For 12 years, the Town of Markham, on Toronto's northeast fringe, was in limbo as developers, elected officials and residents wrangled over how to enliven the city's downtown. At stake was a 243-acre site, redevelopment of which will reshape this city of 265,000 residents.
Government officials especially have been concerned about containing urban sprawl. And it has taken intense back-and-forth talks with developers The Remington Group to come up with a plan, unveiled in late June, that everyone, finally, seems to be happy with.
The deal was announced with great fanfare as the developers and city officials stood together triumphantly and held a press conference unveiling the $2.66-billion project, which will take 20 years to build out.
How was Remington able to break the deadlock after so long? The answer is mixed-use.
“The incentive 10 or 12 years ago would have been to do a conventional development, and get in and get out quickly,” says Rudy Bratty, Remington's chairman and CEO. “By following the municipality's preference for New Urbanism [enshrined in Markham's official plan], you get more density, but you have to be far more patient getting to the point of construction.”
The trend that U.S. developers have been pushing for the past two years is now making the leap north of the border. And Canadian developers are not just aping the idea of blending uses, but also seeing the projects as a key part of revitalizing urban cores. The majority of the mixed-use developments in the works are in Canadian cities, with projects sprouting in and around Quebec, Vancouver and Toronto that blend retail, office, residential, hotel and other uses.
Remington's Markham will combine Euro-style streets, lined with small shops, with condos and other commercial uses, and the 243-acre development will be interspersed with parks and other public spaces. First up: 200 condominiums and 175 townhouses. After that, 1 million square feet of commercial space ranging from luxury retail, small shops, a boutique hotel, restaurants, cinemas, cafes and nightclubs, will follow, as well as 4.2 million square feet of office space.
In developing the plan, Bratty — along with Markham mayor Don Cousens — made repeated trips around the U.S. looking at how cities were approaching urban revitalization. There they saw examples, such as City Center in West Palm Beach, Fla., that helped shape their vision. In the end, Cousens and Bratty hope that by 2026, developers and city officials from all over the continent will be making similar treks to Markham to follow its example on how to rebuild.
“This is a model that will be emulated by many municipalities across North America, as a solution to urban sprawl,” Cousens says.
Blake Hudema, an urban planner and president of Hudema Consulting Group Limited, believes mixed-use will work in Canada and he expects it to progress more smoothly than it will within the U.S.
“Canada in some respects can lead this development,” Hudema says. “Our inner cities are much more vibrant, typically, than many U.S. cities, where there is a need for a lot of revitalization. Most Canadian cities are healthy and offer a good platform for developers and investors to look at [when considering] redevelopment into mixed-use centers.”
Inner cities, he says, are good places for “densification.” Around Vancouver, land is scarce and expensive. That, he says, “is creating an impetus to create a greater amount of mixed-use. We've also always had fairly intense, dense development, so developers, investors, retailers and customers are attuned to underground or structured parking.”
Although many parts of Canada are embracing mixed-use, the province of Alberta, where the office vacancy rate is a microscopic 2 percent, is an exception. There, six high-rise office towers are under construction, but no other uses are involved.
Edmonton, closest to the oil sands drilling projects in the far northern reaches of the province, is the same. Robert Knight, vice president, retail, of Western Canada, Oxford Properties Group, says, “the Bay and Sears department store anchors function like regional shopping centers in downtown Calgary and are renovated and upgraded periodically, but there are no mixed-use centers.” Nor do they exist in the provincial capital: Edmonton City Centre downtown, with its three high-rise office towers, which is essentially the same as similar developments in other Canadian cities, with their bustling retail concourses.
“People will come downtown on weekends for shopping and entertainment, although parking is difficult and they work there during the week, so there is no novelty,” he says. Mixed-use is not hugely popular with local developers because there are “significant operating challenges. It's great to think of adding a hotel into a cluster of office buildings, but it's hard to add on and could obstruct views,” Knight says. “The crossover between hotel guests utilizing the retail to a significant degree is so-so. Tourists staying at a hotel will likely shop at its stores, but business guests will shop when they're back home.”
But aside from Alberta, the rest of Canada seems won to the concept.
Peter Sharpe, Cadillac Fairview Corp. Limited president and CEO noted at an ICSC regional conference in Montreal in June that, “many of the new projects underway in Canada appear more ‘hybrid’ in nature, combining various elements of design and function and offering a different glimpse of the future. It is a trend to pay attention to.”
“No one is building enclosed malls.”
Jean-Francois Breton, copresident of development company Le Groupe Devimco, noted at the ICSC conference that, “demand is very strong because no one is building enclosed malls in Quebec.”
RioCan Real Estate Income Trust, Toronto, the largest REIT in Canada, has a 50 percent interest in the Quartiers Dix 30 project outside Montreal. The firm is contemplating expanding the 1.5-million-square-foot mall, which hasn't even opened yet, with a hotel and convention center.
In neighboring Ontario, Toronto Eaton Centre's cavernous 1.6 million square feet of retail space, meshed with three high-rise office towers and a 459-room hotel, will be completed this fall after unfolding for nearly 30 years. The last pieces on its downtown city block include three new levels of parking, a new three-story business school and 130,000 square feet of new large-format retail.
John Sullivan, senior vice president, of development with The Cadillac Fairview Corporation (CF), Toronto, says the company is scouting large mixed-use opportunities in Montreal, Calgary and Vancouver.
“Fifteen years ago the focus was on huge regional malls and huge downtown office buildings. Today there isn't a great demand for either of them. We want to keep that same scale, but because of the demand for individual components, we're mixing it up a bit,” he says.
The company is redeveloping its 50-year-old Don Mills Shopping Centre, in suburban Toronto. At the time of construction, the 462,000-square-foot mall sat in a 200-acre greenfield site. The mall was enclosed in 1978. Development around the site has put it in a more urban setting. So Cadillac Fairview is starting from scratch. It demolished the center early this summer and will put in its place an open-air, mixed-use town center development with retail in the first phase and residential in the second phase.
A similar story is unfolding in Vancouver, where the first open-air shopping center there, the 56-year-old, 1.2-million-square-foot Park Royal Shopping Centre, has also morphed into a mixed-use project. In addition to retail, it now has 100,000 square feet of office and self-storage space and 500 rental apartment units.
The land under the center is owned by a First Nations group, to which the mall's developer, Larco Investments Ltd., pays rent. That relationship has eased the project's transformation as First Nations has given Larco flexible zoning, which enables multiple uses close to each other.
“Shopping center land is typically zoned for specific uses, and municipal planners have become very single-purpose-oriented. We had the flexibility to do different types of real estate, depending on market,” says Rich Amantea, Larco's vice president.
Nearby, Larco is trying to take advantage of the open zoning to build Morgan Crossing, which Amantea describes as “Canada's first pure mixed-use project, from the ground up,” which, if approved by First Nations, will contain 450,000 square feet of lifestyle retail and 450 condo units. He expects to start construction early next year and open in the fall of 2008.
“Residential development is generally driving mixed-use from a retail standpoint,” Amantea says. “Developers want to build residential, and planners want a soft street-side edge to them, so they're encouraging residential developers to do retail street level to achieve greater social interaction with the local community.”
Success not guaranteed
While mixed-use centers tend to meet developers' expectations, success is not always guaranteed. Financial performance can be mixed. Hazelton Lanes, in Toronto's upscale Yorkville neighborhood, for example, was developed in the late 1970s by William Louis-Dreyfus, chairman of the New York-based Louis Dreyfus Group.
It incorporated retail, office and residential uses (some of the condo units have 2,000-square-foot terraces) in a single, medium-rise and very classy building. It was a winner for many years, but then retail began to slide and that segment bled red ink for years. It didn't recover until a new owner brought in Whole Foods Market Inc., an Austin, Texas-based chain of organic food supermarkets.
It was the first Whole Foods store in Canada, and it was successful from the day it opened, which has also turned Hazelton Lanes' retail around.
Ivanhoe Cambridge's MetroTown in suburban Barnaby, for example, with the largest regional shopping center in British Columbia (1.7 million square feet of commercial space) has a new Hilton Hotel with conference facilities, among other uses.
Keeping people in the city
And under construction is Grosvenor Canada's The RISE, a 290,000-square-foot development on a sloping, 2.2-acre full block under construction in downtown Vancouver. It's designed for 10,000- to 60,000-square-foot retail tenants and 92 residential units which will actually sit on top of the center. Not everybody gets to have a shopping center in their basement.
“It keeps people in the inner city from driving out to suburban shopping centers, so there is less traffic congestion [and polluted air] and it brings more new-format retailers downtown,” Hudema says.
Entertainment centers (cinema multi-plexes/game arcades/food concessions) will be “cautiously developed” in newer mixed-use centers because of high construction costs and unpredictable income (except for popcorn sales). Residential and other commercial developments are a more likely category, such as Bosa Properties' Highgate Village residential/commercial project in Burnaby, which is being built on a former strip mall site.
Some mixed-use centers don't start out that way. Aberdeen Centre, a 380,000-square-foot Asian mall in suburban Richmond, B.C., is one example. Michael Heeney, executive director of Bing Thom Architects in Vancouver, which designed the mall, says Thomas Fung [chairman and CEO of The Fairchild Group, a mixed media enterprise], decided to integrate a 120-unit condo into the mall a few years after it was built.
It is under construction, Heeney says, and in the meantime Fung has moved most of his office and broadcasting studios into the complex, which also allows him to offer on-site print and broadcast promotional services to his tenants.