NEW YORK TIMES, October 13, 2009
By ALBERT WARSON
TORONTO — The financial district of this city, the fifth-largest metropolitan area in North America, with a population of 5.4 million, is the scene of an exceptional flurry of development, especially in light of the recession.
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Steve Payne for The New York Times
A view of the financial district of Toronto, which is experiencing pent-up demand after years of little construction.
Three green towers with a combined 3.1 million square feet of office space are opening before the end of the year in the downtown financial district. In addition, within a 20-minute walk, three high-rise condominium-hotel towers costing about 1.23 billion Canadian dollars (about $1.19 billion) will open next year.
This unusual burst of construction has rejuvenated the lower edge of the Bay Street financial district. The district has also projected to the south into a vacant 30-acre site across Front Street toward the Lake Ontario waterfront.
Despite the worldwide economic downturn, “Toronto’s real estate investment fundamentals and its place as Canada’s financial capital are more sound than most international capitals — New York included,” said Blake Hutcheson, a partner and head of global real estate investing at Mount Hallet Capital, a New York-based private equity fund.
He said the torrent of development in Toronto’s financial district was the culmination of a process that had taken 20 years “from concept to completion.” The three new downtown office towers were started before the recession.
Their developers have preleased more than two-thirds of the space, taking advantage of pent-up demand for modern office space. No significant office towers had been built in the financial district for 17 years, according to the city’s planning department.
The first of the financial district towers to be completed was the 51-story 1.2-million-square-foot Bay Adelaide Centre West, developed by a partnership of the Brookfield Properties Corporation, based in New York, and BPO Properties Ltd., based in Toronto. It opened this month and has been 73 percent preleased to the accounting giant KPMG and other tenants.
The name of the tower includes the word “West” because two more phases, encompassing another 2.6 million square feet of space, are planned. Construction of this first tower, which cost 308 million Canadian dollars, actually began almost two decades ago but was aborted after the foundation was completed in 1991, during an earlier recession, when Toronto’s office vacancy rates hit 20 percent.
Tom Farley, president and chief executive for Brookfield’s Canadian commercial operations, says the new building is the first high-rise office building in downtown Toronto to be awarded a Leadership in Energy and Environmental Design gold rating. He said that the building would have “an estimated 40 percent energy savings relative to other buildings built to the Canadian Model National Energy Code,” another voluntary standard that gives builders green bragging rights
Another new building, the RBC Centre, a 43-story tower with a 10-story podium and three underground parking levels, is the Royal Bank of Canada’s new head office. It was developed at a cost of about 420 million Canadian dollars by the Cadillac Fairview Corporation of Toronto on behalf of its parent, the Ontario Teachers’ Pension Plan. The new tower, which is to open later this month, is at the edge of the financial district, in a thriving entertainment district that includes a circular concert hall, an opulent 1900s-era theater, and other entertainment venues, restaurants, bars and recycled period buildings turned into offices, studios and loft condos.
The final new building, the 30-story Telus Tower, which is costing about 250 million Canadian dollars, is on a corner of the windswept 30-acre former railway lands, which have been abandoned for about three decades. It is to be completed next month. The site is near Union Station, the country’s busiest passenger transportation hub, used by about 250,000 passengers each work day.
Peter Menkes, the president of Menkes Developments of Toronto, the developer of the tower, says the building is 82 percent leased by Telus Business Solutions of Vancouver, which provides communications services across Canada.
The Hospitals of Ontario Pension Plan of Toronto and Halcyon Real Estate Partners Fund, a New York-based institutional real estate equity fund, are joint venture partners with Menkes. “Nearly filling the building space in a difficult leasing environment was an accomplishment,” Mr. Menkes said.
The new buildings will all provide access to the 16.8-mile underground PATH system, a climate-controlled retail, service and food walkway winding under most of the office towers downtown, with access to the subway. The office buildings will also be connected by the PATH to Union Station, which itself will be redeveloped in 2010 at a cost of 640 million Canadian dollars.
The three luxury hotel-condominiums that are under construction are in the downtown Bay Street financial district or within a few blocks of it. They are the 70-story Trump International Hotel and Tower, which is to cost 500 million Canadian dollars; the 53-story Ritz-Carlton and Residences at the Ritz-Carlton, with a price tag of 300 million Canadian dollars; and the 65-story Living Shangri-La Toronto, projected at 430 million Canadian dollars. They are expected to open next year or early in 2011.
All of these properties are expected to be attractive to executives doing business in the financial district, and they will have conference facilities. The upper stories will be used for residential condominiums, a booming sector in Toronto. Another building just starting to go up in the area is 18 York Street, a 26-story tower across the street from Telus Towers. It is expected to open in the fall of 2011.
GWL Realty Advisers of Toronto is developing the tower for the British Columbia Investment Management Corporation of Vancouver. PricewaterhouseCoopers is expected to be the principal tenant.
Kaid Al-Ani, an associate partner of the Mitchell Partnership of Toronto, which is designing its mechanical systems, says 18 York Street will be noteworthy for its cooling system, which will circulate cold water drawn from Lake Ontario.
Doug Webber, a planner who leads the green practice for Toronto-based Halsall Associates Ltd., an engineering consulting firm responsible for green and sustainability features at 18 York Street, says all of these new buildings “meet several city of Toronto planning objectives, including expansion of the downtown business district, employment growth, transit-oriented development and revitalization of the area surrounding Union Station.”
While it seems surprising to have all this activity during a recession, there was an acute need for new construction in the financial district, according to John O’Bryan, a vice chairman of CB Richard Ellis Ltd., a commercial real estate services company, in Toronto.
Until this year, the newest buildings there were almost 20 years old, and a number of major tenants had been pushing for more modern buildings with larger and more efficient floor plates and green qualities, he said.
Many of them also preferred to be downtown because financial employees are seen as increasingly eager to live in condos downtown.
Mr. O’Bryan noted that most of the tenants in the first two buildings came out of existing downtown buildings, leaving huge blocks of space to refill. “The older buildings that tenants left had never been retrofitted, and yet were always full,” Mr. O’Bryan said. “Owners will now retrofit those old buildings and fill them up over time.”