Accounting firm KPMG is set to become the lead tenant in an new office tower at the Vaughan Metropolitan Centre, a new urban core being built just north of Toronto.
KPMG is set to become the main tenant in an office tower in the heart of Vaughan's bustling downtown. The only catch is that the downtown doesn't exist yet.
The space around the proposed KPMG Tower looks like a largely vacant pocket of suburbia just north of Toronto.
The consulting company began its search for additional office space a couple of years ago because its downtown Toronto-based practice catering to entrepreneurs was growing so quickly.
"We looked at a variety of locations across the northern corridor, but really the Vaughan Metropolitan Centre was able to offer everything that we were looking for, particularly central access through the subway and growth in the business community," said Beth Wilson, GTA managing partner at KPMG. Construction on the building is to start within the year.
If the ambitious vision for the Vaughan Metropolitan Centre (VMC) comes to fruition, the expanse of land surrounding the future site of the 15-storey KPMG tower will soon sprout a densely packed urban core where people can live, work, shop and play.
The tower site sits on land that's owned by Calloway Real Estate Investment Trust and SmartCentres, two firms that have specialized in Wal-Mart-anchored shopping centres, making this an unusual project for them. They've been talking about it for years but just agreed last fall on final terms to jointly own and develop 53 acres that they describe as being at centre ice of the VMC.
Key to the project is an 8.6-kilometre subway extension that is under construction (with $2.6-billion of funds from various levels of government) that will connect the VMC, via a new subway station near the KPMG tower, to downtown Toronto's Union Station. The extension is scheduled for completion in late 2016.
"It must be one of the most unusual projects in the country in that there is this enormous tract of undeveloped land with a subway coming up right in the middle of it," said Don Schmitt, a principal with Diamond Schmitt Architects who is working with Calloway and SmartCentres. "You're really designing a piece of the city from first principles, from scratch."
Al Mawani, Calloway's CEO, who admittedly has a bias, describes the project as the most exciting urban development in the country. In addition to the subway, the VMC is close to major Ontario highways such as the 400 and 407, and the project's backers hope it will attract new residents, employees and visitors.
"We want to attract people from beyond our city boundaries," Maurizio Bevilacqua, the mayor of Vaughan, said in an interview. "We want to make it a place to be."
That place covers more than 442 acres of land – including those being developed by Calloway and SmartCentres – and is expected to become home to offices, condos, restaurants, cafés, hotels, cultural centres and landscaped outdoor spaces. The vision that's described in promotional material is "a vibrant, modern urban centre for residents and businesses that encompasses all amenities of urban lifestyle."
A number of projects, both commercial and residential such as the Expo City condos, are well under way, and by 2031 the city foresees the VMC housing 25,000 residents and 11,000 jobs, of which at least 5,000 will be new office jobs. But the pace of development will depend on the demand from prospective tenants and residents.
In the past when commercial tenants looked for suburban space they focused on areas such as Markham, Richmond Hill and Mississauga, said Paul Langer, a senior managing director at Cushman & Wakefield.
"Vaughan was sort of getting bypassed. I think that's definitely changing and will continue to change moving forward, with the main driver being the subways, the highways and the transportation infrastructure."
Companies are increasingly choosing locations that bolster their ability to attract employees, and the amenities that are being contemplated in the VMC will add to its appeal, Mr. Langer and his colleagues said. But they added that there could be a bit of a cart and horse situation, because developers won't build things such as restaurants and hotels until it's clear that the demand is there. As a result, it could be a decade or more before the vision is fully realized.
"Like any great monument, it takes time," Mr. Bevilacqua said. "I think you will begin to see a downtown core developing in the next three or four years."
The mayor noted that the city is ensuring that the VMC houses a mix of projects, in some cases demanding that after a condo building goes up, the next building be offices.
"While it is important to know the number of square feet that you have available for residential and office towers, and while it's important to know the density, what is very important is also to create a human experience," he added. "How are people going to feel when they enter this space of our downtown core? What emotions will people draw from it? How will their senses be engaged?"
"And so a lot of the planning now takes into consideration not only how many storeys and how tall the building is, or how many different housing types you have in the downtown core, but it also embraces the human element, which I think is extremely, extremely important. Sensory-based planning has taken on a very important role here. The idea is to beautify the landscape while nourishing the human spirit."
Mitchell Goldhar, the founder and owner of SmartCentres, and 20.4 per cent owner of Calloway REIT, likens the VMC to London's Canary Wharf business district, in the sense that the development was established around the creation of a subway – or tube – station.
"It started with one tenant, and if you look at it today it's just astronomical," he said.
While Toronto's north end is not London, the VMC has an advantage because it also includes a residential component, he added. "That adds life in terms of shopping, nightlife. It adds colour to the place. It's not all lyrics, it's music too."
The plan
Lands owned jointly by Calloway REIT and SmartCentres are to become home to almost six million square feet of commercial, residential and retail development, at the heart of the Vaughan Metropolitan Centre (VMC).
Calloway's involvement
Calloway specializes in shopping centres that house stores such as Wal-Mart, Winners and Canadian Tire. It's been hunting for new ways to grow "but as a real estate investment trust and an income REIT, investors expect us to buy income assets, not find growth through big development things because they're risky and have long timelines," CEO Al Mawani said. The VMC sits at Calloway's head office in a suburb north of Toronto, land in which it has had an interest for some time. "Vaughan will be less risk for our investors because the land is there, we didn't pay a ton of money for it through public bid, and the city is bringing the subway in so there's reason for the upzoning."
Retail
There is a small bit of retail, including a Wal-Mart, already on the land. The plan is to conceive of a more urban site for the store. "The retail will be different than what we currently do, it won't be big box retail because it doesn't make sense, it takes too much land," Mr. Mawani said. "So maybe it will be the lower two floors of a condo or office building. It may be an underground mall."
Office
The first building planned for the site is the 300,000-square-foot KPMG tower, which will likely house about 500 employees of the accounting firm as well as about 700 others. It will connect underground to the subway and a regional bus terminal.
Other
The plans also call for an eight-acre central park and civic square.
A key challenge
"It's going to be built over very difficult soil," architect Don Schmitt said. "There's a big aquifer, a big amount of water and soaked soil under the site. It's challenging but it's solvable technically, it's just expensive. The reason New York develops to such extraordinary height is you go down four floors and you get rock, it's totally stable, so you can build 50, 75, 100 storeys. Here it's really muck, it's just not as stable."
What analysts are saying
"We think the site is prime for intensification, albeit over multiple years (10 plus) with new construction triggered with new anchor tenants," Macquarie Capital Markets analyst Michael Smith said.
"We view the risk profile of this large project as mitigated by the fact that the lands were acquired in 2005 and are already zoned. In addition, Vaughan is one of the fastest growing municipalities in Canada and stands to benefit from significant infrastructure investments, job growth and population growth."