into the Cadillac Fairview Corp. tower being built in the city's entertainment district. But if you add all the available space created by the three towers, Reading says, that's not much more than the 19 office buildings totalling 2.6 million square feet slated to be built in the suburbs during the same period.
There is no single explanation for the growth of the 905 and the corresponding lacklustre development of the downtown core over the last decade.
One large reason has been cost. Land in the suburbs has been cheaper and more plentiful, and that hasn't escaped the notice of corporations.
Taxes are also significantly less, and companies that don't need the prestige of a downtown office have decided that it's okay to be away from the central core.
Meanwhile, some companies have acknowledged that their employees would rather work and live in the suburbs.
Even small things such as parking can be a big attraction. With so many condos being built downtown and much of the surface parking disappearing, the median price for monthly parking increased by 5 per cent to $300 in 2006, according to a recent study by Colliers International. Suburban parking is usually free.
"There is a real sense of optimism in the 905 — you build it and they will come. The suburbs have developed into true self-sustaining cities," says Glenn Crosby, vice-president of JJ Barnicke Ltd., responsible for leasing the Liberty project.
"And people have realized they don't necessarily have to be downtown. There isn't the same loyalty to geography. They are looking for the best real estate deal. And the best deal is sometimes found in the newest, most modern buildings. It's a win-win situation — if you're willing to move."
On a rainy weekday, Crosby drives his BMW sedan around a sold-out Markham condominium project, which is right beside a Hilton hotel, in the heart of a new higher-density planned city centre. Highway 7, the main thoroughfare, is jammed with cars and employees on their way to head offices of high tech companies such as Apple Computer Inc., IBM Canada Corp. and ATI Technologies Inc.
Markham already has a "cachet" with corporate Canada, says Crosby, that is being solidified by the current suburban building boom.
Even in the suburbs, space is at a premium. While there may have been a dozen options a few years ago for large blocks of space, corporations may now have three or four to choose from, he says.
"You can have all the amenities of downtown without the hassle."
This is no idle boast.
Developers are so confident in the 905 region that many, such as Liberty Development Corp., which is building the Markham office development, are doing something that is unheard of for a developer of a downtown skyscraper. They are building on "spec" or without a confirmed tenant. In fact, seven of the 19 buildings slated for completion have yet to find a tenant.
That would be unthinkable in the downtown core, where a lead tenant like the Royal Bank of Canada is needed to start a million square foot project such as the Cadillac Fairview building in the city's entertainment district.
In other cases, corporations may decide to move to the 905 area and have a building made especially for them. That was the case with the highly publicized move by financial services company Citigroup to start building a 200,000-square-foot headquarters in Mississauga this year.
About 1,100 employees will move from several locations, including from the company's 70,000-square-foot One Toronto St. downtown office when the complex opens by the end of next year.
"The driver was costs and the ability to consolidate different offices and operate in a new building that had all the technology they needed," says Robert Armstrong, senior vice-president at Jones Lang LaSalle, who helped to broker the deal.
Even if the three new towers scheduled for downtown Toronto were available today, Citigroup likely still would have moved outside the core, he says.
"They wouldn't be downtown in the first place; it wouldn't be economically feasible," Armstrong says.
One issue was finding a downtown location with large floor plates suitable for call centre operations. First Canadian Place, the biggest office tower in Toronto, has some of the largest floor plates at 30,000 square feet. But call centres typically need 40,000 square feet and up.
"Because space is such a premium, you have to build up and go vertical, but it gets exponentially much more expensive to build that way," said Eamonn Murphy, senior vice-president at Jones Lang LaSalle.
According to Colliers, the western fringe of the GTA, such as Mississauga, Brampton, Oakville and Burlington, will lead the way in development over the next two years, representing about half the total slated for completion. Demand for new suburban office space has been driven by expansion from companies such as Loblaws and the relocation of companies such as Citigroup and Maple Leaf Foods, Colliers says.
Still, Armstrong cautions that the suburbs are not the solution for every company.
Citigroup, for example, will still maintain a downtown presence with its 125,000 square feet Canadian headquarters. "It's a prestige issue, and it's a business decision. If you want your presence known, you have to be on Bay Street or on Wall Street, especially when you're working with other banks and financial players," Armstrong says.
In the case of the Maritime Life Building, built in 2000 and the first significant office space to be developed downtown in a decade, the lead tenant actually wanted to move to the suburbs, says Murphy. But after Murphy and Armstrong did the analysis, it made more sense for their client to stay downtown.
905 building boom
Suburban development has far outpaced that of downtown as lower costs and lower taxes draw businesses and residents
Sep. 8, 2006. 06:04 AM
TONY WONG
BUSINESS REPORTER
Most area residents wouldn't know it to look at it, but in a few months, the first phase of the tallest office complex in York Region will be ready for occupancy.
At five and 12 storeys, the anonymous steel and glass buildings of Liberty Square, Markham's newest class A office "towers" built on former farmers' fields in the city's downtown don't exactly exude the marble and limestone-lined prestige of say, a First Canadian Place. But it is representative of a quiet revolution that has taken a decade to happen, transforming the 905 region.
While much of the attention lately has been on the three skyscrapers announced for downtown Toronto this year, dozens of significant projects such as Liberty Square have slipped by unnoticed. But their cumulative effect on development in the Greater Toronto Area has been arguably much more profound.
"There is so much focus on the downtown core that I think the general public really hasn't noticed what's going on," Keith Reading, vice-president of research for Colliers International, said in an interview. "But what's going on is huge."
According to a study by Colliers, since 2000 there has been about a million square feet of office space built in downtown Toronto. In that same period, the suburbs saw a staggering nine times as much, or 9.4 million square feet of space being built.
Toronto is just starting to catch up. In the next two years, 19 office buildings will be completed in the 905 region versus a confirmed three in the downtown core.
The three are massive, totalling more than 3 million square feet. They are the first skyscrapers to be built downtown since BCE Place in 1992.
In July, Brookfield Properties Corp. said it would restart building the moribund Bay Adelaide Centre project, a 1.1 million square foot project with KPMG LLP as the lead tenant.
That announcement followed on the heels of Menkes Developments saying it would be building adjacent to Union Station with Telus Corp. as its tenant. And earlier this year RBC Financial Group and RBC Dexia Investor Services said they would move into the Cadillac Fairview Corp. tower being built in the city's entertainment district. But if you add all the available space created by the three towers, Reading says, that's not much more than the 19 office buildings totalling 2.6 million square feet slated to be built in the suburbs during the same period.
There is no single explanation for the growth of the 905 and the corresponding lacklustre development of the downtown core over the last decade.
One large reason has been cost. Land in the suburbs has been cheaper and more plentiful, and that hasn't escaped the notice of corporations.
Taxes are also significantly less, and companies that don't need the prestige of a downtown office have decided that it's okay to be away from the central core.
Meanwhile, some companies have acknowledged that their employees would rather work and live in the suburbs.
Even small things such as parking can be a big attraction. With so many condos being built downtown and much of the surface parking disappearing, the median price for monthly parking increased by 5 per cent to $300 in 2006, according to a recent study by Colliers International. Suburban parking is usually free.
"There is a real sense of optimism in the 905 — you build it and they will come. The suburbs have developed into true self-sustaining cities," says Glenn Crosby, vice-president of JJ Barnicke Ltd., responsible for leasing the Liberty project.
"And people have realized they don't necessarily have to be downtown. There isn't the same loyalty to geography. They are looking for the best real estate deal. And the best deal is sometimes found in the newest, most modern buildings. It's a win-win situation — if you're willing to move."
On a rainy weekday, Crosby drives his BMW sedan around a sold-out Markham condominium project, which is right beside a Hilton hotel, in the heart of a new higher-density planned city centre. Highway 7, the main thoroughfare, is jammed with cars and employees on their way to head offices of high tech companies such as Apple Computer Inc., IBM Canada Corp. and ATI Technologies Inc.
Markham already has a "cachet" with corporate Canada, says Crosby, that is being solidified by the current suburban building boom.
Even in the suburbs, space is at a premium. While there may have been a dozen options a few years ago for large blocks of space, corporations may now have three or four to choose from, he says.
"You can have all the amenities of downtown without the hassle."
This is no idle boast.
Developers are so confident in the 905 region that many, such as Liberty Development Corp., which is building the Markham office development, are doing something that is unheard of for a developer of a downtown skyscraper. They are building on "spec" or without a confirmed tenant. In fact, seven of the 19 buildings slated for completion have yet to find a tenant.
That would be unthinkable in the downtown core, where a lead tenant like the Royal Bank of Canada is needed to start a million square foot project such as the Cadillac Fairview building in the city's entertainment district.
In other cases, corporations may decide to move to the 905 area and have a building made especially for them. That was the case with the highly publicized move by financial services company Citigroup to start building a 200,000-square-foot headquarters in Mississauga this year.
About 1,100 employees will move from several locations, including from the company's 70,000-square-foot One Toronto St. downtown office when the complex opens by the end of next year.
"The driver was costs and the ability to consolidate different offices and operate in a new building that had all the technology they needed," says Robert Armstrong, senior vice-president at Jones Lang LaSalle, who helped to broker the deal.
Even if the three new towers scheduled for downtown Toronto were available today, Citigroup likely still would have moved outside the core, he says.
"They wouldn't be downtown in the first place; it wouldn't be economically feasible," Armstrong says.
One issue was finding a downtown location with large floor plates suitable for call centre operations. First Canadian Place, the biggest office tower in Toronto, has some of the largest floor plates at 30,000 square feet. But call centres typically need 40,000 square feet and up.
"Because space is such a premium, you have to build up and go vertical, but it gets exponentially much more expensive to build that way," said Eamonn Murphy, senior vice-president at Jones Lang LaSalle.
According to Colliers, the western fringe of the GTA, such as Mississauga, Brampton, Oakville and Burlington, will lead the way in development over the next two years, representing about half the total slated for completion. Demand for new suburban office space has been driven by expansion from companies such as Loblaws and the relocation of companies such as Citigroup and Maple Leaf Foods, Colliers says.
Still, Armstrong cautions that the suburbs are not the solution for every company.
Citigroup, for example, will still maintain a downtown presence with its 125,000 square feet Canadian headquarters. "It's a prestige issue, and it's a business decision. If you want your presence known, you have to be on Bay Street or on Wall Street, especially when you're working with other banks and financial players," Armstrong says.
In the case of the Maritime Life Building, built in 2000 and the first significant office space to be developed downtown in a decade, the lead tenant actually wanted to move to the suburbs, says Murphy. But after Murphy and Armstrong did the analysis, it made more sense for their client to stay downtown.
