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Property Report Public transit investment spurs renewal in downtown core

Slated to open in 2021, the 27-storey mixed-use development now known as the GloveBox will be constructed to incorporate a three-and-a-half-storey, 19th-century brick-and-beam former glove factory.

Glenn Lowson

With a quiet hum, sleek light-rail trains carve their way along an urban spine from the north end of Waterloo to the south end of next-door Kitchener, traversing a 22-stop route that includes two shopping malls, two universities, two city halls, one hospital and a future multimodal transit hub.

Funded by Waterloo Region, the province and the federal government, the $818-million light rail train (LRT) system – known as the Ion – has proven highly popular since it opened in June. But the Ion isn’t just moving people. It’s been designed to limit sprawl, intensify downtown development and make it more convenient for the area’s youthful demographic to live and work close to the amenities they need in this fast-growing urban centre.

“The Ion represents quite a structural shift in the development pattern,” says Rod Regier, commissioner of planning, development and legislative services for the region of Waterloo. “There is a fundamental shift in the nature of the built form that is emerging.”

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The GloveBox project on Victoria Street South in Kitchener is located seconds away from the new LRT and is in the heart of Kitchener's innovation district.

Glenn Lowson

Since approving the LRT in 2011, $3.2-billion worth of building permits have been issued by the region, of which two-thirds were residential and included new condominiums at or near Ion stops. By contrast, residential approvals accounted for only about one-third of the $1.9-billion in permits issued between 2003 and 2010.

In the eight-year lead-up to Ion’s opening, Mr. Regier says, “The private sector has invested more than three times what it cost us to build the system. It is absolutely working as a catalyst for change and investment.”

Mixed-use space leads the downtown regrowth

Among the largest projects reshaping the region’s profile along the Ion corridor is a mixed-used office, retail and residential development on Victoria Street. Situated just two blocks from the site of the future multimodal transit hub to be built in downtown Kitchener (and a current Ion stop), Zehr Group and Momentum Developments are erecting two condo towers at 17 and 21 storeys high.

On the same site, Zehr Group has teamed up with Momentum Developments and KingSett Capital Inc. to construct a third 27-storey-high residential condo and a six-storey, 130,000-square-foot retail and office development. Slated to open in 2021, the aptly-named ‘GloveBox’ office complex will be constructed to incorporate a 3½-storey, 19th-century brick-and-beam former glove factory.

Don Zehr, Zehr Group CEO, and Zac Zehr, VP of development, with John Whitney, broker of record with Whitney and Company Realty Ltd.

Glenn Lowson

The development has already secured a five-star occupant: KPMG’s Waterloo region office was recently confirmed as the anchor tenant for the entire top floor. The professional-services company was based in downtown Kitchener until the early 1990s, when the region’s declining industrial base prompted a relocation to its current office, also on the Ion line, in uptown Waterloo. With the current lease expiring, the historic and contemporary features of the GloveBox seemed to align perfectly with the firm’s history and strong corporate roots in the region, which date back to 1917, according to KPMG Waterloo office managing partner Mary Jo Fedy.

“To be part of this blend of old and new is most exciting to us,” Ms. Fedy says. “We are going to be very close to the downtown core and the hub of activity. Those things are very important to our people as they are currently in uptown Waterloo.”

Densification is key to urban growth

For many, the current flurry of building activity along the Ion corridor is a natural outgrowth of regional and provincial government planning rules over the past 15 years that, in combination with local economic incentives, are working to encourage intensification within Waterloo Region.

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Renderings and floor plans of the three towers of the under-construction GloveBox project on Victoria Street South.

Glenn Lowson

“More development [now] is taking place within the existing urban footprint of Kitchener-Waterloo than out on the periphery,” says associate professor Brian Doucet, Canada Research Chair in Urban Change and Social Inclusion at the University of Waterloo. “That to me is a sign that the [growth-management] objective is working.”

Mr. Regier says that single-detached houses accounted for 67 per cent of building permits here in 2005, a share that dropped to 31 per cent last year. Officials of Kitchener say that the city currently has 14 high-rise condo projects with 3,775 units either under construction or in the permit phase. Over the next few years, a further five projects proposed or under way would add more than 660,000 square feet of new Class A office and retail space to locations on or near the Ion line in downtown Kitchener. Several, such as the GloveBox, are slated to combine office, retail and residential.

Zehr Group’s chief executive officer, Don Zehr, is among those who credit the recent spate of activity to planning and related policies, including a Kitchener development charge exemption that recently came to an end in the core.

“The Ion was the icing on the cake,” Mr. Zehr says. “But it is not the sole reason for what has happened in Waterloo Region.” For a successful downtown, he adds, “you need pillows and beds, and that has happened. After the beds, there is also the office [space].” Once completed, the GloveBox and surrounding condos will be home to about 1,000 residents and 800 employees.

The first of three towers is operational as construction continues on the GloveBox development project in Kitchener.

Glenn Lowson

Rising demand for downtown live-work options is also spurring development, says Cory Bluhm, executive director of economic development for the City of Kitchener. “Twenty years ago, this notion of living and working downtown would have been only for the urban idealists,” he says. “Now it is much more widely accepted.”

Last year, when Zehr Group and its partners released 245 residential units in the third tower, they sold in less than an hour, Mr. Zehr says.

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With a generational shift to living and working downtown comes reduced demand for parking, says John Whitney, broker of record for Whitney & Company Realty Limited Brokerage, the commercial real estate firm that works with Zehr Group on office leasing.

“It is the millennials who work in these tech companies, who live in the downtown, and they are the ridership for the LRT,” Mr. Whitney says. For example, the developers have set aside 525 shared parking spaces for GloveBox company employees and condo owners.

“We are seeing as we start to sell out the [residential] buildings that people don’t want to necessarily buy parking,” says Zac Zehr, vice-president of development for Zehr Group.

The current intensification trend in Kitchener and Waterloo is likely to continue, predicts Peter Whatmore, senior vice-president for CBRE Southwestern Ontario, a national commercial realtor.

Several developments, such as the GloveBox, are slated to combine office, retail and residential.

Glenn Lowson

“The market has a lot more ahead of it for growth,” Mr. Whatmore says, fuelled in part by millennials with no cars. “They want the full urban experience, to live in the core and work in the core, and if you are not in the core but on the [transit] system you have the flexibility to get anywhere.”

Despite widespread praise for the Ion’s economic development role, Prof. Doucet warns that housing affordability remains a concern. “What is being built along the LRT corridor is being determined by the market,” he says. “That is going to lead to outcomes that don’t necessarily address the concerns, both commercial and residential, of a lot of the population.”

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Meantime, more transit-oriented intensification is on the horizon, and will likely spark more private investment. Waterloo Region is in the design phase of a proposed multimodal transit hub in central Kitchener to accommodate Via Rail and GO Transit services from Toronto, with separate plans in the works to extend the 19-kilometre Ion to nearby Cambridge, now served by bus.

“We expect over the next three to five years the most transformational change that this city will ever undergo,” Mr. Bluhm says.

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