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Fixer-upper: Can Toronto turn a patch of urban wasteland into Amazon's jewel?
Saturday, February 03, 2018
It is a vast tract of industrial land in Toronto's east end, a site unfamiliar to most people in city - even those living nearby. It has no public road access and is largely fenced off, with railway lines on the north side blocking views into the property.
The most notable building on the land is the long-abandoned Unilever soap factory, used only occasionally for events or film shoots. Much of the interior of the 62-acre lot - stretching many long city blocks - is empty pavement.
Viewed on a windy day in January, it takes immense imagination to picture the city of Toronto's transformational vision for the site, which would one day see up to 50,000 workers pour from a transit station and walk through new streets filled with tall office towers and other buildings of all sizes, separated by green spaces and parks.
The city has pitched the location as a potential home for Amazon.com Inc.'s second headquarters, proposing a bustling new neighbourhood with 13 million square feet of office and retail space that could become a walkable green campus for the e-commerce giant.
The joint regional Toronto bidding group hopes the site's untapped promise will help to lure the e-commerce giant to choose Toronto over 19 other cities that have also been shortlisted to play host to the headquarters, including cities such as New York, Chicago, Boston and Washington.
First Gulf Corp., which owns a majority of the land at the East Harbour site and has spent years working on a development plan, has called it Toronto's Canary Wharf, referring to the once derelict district in east London that has been transformed into a financial hub on the Thames.
Whether Amazon will share that ambitious vision for East Harbour remains to be seen. But the first challenge for Toronto's bidding group is to convince the e-commerce and technology company that the site's numerous problems can be overcome, and that the city's notoriously slow developmentapproval process can kick into high gear to meet Amazon's requirement to move quickly on construction.
Local city councillor Paula Fletcher said the amount of work and moving parts will make it difficult to have the entire site ready for prime time, even with Amazon at the door. "I don't know how all that work could be expedited," Ms.
Fletcher said. "If it's that site, it's not as easy as it looks."
"THINK BIG AND CREATIVELY"
When Amazon announced last year that it was soliciting bids from cities willing to host its second headquarters location - dubbed HQ2 - it said the real estate and site location were of "paramount importance," above all other considerations.
Amazon has outgrown its Seattle headquarters base, where its employees are squeezed into 33 different buildings throughout the downtown core, so its primary focus on getting the right site for HQ2 is little surprise.
Amazon's employee growth has been remarkable, climbing from just 20,000 employees in 2008 to more than 540,000 today as it has expanded far beyond its original business of electronic retailing. That figure includes 40,000 people who work at the Seattle headquarters alone.
Amazon urged communities to "think big and creatively" about the real estate options they pitched, but said it will prioritize "certified or shovel-ready greenfield sites and infill opportunities."
In the initial phase, the company says it needs more than 500,000 square feet of existing building space that can be ready for employees by 2019, but its needs will climb to eight million square feet beyond 2027. Amazon estimated it would require about 100 acres of land that is ready for development with utilities in place.
The sites do not have to be contiguous, "but should be in proximity to each other to foster a sense of space and be pedestrian friendly," the company added.
URBAN AND AVAILABLE
It's a tall order for any major city to have that much developmentready land available for launch but unused, but the East Harbour site is moving closer to development at the right moment.
Toronto's regional bidding group proposed 10 locations for Amazon, ranging from an assortment of available office space in the downtown financial core to essentially empty land in the far reaches of the suburbs ranging from Ajax to the east and Burlington to the west.
Most of the suburban sites offer far simpler development planning on shovel-ready open land. But many urban planners believe the most appealing site for Amazon would be the industrial land just east of the Don Valley Parkway on the east side of downtown.
The East Harbour location is one of the largest pieces of undeveloped land in the centre of the city, and Amazon could shape it as it wished, building a trendy new urban destination likely to attract young technology workers.
"It would be a great location," said Frank Clayton, senior research fellow at the Centre for Urban Research and Land Development at Ryerson University.
While other locations in the GTA also are good options, he says he doesn't believe Amazon would choose some of the more remote spots because of the limited public transit access, with many of the sites served only by regional buses.
"If rapid transit is really important to them, the only place that really makes sense for them is in central Toronto," he said.
Toronto real estate agent Adam Brind says East Harbour is the right site for Amazon to attract employees. He says many of the young tech sector workers he deals with choose companies in part on their location.
"These companies can't go to Nebraska and open up shop there ... . They have to go where people want to live, and where it's attractive," he said. "These are young talented people in their 20s and early 30s, and if a city or community doesn't provide the lifestyle they're looking for, they'll just go find a job somewhere else."
PUBLIC TRANSIT A KEY FACTOR
For the East Harbour site to work, however, a mountain of infrastructure projects - to be coordinated among different governments and regional agencies - must come together on an aggressive timetable.
The site remains largely inaccessible by public transit, a key Amazon demand, so its viability partly rests on plans to build one of Toronto Mayor John Tory's socalled SmartTrack commuter rail stations at its north end. The station would use existing rail tracks with an expanded GO Transit rail service to the site.
First Gulf's first major phase of new development will be about three million square feet of office, retail and entertainment timed to be completed with the opening of the new train station in 2023. "We are counting on it being built," said Derek Goring, First Gulf's vicepresident of development.
But planning for the station by Metrolinx, the province's regional Toronto transit agency, is still under way, and its price tag is estimated to be as high as $400-million. Whether, or how much, First Gulf would contribute to the construction remains subject to negotiations, city officials say. Still, the target date for opening is 2023.
Meanwhile, for commuters from neighbourhoods to the north, or those who use the city's subway system, the city also plans to extend nearby Broadview Avenue and its streetcar line south into the new SmartTrack station. The work isn't expected to begin until 2020 at the earliest.
Don Peat, a spokesman for Toronto's mayor, said he has "no reason to doubt" that the SmartTrack station will be in service on time.
At the base of the Don River, East Harbour is also entirely within a floodplain, and development of office space on the location is restricted as a result.
Last year, the federal, provincial and city governments committed to a $1.2-billion, seven-year plan to flood-proof the area. The work must be done before major development goes ahead, although it may be possible to speed it up.
There are still other headaches: Rail tracks to the south will eventually need to be moved.
Plus, the city is still gearing up for a huge project to realign its elevated Gardiner Expressway, right next to the site, which will take years. The city also owns land within the East Harbour site and is still consulting on its plans, which it would integrate with First Gulf's development.
'That great urban feeling' First Gulf and its partners say enough groundwork has been laid over eight years of work on East Harbour that it can move forward quickly.
Mark Cowie, executive vicepresident with Colliers International, who is in charge of finding tenants for East Harbour, said First Gulf has already spent tens of millions of dollars on zoning, transit planning, engineers, and traffic studies.
"It was a long process to get to where we are today," Mr. Cowie said.
As a long time realtor and leaser, Mr. Cowie had his eye on the sprawling patch of unused land for years. He helped put the deal together with First Gulf to buy the lot in 2011 and personally owns a minority stake.
The planning evolved over the years to what Mr. Cowie now describes as a "second city," a major business and entertainment hub. Mr. Cowie and Mr. Goring says the beauty of East Harbour is that they will be able to design the site to achieve "that great urban feeling." "We want something that makes a statement ... . The worst thing would be to have it boring and everything the same," Mr. Cowie said.
The developer is now waiting for the city to approve its zoning application to build 8.5 million square feet of office space and 1.5 million square feet of retail and entertainment. It says it expects to win approval around midyear, and then will try to prelease the buildings.
First Gulf's first building - turning the soap factory into 500,000 square feet of mostly office space - is expected to be completed around 2021, before the public transit is in place. Developers said they will use shuttle buses and temporary onsite parking on an interim measure.
Some of Toronto's leading urban planners have criticized the plan for the site because the current zoning prohibits residential development.
Ken Greenberg, a former chief planner for the city who has spent decades consulting in cities across North America and Europe about development planning, said mixed-use neighbourhoods have become the accepted norm in urban development, and the worst-case scenario would be to create a sea of office towers that hollow out at night.
"It flies in the face of everything we've learned about mixed environments ... . It's an outdated and anomalous idea about segregated land uses," he said.
THE REAL ESTATE RIPPLE EFFECT
The impact of a company such as Amazon coming to East Harbour would be felt far beyond the development site itself, rippling through the nearby neighbourhood and the central Toronto real estate market more broadly.
Toronto's home prices have seen rapid price growth in recent years, and the downtown core in particular can't keep up with demand from condominium buyers or renters. Adding 50,000 new employees would undoubtedly strain supply and add pressure for more price increases, but could also be an impetus to encourage more condo growth on the east side of the city.
On the commercial real estate front, the company's arrival would likely not worsen the city's lack of downtown office space, where the vacancy rate is currently 2.7 per cent - the lowest of any major North American city - says Stuart Barron, national research director at Cushman & Wakefield. New office developments are under construction in the core that will significantly improve the vacancy rate by 2020 and again by 2023, Mr. Barron said.
If Amazon takes East Harbour it would not be taking up existing space in the downtown core, making it a wash in terms of adding to space constraints, said Bill Argeropoulos, head of research at commercial real estate firm Avison Young. He said Amazon's arrival could actually free up office space in the downtown core if the company moved its current Toronto-based employees out of about 240,000 square feet of space in the financial district to a new location.
LONG ODDS, LONG-TERM VISION
Amazon has not revealed much publicly about what will happen next, nor whether there will be another round of cuts to get to a shorter list of bidders. It will announce its final decision later this year.
Many in Toronto think the city is a long-shot to win the bid because they don't believe Amazon would leave the United States in an era of growing protectionist sentiment. U.S. oddsmaker SportsBettingDime.com recently ranked Toronto's odds near the bottom of the list of bidders in a tie for 16th place.
Regardless of whether Amazon chooses Toronto, First Gulf says it will proceed with its multibillion-dollar construction project to turn acres of vacant industrial land into a vibrant business hub.
"We are staying on our current path of development. We are not going to at this stage alter our path in terms of our approvals and process," Mr. Cowie said.
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