For a grow­ing num­ber of Toronto com­pa­nies, the grass is look­ing greener south of the tracks, sev­eral blocks away from Bay Street. Inside the new “south core” finan­cial district—how it’s cater­ing to younger work­ers and what it means for the city.

Danielle Groen – The Grid

The view from the cor­ner of York and Brem­ner is a work in progress. Fac­ing south, it doesn’t look like much now: the ubiq­ui­tous Toronto tableau of cranes and con­struc­tion pits flank­ing a con­gested line of traf­fic, with the Gar­diner bisect­ing the hori­zon and block­ing out the lake. But that will soon change. In the next four years, at least four brand new, sky-scraping tow­ers will be vis­i­ble from this corner—and another four will be nes­tled in the blocks close behind.

Toronto’s busi­ness dis­trict is get­ting big­ger. Spurred by a robust com­mer­cial mar­ket, grow­ing com­pany sizes and lim­ited office space in the finan­cial core, devel­op­ers are jump­ing the tracks to set up closer to the water. The loca­tion is pre­pos­ter­ously attrac­tive: plots big enough to build tow­ers that will be shout­ing dis­tance from Union Sta­tion, with PATH con­nec­tions back to the orig­i­nal finan­cial dis­trict so shut­tling work­ers needn’t brave win­ter (not that we have win­ter any­more). Even more desir­ably, the new “south core”—yes, it has a cute name—is a 15-minute walk from the heart of City­Place, where many of the newest gen­er­a­tion of work­ers buy their first con­dos.

Already, the two glis­ten­ing struc­tures that strad­dle York Street—the Telus Tower at 25 York, which opened in June 2010, and the Price­wa­ter­house Coop­ers Tower at 18 York, which opened last September—are poach­ing ten­ants from the finan­cial dis­trict. Insur­ance com­pa­nies, engi­neer­ing firms and min­ing cor­po­ra­tions have all relo­cated, in addi­tion to the telecom­mu­ni­ca­tions and account­ing giants. Then, last Octo­ber, it was announced that Canada’s largest bank, RBC, would make its own leap south, open­ing a new domes­tic head­quar­ters on Har­bour Street for 2014. When all eight south core build­ings are com­plete, an addi­tional 7.3 mil­lion square feet of real estate will have been added to the roughly six blocks bor­dered by Lower Sim­coe, Bay Street, the tracks and the lake. That will triple the size of the exist­ing south core.

“The Bay Street com­pa­nies that are com­ing here want to attract work­ers look­ing for a live/work/play envi­ron­ment,” says Peter Menkes, pres­i­dent of Menkes, the devel­oper behind the Telus Tower. The busi­nesses have their eye on the employ­ees who have bet­ter things to do than com­mute for an hour—who expect to spend their days in a mod­ern, eco-friendly tower and their spring nights at a Jays game next door. It’s not an acci­dent that, at Telus, the aver­age employee is only 28 years old. Says Menkes: “This is a new core with a new lifestyle.”

Less than a decade ago, it would have been incon­ceiv­able for a com­pet­i­tive busi­ness to move out of the finan­cial core. Bay Street wasn’t just where you worked, it was where your lawyers and your accoun­tants and your bankers worked, as well. A cab or sub­way ride wasn’t nec­es­sary to con­duct business—everyone was con­ve­niently located just across the street. “I heard about a com­pany mov­ing from Brook­field Place—it was still called BCE Place—down to the Queen’s Quay ter­mi­nus build­ing on Har­bourfront,” says Ian M. Thomp­son, senior research ana­lyst at CBRE Lim­ited, a com­mer­cial real-estate ser­vices firm. “Back then, some said it was busi­ness sui­cide to go maybe 500 yards away.”

Of course, Bay Street is as much about pres­tige as loca­tion: the grand tow­ers and extrav­a­gant lob­bies and mas­sive cor­ner offices. The trou­ble is that kind of opu­lence can feel a lit­tle fussy by our sleek 21^st-century stan­dards. These 30– or 40-year-old build­ings show their age, with recy­cled air, a lack of nat­ural light, clunk­ing heat­ing sys­tems and unap­pe­tiz­ing food courts. And employ­ees show their dis­plea­sure with such a stale work­place by call­ing in sick a whole bunch. “Absen­teeism is a big issue,” Menkes says. “The HR depart­ments of these finan­cial com­pa­nies play a big role in say­ing to the exec­u­tives, ‘We want an envi­ron­ment where our employ­ees are happy and healthy and we can attract new people.’”

The Telus and PwC Towers—among the first sky­scrap­ers to be built in Toronto in almost two decades—have taken full advan­tage of the cur­rent Lead­er­ship in Energy and Envi­ron­men­tal Design (LEED) green tech­nolo­gies. The Telus Tower, for exam­ple, employs the city’s inno­v­a­tive deep-lake cool­ing sys­tem, which uses cold water’s energy to air-condition its build­ing. Floor-to-ceiling glass brings in an absurd amount of nat­ural light, which sen­sors respond to by dim­ming the over­heads. There’s also a rain cis­tern for non-drinking water and more than 16,000 square feet of rooftop gar­dens; any veg­gies grown can be pre­pared in the team-building kitchen, where nutri­tion classes are offered each week. It’s as good for the envi­ron­ment as it is for the bot­tom line: The Telus Tower con­sumes roughly half the energy and water a tra­di­tional finan­cial tower does.

“This is not your grandfather’s office build­ing,” Menkes says, which might as well have been the tagline on the tower’s promo mate­r­ial. The south core employ­ees stream­ing through the atrium don’t much look like my grandfather’s office work­ers, either: skinny ties or Brian Atwood heels, iPads under one arm and a yoga mat under the other. (Their bikes are downstairs—the Telus Tower has 127 bike racks and, next to them, two show­ers for fresh­en­ing up.) These are the young urban pro­fes­sion­als, Thomp­son says, “who grew up in the 905, grad­u­ated uni­ver­sity and just got their first place. They’re not buy­ing con­dos out in Bramp­ton.” The tow­ers are fol­low­ing the tal­ent, and the tal­ent is right next door. In the slice of down­town Toronto that con­tains CityPlace—from Lake Ontario to Front Street, Bathurst to Spadina—the pop­u­la­tion has grown by 434% in the past five years.

But those who don’t live in or adja­cent to the south core—those who are com­ing in on a VIA Rail train or GO bus, or even the TTC—still ben­e­fit from the new build­ings’ prox­im­ity to Union Sta­tion. Both the PwC and Telus tow­ers con­nect through the PATH to Canada’s busiest trans­porta­tion hub, which is cur­rently under­go­ing a $640-million facelift. Each new build­ing that opens must pro­vide avail­abil­ity for the next tower to con­nect to the PATH as well, so the two can snap together like Lego pieces. And these pas­sage­ways won’t nec­es­sar­ily be buried under­ground: Oxford Prop­er­ties, which is devel­op­ing the new RBC head­quar­ters, has pro­posed a glass, raised PATH exten­sion that would run per­pen­dic­u­lar to (and just under­neath) the Gardiner.

Accord­ing to Stu­art Bar­ron, national direc­tor of research for com­mer­cial real-estate con­sul­tant Cush­man & Wake­field, these new PATH con­nec­tions have con­tributed to “a wider per­cep­tion of where we can do busi­ness.” And as thou­sands of work­ers started head­ing south from the tracks, the axis of the finan­cial dis­trict changed. “There’s lit­er­ally been a shift in the cen­tre point,” Bar­ron says. Bay and King is no longer the beat­ing heart of the finan­cial core—that dis­tinc­tion now belongs to Union Station.

But Bay Street is putting up a fight. The older com­mer­cial tow­ers are work­ing to retain ten­ants and lure new ones by throw­ing some seri­ous dol­lars into redec­o­rat­ing. TD Cen­tre has spent more than $100 mil­lion on its 77 King St. W. loca­tion alone, gussy­ing up its dated lobby and upgrad­ing all of its win­dows. First Cana­dian Place has been equally aggres­sive, spend­ing the same amount on an improved ven­ti­la­tion sys­tem, bet­ter floors and ele­va­tors, and new glass cladding in place of the old mar­ble. Both are chas­ing the cov­eted LEED certification.

That work, plus the abid­ing lure of a Bay Street loca­tion, means it’s hard to find space in the finan­cial dis­trict. In the last quar­ter of 2011, vacancy rates were at 5.3%, down from 5.9% just two quar­ters before—and that’s given oper­at­ing costs that are at least 15% higher than build­ings in the south core. For new or grow­ing busi­nesses, then, the grass is going to look much greener as they get closer to the lake.

Busi­ness is good in the new south core, and soon enough, the land by the water will look very dif­fer­ent. Not only will glass sky­scrap­ers and condo tow­ers envelop both sides of the Gar­diner, but new retail space and restau­rants will fol­low on their heels. (Hot tip: Bar­ron says set­ting up shop there now is a great medium– to long-run deci­sion.) Cer­tainly, many Toron­to­ni­ans are only dimly aware that we sit on a lake, so there’s some­thing to be said for an urban expan­sion that brings us closer to the water. But do a fist­ful of office tow­ers and PATH con­nec­tions and high-end cloth­ing stores actu­ally make a neigh­bour­hood? Would any­one ever say on a Sat­ur­day night, “Hey, let’s hang out at Har­bour and York?”

To cre­ate a neigh­bour­hood, says U of T Scar­bor­ough geog­ra­phy pro­fes­sor Susan­nah Bunce, “You need a vari­ety of uses, some that are 24 hours, some that aren’t all about money-making but also about enjoy­ing access to the water­front.” Per­haps pres­sure for a var­ied neigh­bour­hood will come from the very work­ers that the tow­ers orig­i­nally chased into the south core. This new gen­er­a­tion wants to live and work and play in close quar­ters, but they don’t want all three envi­ron­ments to look tediously the same.

That sense of a neigh­bour­hood is going to require some vig­i­lance on the part of the city as well, to ensure that the expan­sion of the finan­cial dis­trict along the water­front doesn’t trans­late entirely into pri­vate own­er­ship of the water­front. Chicago, for exam­ple, has a large amount of com­mer­cial devel­op­ment by its lake’s edge, but, sig­nif­i­cantly, it also cre­ated the play­ful and daz­zling Mil­len­nium Park. Could we have one of those, please? Office tow­ers are dandy, but a park like that by Toronto’s har­bour would really be worth a trip south.

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Con­tact the Jef­frey Team for more infor­ma­tion – 416−388−1960

Lau­rin & Natalie Jef­frey are Toronto Real­tors with Cen­tury 21 Regal Realty.
They did not write these arti­cles, they just repro­duce them here for peo­ple
who are inter­ested in Toronto real estate. They do not work for any builders.
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