By Kathryn Willms
When people talk about the hot real estate market in Markham, they’re typically talking about houses. There is some irony in the fact that, while residential real estate dominates the national conversation, an inquiry into its more tempered counterpart, commercial real estate, reveals the longer-term trends that may shape not only the housing market but the future of our cities themselves. In Markham, the state of commercial real estate tells a different story than its record-breaking housing prices.
“Commercial is a challenge,” says Glen Crosby, President and Broker of Record at Ashlar Crosby Cairo Realty. The decline in manufacturing has reduced the demand for industrial buildings, and there is little appetite for distribution centres that generate few jobs and a lot of trucks. Companies are increasingly looking to the City of Toronto for office space, seeking access to a larger and younger workforce attracted to the amenities of big-city life, like condos and transit.
“Younger employees want to be downtown,” says Crosby. “They don’t want to do the Don Valley Parking Lot every day. People will go where they can attract the best employees.”
This has led to a 20% vacancy in office space in Markham, a far cry from the 1% vacancy in downtown Toronto. And while development in Markham has by no means stalled – for example, General Motors recently announced that Markham will be home to its research centre for connected vehicles – it has changed. Steve Zigomanis of Zigomanis Commercial Realty says many of his clients are in the market for smaller and more flexible spaces (and leases) that allow them to reduce overhead while accommodating a fluctuating workforce. For example, smaller tech companies prefer open-concept spaces that can be rearranged as contract workers are brought on board for particular projects. As they search for these more flexible spaces, companies are less and less tied to one particular region and are able to diversify their search to a number of developing areas.
These trends are just part of a larger set of changes taking place in Markham and surrounding areas that are altering the face of suburbia in southern Ontario. Among the key changes is density intensification. The Ontario government has set population density targets for municipalities, and through heavy investment in transit and infrastructure, as well as the creation of barriers to sprawl such as the Oak Ridges Moraine (a swath of conservation land that includes northern Markham), is encouraging cities like Markham to “build up” – that means more condos and townhouses, and fewer single-detached homes. A reality that prices alone might have dictated.
“Six years ago, we’d sell an acre of land for $600,000,” says Crosby, “now it’s over $2 million an acre. What you end up doing is putting up more houses on it, more townhouses.”
But for density intensification to succeed, people must continue to want to live and work in Markham, even if they can’t afford a traditional detached suburban home in the area.
“The lawn and picket fence,” says Crosby, “I think is something of the past.”
York Region is trying to address this issue on a number of fronts. This September it announced the creation of York Link, a marketing campaign to attract knowledge-based businesses to the area.
“We discovered that while we have a pretty significant amount of office space and some really wonderful office locations over time we were losing share in terms of how much office development we were seeing related to the City of Toronto,” says Doug Lindeblom, York Region’s Director of Economic Strategy.
The campaign, which runs until the end of 2018, is aimed at attracting industries with a tech component (healthcare, financial services, manufacturing) and promotes the region’s highly educated workforce and existing opportunities that are the result of the current ecosystem of businesses. In the course of creating the campaign, Lindeblom and his colleagues discovered that businesses consistently noted two challenges. The first is attracting the right kind of talent. In particular, businesses are often looking for a very specialized kind of tech worker.
“That’s probably going to be an ongoing problem,” says Lindeblom. “Anyone on the bleeding edge of technology is always going to have trouble finding enough of the right workers to grow as quickly as they want to grow.”
The other issue is congestion. Lindeblom says York Region is adding almost 25,000 residents per year, and 12,000 to 13,000 employees in York businesses per year. While this is exactly the sort of growth that York Link hopes to continue, it is not without side effects.
“One of the by-products of growth,” says Lindeblom, “is traffic.”
This issue is exacerbated by a workforce who must get into their cars at lunch hour to run errands and to find food. Ironically, one of the solutions to combatting congestion may also help attract top-quality workers: doing away with the traditional business park and replacing it with mixed-use communities. York Region has developed the Centres and Corridors plan with this in mind. Four regions – Markham Centre, Vaughan Metropolitan Centre, Newmarket Centre, and Richmond Hill/Langstaff Centre – have been identified as key areas for growth, places where homes, shops, businesses, and transit will intersect. Urban living in suburbia.
“When the suburbs grew with the automobile, that’s what drove development,” says Lindeblom. “Today the 905s need to be driven by a broader range of uses and the development of mixed uses.”
This development will look to integrate and influence the vision of private projects, including the Buttonville Airport development that is currently before the Ontario Municipal Board. These projects will be better served if they work in concert with projects already approved, such as the York University campus in Markham and the investment in transit by the Ontario government.
“I think the vision of a lot of these developers,” says Zigomanis, “is to try to master-plan a community that would allow people to actually live.”
Creating communities where people can walk, live, shop, and work will attract more workers to the area, make condo or townhouse living more attractive, and act as a draw for businesses thinking of moving to Markham. Both real estate agents and representatives from York Region agree that this is the future of Markham. How it’s happening and how quickly, and what will be the ramifications, are still to be determined.
For York Region, planning is paramount, but the sheer amount of development currently underway is a testament to a process that is working. Markham has the third greatest concentration of businesses in the Greater Toronto Area, after downtown Toronto and Pearson Airport, and the vision for Markham Centre conceived 30 years ago is now coming to fruition.
“Markham is in a very good position to capture a lot of the future business growth we expect to see over the coming years,” says Lindeblom.
Zigomanis sees the key to that growth in the development of transit, something the City of Toronto has struggled to keep pace with through its spectacular growth cycle. “When you do it right from the beginning – when you should do it – it makes the process of long-term planning a lot better,” he says.
And while Crosby agrees decisions made now can have a massive impact on the future of the city, he would like to see the process move a little faster. “The process is so cumbersome; it takes years to get something approved,” he says, “and that adds to the cost.”
What the commercial real estate context teaches us is that the future of Markham will not be created in a day but through a vast interplay of time, money, planning, and individual decisions.