For years, Toronto and other municipalities have struggled to find planning solutions to address a problem inherent in mixed-use developments; the retail elements are often an unwanted orphan to the more lucrative residential elements. Empty storefronts at the base of many condos are a common sight.
Developers know that getting the retail angle right can enliven the city and burnish your brand. Do it wrong and you may end up with unleasable spaces that deaden the streetscape around a building that bears your name.
“Your long term reputation could be at stake,” said Matthew Boukall, vice-president, product management, data solutions at Altus Group Ltd.
One challenge developers face is simply who owns what. Once the condo corporation takes ownership of the residential units the developer’s stake in the main part of the project has ended. According to Mr. Boukall, there are three main ways developers handle the spaces they have dedicated to mixed-uses: build the commercial space in a joint venture with a retail real estate expert who handles that side of things (RioCan’s burgeoning mixed-use portfolio is an example); sell or lease the finished space to whoever the highest bidder is (either an end-user such as a chain retailer or a sub-leasing specialist); or keep ownership and management of the space in-house.
“Some smaller developers don’t necessarily want to know about commercial," said Niall Haggart, executive vice-president of The Daniels Corporation. "We take a different view.”
Daniels has chosen restaurant, grocery or café tenants, but has also been behind some creative plans such as the TIFF Bell Lightbox building and a waterfront co-working space with Artscape.
“Mixed-use has been something the city has been moving toward for a little more than 10 years. … We embraced that whole-heartedly and we try to make it the best it can be," Mr. Haggart said. "We are happy to maintain a long-term ownership [of the commercial space, instead of sub-leasing] we want to find the right use and we want to make sure that use does not become a problem with that building.”
Some developers are also seeing the value in planning for quality retail or commercial uses, particularly as a way to make yet another condominium project stand out from the crowd. That’s what’s behind developer Camrost Felcorp’s decision to plan for a rooftop restaurant in an upcoming phase of its Exchange District community in Mississauga’s rapidly densifying city centre.
A restaurant 40 storeys up will be a first in Mississauga and according to Joseph Feldman, director of development, it will signal to potential buyers that the company is committed to building a high-end neighbourhood that will stand the test of time.
“Sometimes the highest dollar will be achieved by putting in a Tim’s or Burger King or McDonald’s [in a retail space]. I don’t think people would be happy with a rooftop McDonald’s … it wouldn’t fit with what we’re trying to accomplish at the Exchange District,” he said.
“We’re in Mississauga for the long run … in the next 10 years, there’s another 30,000 units to be built. You can’t just put residential units in the air and call it a day,” Mr. Feldman said.
In the past, Camrost Felcorp has tried several approaches; holding onto space, choosing a tenant and then turning over management to a third party, with mixed results.
“If you have an outsourced consultant to provide you with a list of tenants, that doesn’t really do the trick,” Mr. Feldman said.
One of the main challenges is building commercial space that is tenant-specific. The Exchange District will include a grocery store and the loading dock and garbage disposal requirements are completely unique. For a rooftop restaurant, it means dedicating an express elevator that only goes to that top floor (for the safety and comfort of both patrons and residents), not to mention the gas, water and other infrastructure that must be managed. It can be a tricky balance.
“A site is either an amazing condo site, or an amazing retail site; rarely is it both,” Mr. Boukall said. Across the country, he’s seeing other cities struggle to square this reality with policies that encourage or mandate mixed-use development.
“Once you get off the main streets, having retail at grade often just doesn’t make financial sense. You wouldn’t have the traffic and it can make the NIMBYs upset [with the whole project]," Mr. Boukall said. He adds that developers who are turning their attention back to constructing rental buildings are even more interested in finding mixed-use tenants that add continuous value to the site – grocery stores, or other entertainment amenities – once again because in those cases the long-term interests of low turnover and high rents align with the interests of functioning commercial.
Camrost Felcorp’s rooftop restaurant is at least five years away from completion, so they can’t yet say who their eventual restaurant partner will be. One interested party is Sash Simpson, a family friend of the Feldman’s, who recently opened the eponymous Sash restaurant in Toronto’s Summerhill neighbourhood. Mr. Simpson said he can’t think of a similar rooftop restaurant inside a condo in the city – the idea is more common in hotels – but says the opportunity is a no-brainer. High-end restaurants can be great tenants and in the example of the Nobu project in downtown Toronto, that whole building is designed around and named after the (ground-level) first Toronto location for famous chef Nobu Matsuhisa.
“It’s like being situated in an office tower; if you have 500 people in that condo all you have to get is 100 people coming in; 150, and you’re booked solid,” Mr. Simpson said. He also is intrigued by the early plans that suggest the space could have four separate patios, each with unique views. “You need uniqueness in whatever you build. I can imagine having venue space up there and doing parties. If you’re going to get married you have a great view.”
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