Monthly Archives: August 2014

Manhattanization-Toronto

The “Manhattanization” of Toronto’s Downtown Core

Two days of Toronto city council meetings in late August concluded with the approval of 18 new buildings in the downtown core, three of which are commercial, and will be located on Front Street and King Street West. The construction developments will add 755 storeys (6,887 new units and 377,900 square metres of non-residential development) to Toronto’s skyline, adding to the 70,000 units already approved by city council. The estimated cost of completing the 18 approved projects is an estimated $21-Billion. During a quick recess on the second day of meetings, Councillor Joe Mihevc was quoted by Betsy Powell and Jennifer Pagliaro of The Toronto Star:

“If ever there was a meeting that signified the Manhattanization of downtown (Toronto) it was the approval of 750 storeys of new development, mostly concentrated in the downtown area.”

The use of the term “Manhattanization” by Mihevc, sparked a lot of interest in the media about the concept, becoming the latest buzzword in Toronto real estate circles. Mihevc by no means coined the term, with Monika Warzecha of BuzzBuzzHome, tracing the lineage of its usage back to the 1971 San Francisco Mayoral Race. The term can best be understood as describing a form of neighbourhood gentrification, whereby an influx of wealthy inhabitants to a specific community leads to mass home redevelopment and construction. What makes Manhattanization unique from typical gentrification, is the construction of skyscrapers in the downtown core for the purposes of increasing population density.

An aerial shot of Manhattan's skyline
An aerial shot of Manhattan’s skyline

The overwhelming consensus in the media is that of impending doom, expressing concern over the escalating number of high-rise developments under construction, with many pointing to the fact that Toronto currently tops all North American cities in high-rise construction. Christopher Hume of The Toronto Star is one of the few urban analysts in the media to argue that Manhattanization is the best thing for Toronto’s future, but that residents and city officials have been slow to embrace it. Hume argues that Manhattan residents are unique, in that, they are passionate and accepting of population density, foreseeing the infrastructure changes that will be needed in order to facilitate that density.

Chief City Planner Jennifer Keesmaat, in a public statement made to the press after meetings ended (read here), stated that investment in essential services and city infrastructure will be needed in order to accommodate population growth. Investment in the public realm, in transit, and in park space, Keesmaat argues, is needed in order to ensure Torontonians don’t experience a decline in the standard of living to which they are accustomed. Of utmost importance, she argues, is investment in a relief subway line for the already overwhelmed Yonge line, congestion which will inevitably get worse should 70,000 new downtown units find occupants in the near future. To address these concerns, the city has agreed to undertake several assessments to determine what changes to the “hard and soft infrastructure,” like water, sewage, schools and parks, may be required. The question as to whether or not Toronto’s infrastructure can keep up with population growth, is a question for additional speculation and discussion.

Buffalo Bills in Toronto

Relocating the Buffalo Bills to Toronto: Can it be done?

The Buffalo Bills, an NFL franchise with a storied past and several Super Bowl appearances (with no title wins, unfortunately), is in search of a new owner, and possibly a new home. Rumors of a potential sale started appearing online in November, 2013, but the death of long-time franchise owner Ralph Wilson in March of this year, set the sales process for the team officially in motion, with Morgan Stanley handling the transaction on behalf of Wilson’s estate. An investment team including rocker Jon Bovi Jovi, Larry Tannenbaum (chairman and 25% stakeholder in Maple Leaf Sports and Entertainment) and Edward Rogers (deputy chairman and majority stakeholder of Rogers Communications) has reportedly put together a bid to purchase the Bills, somewhere in the $900 million dollar range. According to Forbes, the team is currently valued at $870 million, but will likely sell for $1 billion, considering how rare NFL teams are put on the market.

The Toronto bid has been mired in controversy since news began to surface in late July, with debate swirling as to whether the team can, and should be relocated. Erie County Executive Mark Poloncarz was quoted by the Associated Press saying he has no doubts regarding the group’s long-term intentions to move the team to Toronto. New York Lt. Gov. Robert Duffy has been the most vocal opponent to the hypothetical moving plans, starting a Twitter campaign to send a warning to any prospective ownership groups, mentioning Bon Jovi specifically:

“Note to JBJ: You will lose fans/all of WNY- forever. Not worth it,” Duffy said, referring to Bon Jovi and western New York. “Note to prospective owners: BUFFALO Bills. Don’t pick this fight.”

As a requirement of the bidding process, the Bon Jovi group conducted a feasibility study, part of which involved scouting locations to determine whether space existed for the construction of a new stadium. According to an interview with an anonymous source close to the project (conducted by AP and re-published by Global News), the study identified three potential sites for the proposed stadium: two in Toronto, including one on the waterfront, and another in Mississauga.

Downsview Park
An overhead shot of Downsview Park, Toronto

Downsview Park is mentioned specifically as a potential location, a former Canadian Armed Forces Base spanning 231 acres (93 hectares), easily accessible by public transit. The park has played host to dozens of large outdoor concerts and events, making it an already familiar location for most Torontonians. The second scouted location of particular interest is referred to as the Port Lands, the area surrounding a section of the waterfront called Cherry Beach. Large outdoor events are also not uncommon in this location, with Cirque du Soleil having a semi-permanent presence there the past few years. The final location is the former site of the Lakeview Generating Station, currently owned by Ontario Power Generation, right off Lakeshore Boulevard. Another waterfront location, the site is believed to be appealing because of its proximity to the Toronto border and Port Credit GO station.

The legalities of a Bills relocation has been explored in the news in-depth. If the Toronto bid is successful, moving the team to would not be permitted until 2022, when the Bills’ lease with Ralph Wilson stadium expires. A clause in the Bills’ lease provides the state and county an opportunity to seek court action to block negotiations between the team and interested parties, should those parties have any intention of moving the team. Should the Bills get relocated before the lease expires, the state could seek $400 million in compensation.

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What Caused Toronto’s Surge in Homes Sales and Prices in July?

What turned out to be a slow spring in the GTA housing market, a spring that was delayed because of an unusually extended winter, has made way for a blistering hot summer. All the statistics suggest that Toronto homebuyers have awoken from their collective hibernation, and are poised to make plenty of purchases. The real question is, what happened in the transition between spring and summer that is causing the surge in the market?

What happened in July?

Toronto-Real-Estate-Board-housing-charts-July-2014-sales-Condo.ca_Home resales in Toronto went up by 10% in July year-over-year, according to the Toronto Real Estate Board. TREB data illustrated that 9,198 homes in the Greater Toronto Area switched ownership, which is the second best July sales result on record. The data also showed that the average sales price in Toronto went up 7.5% to $550,700 in the same time period, with the largest increase in the average selling price belonging to detached houses, which saw a surge of 11% year-over-year to an average of $880,433. Tara Perkins of The Globe and Mail (read here), notes that market observers are waiting for the average selling price of a detached home in downtown Toronto to hit the $1-million mark. But even though the price in July was $880,433, it’s actually on downturn. TREB data from previous months shows that the price of semi-detached homes is down month-over-month, from $921,127 in June, and $943,055 in May.

Condominium units saw a 14% increase in sales across the GTA, which is not surprising, considering that condos are still realistically affordable for the bulk of the population, even with the increase in average price by 4.7%, year-over-year, to $379,002.Average-price-sales-TREB-Toronto-July-Condo.ca_

Susan Pigg of the Toronto Star (read here), analyzed the same TREB data, and was one of the few reports/analysts to notice a figure that raised some concern. While there were 15,187 new listings, overall active listings went down 5% year-over-year in July. She argues that “the inventory of houses for sale remains a challenge,” implying later on in the article that the lack of supply is the cause of the recent surge in bidding wars, a leap that’s not terribly difficult to make.

The Canadian Real Estate Association (CREA) is set to release similar data regarding existing homes sales in July later this month. It will be interesting to see whether this data backs up the evidence collected by TREB.

What does TREB have to say about it?

TREB President Paul Etherington in a release:

“Sales were up strongly for most major home types and market conditions actually tightened, with sales growth outpacing listings growth. The result was average price growth well above the rate of inflation.”

Etherington’s comment is interesting, pointing out that the number of sales outnumbered new listings, connecting that to price increases. But it doesn’t why the number of sales increased. Another senior market analyst at TREB, Jason Mercer, argues that we will continue to see price increases until “growth in listings outpaces growth in sales for a sustained period of time.” But alludes to the idea that increased sales are simply the result of increased demand. But what caused the increased demand? Perhaps the upcoming national CREA statistics will shed more light on why demand is increasing in the country’s major metropolises.