The sale of a portfolio of data centers handled by CBRE and Scotiabank and an office disposition arranged by Cushman & Wakefield are among the top third-quarter property sales recognized by CoStar.
As big-ticket items involving sizable investments, commercial property transactions often have a wider impact within the local community. CoStar recognized the largest deals completed during the third quarter in their respective markets.
Here are the Greater Toronto property sales selected as the third-quarter 2023 winners of the CoStar Power Broker Quarterly Deal Awards:
Seller: Allied Properties Real Estate Investment Trust, Toronto, ON
Brokers Involved: Peter Senst of CBRE and Justin Bosa and Peter Zorbas of Scotiabank represented the seller.
Deal Commentary: In one of the largest deals in the third quarter for the market, Allied Properties sold a trio of data centre properties, including a leasehold interest at CBC’s headquarters, to a Japanese telecommunications provider in a CA$1.35 billion deal. The Toronto-based real estate investment trust, hired CBRE Limited and Scotiabank to market the portfolio that included freehold interests in 151 Front St. West and 905 King St. West, as well as a leasehold interest in 250 Front St. West.
Brokers Involved: Robert Elms and Pat Murphy of Cushman & Wakefield represented the seller.
Deal Commentary: In another top deal from the quarter, IBM sold a pair of office properties to New York-based Veyron & Co. for $191.04 per square foot. The sale-leaseback transaction included the four-storey 8200 Warden Ave. building as well as a second office property in Bromont, Quebec, that has yet to close.
Buyer: Groupe Mach and Sarees Investments, Montreal, QC
Seller: Dorsay Development, Toronto, ON and AIMCo, Edmonton, AB
Brokers Involved: Matt Picken, Bryce Gibson and Tyler Randa of JLL represented the seller.
Deal Commentary: Groupe Mach kicked off the quarter with a blockbuster deal in early July to buy the Atria Business Park in partnership with Sarees Investments. The three office buildings at 2225, 2235 and 2255 Sheppard Ave. E. in North York is considered one of the largest office nodes on the outskirts of downtown Toronto. The purchase expanded Montreal-based Mach’s position in the Toronto market.
Brokers Involved: Jonathan Gorenstein of Lennard Commercial Realty represented the buyer.
Deal Commentary: Newmar Alpa Lumber Group, one of the largest suppliers and manufacturers of construction products distributed across Canada and within the United States, accomplished a rare feat in the third quarter by acquiring an industrial building in Oxford Properties’ Vaughan Industrial Park in an off-market transaction. Oxford rarely parts with properties in the industrial park, according to local brokers. The building at 81 Royal Group Crescent is located in Concord, north of Toronto. The sale was arranged by Lennard Commercial Realty broker Jonathan Gorenstein. The property, which occupies a 10-acre parcel and was built in the late 1990s, is currently tenanted by automotive supplier Martinrea, with five years remaining on its lease. A previous furniture supplier tenant went out of business and vacated the property earlier this year.
Brokers Involved: Peter Senst, Matthew Brown and Kai Tai Li of CBRE represented the seller.
Deal Commentary: Woodbourne, a major investor, operator and developer of apartments, seniors’ housing, student housing, self-storage and other real estate assets, invests primarily in urban areas across Canada on behalf of a broad base of institutional investors, including public and private pension funds, endowments, foundations, and funds of funds, picked up this seven-property industrial portfolio in Vaughan from BentallGreenOak in a third-quarter deal.
Skyline Industrial REIT has acquired two newly constructed assets in Quebec and Ontario as it continues to increase its weighting in more modern properties across Canada.
“We’re being selective as we acquire assets right now,” president Mike Bonneveld told RENX, “but I think we’re one of the few groups that’s actively out there looking for assets.”
Skyline’s balance sheet is in a good position, according to Bonneveld, after pruning its portfolio with the disposition of its last office property in February and the sale of other non-core assets over the past few years.
“We got ahead of the curve and I’d love to say we were really smart and knew what was coming, but there was also luck involved,” Bonneveld explained.
“It’s put us in a really good spot where we can be a bit picky and be able to acquire good assets when lots of guys are ‘pens down’.”
Quebec cold-storage facility leased to Congebec
Skyline acquired the interests of its development partner, Rosefellow, and is now the sole owner of a facility at 3601 Avenue de la Gare in Mascouche, Que., an off-island suburb of Montreal.
Construction was completed in late September on the multi-tenant development totalling 321,000 square feet. A 226,000-square-foot cold-storage facility with a 32-foot clear height is being used entirely by Congebec.
Bonneveld said Congebec had approached the trust and other developers several years ago about its desire for a new building in the Montreal area. The site in Mascouche was acquired for that purpose based on the cold- and multi-temperature storage, warehousing and distribution company committing to a 20-year lease for the new development.
Montreal-based Rosefellow owned a small stake in the property and the plan was always for Skyline to acquire it upon completion of the building.
Skyline is in lease negotiations for the site’s remaining dry-storage space. Bonneveld is looking to close a deal for about 60 per cent of it very shortly and two other tenants are interested in the remaining space, so he’s hopeful it will be fully leased before the end of the year.
Other Rosefellow partnership developments
Skyline is in partnership with Rosefellow on seven developments in the Montreal area and two in Ottawa. Seven are at various stages of development and Bonneveld said they’re on or ahead of schedule from both construction and leasing standpoints.
Two Montreal projects are essentially finished and 100 per cent leased.
“We are working with Rosefellow and our other equity partner in there to buy them out of both of those, and the hope is that those will close in Q1 of ’24,” Bonneveld said.
Second Woodstock, Ont. acquisition
Skyline also acquired a 148,050-square-foot building with a 28-foot clear height and 16 shipping doors at 353 Griffin Way in Woodstock, Ont. It was completed in October and is fully leased long-term to IPEX.
Bonneveld said the deal was brought to Skyline from a broker late in 2022 when it was in the early construction stages. It was developed by Paris, Ont.-based 214 Carson Co. and acquired by Skyline for $28.5 million.
Skyline acquired another Woodstock property in a small industrial node just off Hwy. 401 last year and Bonneveld said it has become popular with manufacturers and logistics companies, so he was happy to purchase another asset in the area.
“For tenants, it’s a bit of a rent discount compared to Kitchener-Waterloo and Brantford, but it’s a brand new building that’s really well-built,” he said. “IPEX is a very strong tenant, so getting a long-term lease with annual escalations, from what I think is a really good starting rent in terms of cost per square foot, gives us a really nice entry point.”
Skyline is doing due diligence on two other potential acquisitions, one of which Bonneveld hopes to close before Christmas and another that’s at an earlier stage.
September dispositions
Skyline sold 12 non-core assets totalling 485,488 square feet across four provinces, in two separate transactions, in September.
Cervus Equipment Corporation was leasing 11 light industrial/showroom spaces totalling 364,954 square feet in Alberta, Saskatchewan and Manitoba when it was acquired by Brandt Tractor Ltd. a year ago. The new owner preferred owning its properties over leasing them and an off-market deal was struck to acquire them from Skyline for $68 million.
Skyline also sold an older 120,534-square-foot cold-storage facility at 7801 Boulevard Henri-Bourassa E. in Montreal.
Congebec had occupied the facility and Bonneveld said “we had an agreement where we would let them out of their lease if we were able to re-lease to an equal or better tenant and then sell the building off to a third party, which we did.”
Skyline completed a lease agreement for the entire facility with Confederation Freezers and then sold the property for $22.6 million.
Capital from those sales will be put toward acquisitions and development.
“We’re done the strategic disposition program and there’s really not much, if anything, that’s targeted for sale,” Bonneveld said in reference to the sale of non-core assets.
The firm’s current focus is on acquiring warehousing and logistics-centred properties along major highway corridors and transportation routes.
Skyline will, however, consider selling properties if it’s approached with an attractive offer.
Skyline now owns 49 properties
Guelph, Ont.-based Skyline is now 84 per cent weighted in warehousing, distribution and logistics-focused assets. The portfolio comprises 49 properties in five provinces with a total of 9,196,171 square feet of industrial space.
Skyline is a privately owned and managed real estate investment trust that launched in 2012. It’s distributed as an alternative investment product through Skyline Wealth Management Inc.
The REIT’s properties are managed by Skyline Commercial Management, a commercial real estate property management company housed within Skyline Group of Companies.
Employers are gradually mandating workers back to their offices, but not without first inducing them with progressive spaces.
Count the Investment Management Corporation of Ontario (IMCO) among a cadre of established corporations in the Greater Toronto Area that have used the pandemic-induced office furloughs of the past few years to reimagine the office experience.
IMCO has consolidated employees from three offices in the GTA into a single location at 16 York St., where it’s taken up residence from the 23rd to 25th floors, comprising 66,000 square feet.
That might have seemed superfluous before the pandemic, but that’s hardly the case today.
IMCO is taking the open-concept office to another level. Rather than sequestering its employees at dedicated workstations, the vast, capacious office space is designed to encourage interaction, incubate creativity and, ultimately, cultivate collaboration between otherwise disparate departments.
The space is also sufficiently spacious to proffer privacy at any number of its workstations. There’s even a multi-function café on premises.
16 York LEED and WELL-certified
Julie Phillips, president and partner at Flat Iron Building Group Inc. — which constructed IMCO’s new office space — told RENX workers have been apprehensive about returning to staid, stuffy offices after several years of working comfortably from home. She’s unsurprised.
That’s why it is no coincidence IMCO choose the 33-storey, 800,000 square-foot 16 York to house its new offices, because it’s both LEED Platinum and WELL Institute-certified. Not only is that important for both a company’s ESG score and reducing its overhead, it’s a recruiting tool.
And while innovative corporate cultures and office designs are inducements, large companies like IMCO are sweetening the pot by taking advantage of vacancies in prime locations like 16 York.
“It’s super accessible to Union Station for people to commute in,” Phillips said.
“With these new buildings, from an air-quality perspective and from an amenities perspective — whether that be parking or bike facilities or nearby restaurants — there’s a flight to quality right now where people are looking to new buildings, especially with vacancy rates being where they are.”
IMCO office decision provides dual benefits
Employers like IMCO have also used the turbulence caused by COVID-19 to make fiscally sound decisions. In consolidating three offices into a single headquarters, IMCO has cut unnecessary costs, Phillips said.
“In addition, it is the way people can flow between departments and share a single lunch room, multiple collaborative spaces and meeting rooms, one reception, one quiet area, rather than separate amenities in three separate places,” she added.
A light-filled collaboration area in IMCO’s new Toronto headquarters at 16 York St. (Courtesy IMCO)
Moreover, unlike earlier in the pandemic when workers enjoyed leverage afforded by a hiring boom fuelled by low interest rates, labour conditions are no longer as tight, turning the tables back in favour of employers.
However, high interest rates haven’t just curbed new job creation. They have also — as seen in Canada’s tech sector that shed 160,000 jobs in 2022 and 100,000 more during the first six weeks of 2023 — forced some companies to downsize.
“A lot of companies were told staff who didn’t want to go into the office would quit and would be difficult to replace, so that was the motivation to let people keep working from home. That was the case 12 to 24 months ago,” Ron Jasinski, senior vice-president of Colliers’ GTA office division, told RENX.
And because, Jasinski added, companies still fervently believe employees are more productive working on-site than remotely, they’re taking advantage of the economic headwinds. Heading into 2024, it isn’t as easy to jump ship and join another company.
“Now companies are laying people off and hiring less,” Jasinski continued. “The pendulum is slowly swinging back the other way.”
“The Hive”
IMCO requires its employees to be at the office at least three days a week — but it’s betting staff will like what they see when they arrive.
The firm hired SDI Design to design the office and conceptualize its culture. Themed “The Hive,” IMCO’s 16 York head office is inspired by the egalitarian nature of beehives, spurning surfeit executive suites in favour of these types of workspaces.
“Even from CEO down, not having private offices in some environments, it got accentuated even more during COVID,” Phillips said.
“Why come to an office if you’re sitting with your head down at a desk, crunching numbers? You should be coming to an office because you need to work with a team, because you need to collaborate, because you need to engage.
“It’s not as effective to work in an office if all you’re doing is working by yourself.”
Downtown Toronto saw an upswing in leasing activity in the third quarter despite economic headwinds, Jones Lang LaSalle (JLL) has reported.
JLL’s Office Insight report for Q3 found the total vacancy rate in Downtown Toronto hit a peak of 15 per cent in the quarter. This was primarily due to significant amounts of Class C vacant space added to both the downtown east and west markets.
Despite an annual 3.8 per cent increase, Toronto Downtown saw a second quarterly dip in average direct asking net rents, sitting at $37.67 as of Q3. The region saw two new completions in Q3 2023, totalling 304,876 square feet, with a 16.5 per cent average pre-leased rate.
JLL found that office occupiers continue to weigh their capital expenditure on real estate amidst overall economic uncertainty. The finance, insurance and real estate (FIRE) sector continues to lead in demand for premium office spaces. Notable examples include Northleaf Capital and Pacific Life, who leased up to 52,000 square feet and 23,000 square feet at Scotia Plaza, respectively; both are relocations.
On the renewal front, Desjardins Securities extended and expanded at 25 York St., leasing up to 57,000 square feet. ICICI bank is relocating from the suburbs to downtown for approximately 40,000 square feet in a newly improved space on Bay Street.
Downtown Toronto sublease availability plateaued in Q3, sitting at 4.4 million square feet. Notably, Downtown Class A sublease availability decreased by 2.9 per cent quarter-over-quarter, with downtown south registering a notably substantial decline by 24.2 per cent. This decline in sublease availability is credited to not only to strong demand for quality sublet space in newer buildings, but also the increasing flexibility in disposition and termination options offered by landlords that has resulted in more spaces being vacated.
With more than five million square feet of office space delivered since the onset of COVID-19, the construction pipeline continues to thin out, JLL stated. In response to the diminished demand for new office space, a few mixed-use projects have reconfigured their usage mix while still in the proposal or early construction phase.
Two noteworthy projects that broke ground in Q3 are 266 King St. W. and 481 University Ave. Both projects are retaining their office components and adding high-rise residential condominiums above.
A pilot project is winding down in Burlington, Ont. that accelerates the permitting process for industrial and commercial buildings.
By using AI technology, the platform digitizes the rules in Burlington’s zoning bylaws relating to such aforementioned projects.
City of Burlington executive director of digital services and chief information officer Chad MacDonald explains the pilot is structured into four strategic phases, each designed to build upon the previous to develop a robust AI-driven assessment tool for building applications.
The four phases include:
Phase 1: An industrial submission review to analyze various design submissions against the City of Burlington’s “Employment Zone” zoning bylaws. This phase aims to grasp the complexity of the codes and gather data to develop an assessment template for the AI algorithm.
Phase 2: Assessment template design. This is to create a standardized assessment template tailored to the City of Burlington’s zoning bylaws, particularly for industrial designs. This will form the groundwork for the subsequent automation phase, shaping the AI’s evaluation criteria within the eCheck engine.
Phase 3: Automation feasibility with the eCheck engine. This phase determines the feasibility of automating the assessment process. This will outline the automation techniques suitable for encoding into the eCheck system, focusing on key zoning features like setbacks, heights and parking ratios.
Phase 4: Generating sample eCheck reports to test the AI’s performance by processing three “real world” industrial design submissions to the City of Burlington. This will showcase the practical application of phases one through three and the AI’s capability to generate reports that align with Burlington’s zoning bylaws.
“It’s crucial to emphasize that our approach is iterative. We are committed to refining the algorithm continuously. This involves a rigorous process of evaluating the output and making iterative enhancements to the engine,” said MacDonald.
Burlington is the first Canadian city to use the technology specifically for development on areas that have been set aside in land-use planning for commercial or industrial development.
“This proof-of-concept represents a pivotal step in harnessing the power of AI to not only streamline complex processes but also foster a more collaborative and efficient interface between the city and its constituents. By integrating cutting-edge technology into urban planning, we’re preparing for a future where digital tools help our city act faster, work smarter and welcome everyone. We’re not only optimizing the building application process but also setting a new standard for how technology can be used to serve our community more effectively,” said MacDonald.
The AI-powered technology’s ability to review designs quickly and efficiently provides value to the city, customers and staff, including:
Saved time, by reducing the number of manual exchanges between applicants and city staff;
allowing applicants to have immediate feedback on proposals and allowing for modifications prior to submission;
faster approvals and turnaround time on issuing building permits;
shortened design time;
higher quality of design submissions;
financial savings on the cost of multiple design revisions; and
enhanced transparency about the City of Burlington’s development review process.
The pilot began in late July and will conclude by the end of 2023. The objective is to provide essential data on the value such a tool may provide for Burlington in accomplishing stated organizational goals related to housing.
The platform can also be used to check design compliance on all forms of development. While this option is not currently part of the pilot, applicants can pick a specific site, upload their design to the platform and immediately see a 3D visualization which allows users to assess whether their design meets the rules. To date, reaction from users has been encouraging.
“While the proof-of-concept is still in progress and comprehensive feedback is forthcoming, the indications we have received so far are quite promising. As the project has progressed, the eCheck engine has demonstrated a high degree of precision in interpreting our bylaws and generating reports,” said MacDonald.
According to city officials, next steps after the pilot concludes may include further pilots or a larger-scale rollout.
In a Canadian commercial real estate market facing bearish conditions across most asset classes, any advantage that can improve asset performance becomes increasingly essential to withstand the economic challenges.
The CRE industry is typically awash in data, but the extent to which that data is leveraged by asset owners has not always kept pace, especially when it comes to occupier data.
Toronto-based firm simplydbs has developed a series of data products built for real estate owners, operators and developers to make them more responsive to the needs of occupiers — and therefore more successful. The suite of tools launched commercially about a year ago.
Mainly, simplydbs provides what its founders call “circular surveys” through its product Shape Your Space, which gathers data on preferences and satisfaction from tenants and residents via custom surveys that are regular and adaptive.
“There’s actually nothing like this currently as a solution for users of space,” said simplydbs CEO Sarah Segal, who co-founded the company with COO Katherine Radziszewski. “Traditional surveys are done in a linear fashion.”
Segal said that means typical user surveys in the CRE space are one-directional and close-ended, and not conducted frequently so “there’s no way to form that relationship with the people in the buildings.”
Better data collection and analytics
Canada’s commercial real estate firms lag global peers in adopting, and adapting, data science into their investment strategies, according to Altus Group’s The State of Data Science in Commercial Real Estate Investing report.
The report stated 93 per cent of Canadian firms use analytics, but only 35 per cent employed data science to properly interpret and leverage that data.
“simplydbs uses both feedback programs and ESG solutions as much as a data science methodology to power decisions for the industry as a whole,” Segal said.
“By combining math and statistics, advanced analytics with industry expertise, our products are able to provide actionable insights for our clients.”
Segal said these occupier-centric insights are used to guide strategic planning and decision-making for all areas of an organization, including leasing, property management, asset management and investor relations.
Surveys on the Shape Your Space platform are updated or changed every 30 days and provide opportunity for granular or personal feedback. Segal said the team filters the data to provide reports and visualizations.
“The industry now has a tool to know what people are thinking every day with our circular and relationship-driven survey and feedback platform, Shape Your Space,” Segal said, adding that in challenging economic times, information is more important than ever to validate and inform decisions.
Survey data can unlock interesting revelations
simplydbs has performed surveys, for example, that revealed people feel less safe in their parking area than they do in other areas of the building.
“We asked what would make you feel more safe in your parking area? It turns out that (it’s) not on-site attendants, but actually video cameras. So now we’re able to go back to our clients and say, ‘What is the signage like? Do you have cameras? If you have them, make sure people know you have cameras.’ ”
As with most survey data, the larger the response pool, the better the results.
“Our national multifamily survey that we just finished (included) some 20,000 responses,” Segal said. “With 20,000 responses we achieved a 95-99% confidence level, meaning if we ran the survey again, the likelihood we would receive the same results is 95-99 per cent.”
One of the main takeaways from that national survey was that 46 per cent of renters said they were renters out of preference. (Sixteen per cent of those respondents said renting was a better fit for their budget, meaning 30 per cent preferred renting for other reasons).
simplydbs is working with clients including Canadian Apartment Properties REIT, Cushman & Wakefield, Fiera Real Estate and Starlight. The company is also an official partner with GRESB Real Estate.
Segal said residential, office and retail owners have been driving the most demand for the products.
Other simplydbs products
In addition to Shape Your Space, the company has other products including Activate This Space, which gathers demand-side data ahead of creative placemaking and activations, capital expenditure programs, new developments and/or redevelopments; and SDBS Engagement Index, which measures creative activations, placemaking and events.
simplydbs then provides an overall activation score and a broader building/portfolio score for benchmarking.
Most of the data the firm provides is national- or broad-based-level data, Segal said. It’s not about asking a single building’s tenants if they want food trucks on Thursdays.
“It’s about (surveying) all users of that asset class; all office employees; all retail shoppers; all retail employees.”
The surveys function by “layering on to existing communications,” Segal said. That could be a digital sign or a QR code, an app, or any type of regular building communications channels.
“We understand where the responses are coming from, (but we also don’t) burden property management teams with a lot of extra work.”
Segal said the voices of building users or residents should be used to inform ownership and management.
“Demand data informs ROI assumptions from validating capital and technological decisions, benchmarking satisfaction and services to predictive analytics and more,” Segal said.
“Understanding what people in our spaces want and need is invaluable.”
Entertainment Tenants Don’t Bring Foot Traffic to Other Retailers in a Mall, Owner Says
Experiential real estate is a buzzword for getting shoppers to visit malls, but an executive for a major North American retail landlord said those types of tenants that offer customers something to do are not necessarily his company’s first choice.
Darryl Schmidt, vice president of national leasing at Cadillac Fairview Corp., the owner of 35 million square feet of retail space in Canada, said the trend toward entertainment to drive foot traffic to malls across his country and the United States following the pandemic has drawbacks.
“There is no question you are seeing more entertainment uses, but the cold, hard reality is they don’t want to pay a lot of rent,” said Schmidt in discussing on the evolution of retail at ICSC Canada in Toronto. “Selfishly, for Cadillac Fairview, our highest and best use is a much more traditional fashion-oriented store or a general-purpose store. That’s at the top of our pecking order.”
He said the real estate company, controlled by the Ontario Teachers’ Pension Plan Board, is monitoring Europe and the United States for what happens next with the trend toward experiential and entertainment tenants in retail spaces.
Everything from pop-up stores to immersive buying experiences to superhero exhibits are becoming part of the mall landscape that some call “retailtainment.”
“Large entertainment-type uses attract a lot of foot [traffic] but not a lot of cross synergies with the rest of the retail brands,” said Schmidt.
The Cadillac Fairview executive said the number of troubled companies in its portfolio is at a 15-year-low, so the real estate company is not in a position where it needs to look for leases to replace failing tenants.
But new tenants are looking for locations and bucking the trend of the past two decades that saw Canada mostly as fertile ground for expanding U.S. retailers.
“It really is a global marketplace. We try to source new leads globally,” he said. “If you look at a triple-A enclosed shopping [mall], whether in London, Los Angeles or Toronto, there is a homogeneity to the mix. Maybe 50% of the brands are global.”
Brick and Mortar Returns
The consensus among the retailers and landlords in one panel discussion was that brick-and-mortar stores are coming back as strong as ever, but the omnichannel nature of shopping that includes e-commerce is here to stay.
David Bianchi, vice president of real estate development with Canadian Tire, one of the country’s largest retailers with 500 locations, said he believes customers still need an in-person experience. However, he noted the Toronto-based company, which sells everything from automotive goods and tools to everyday items like coffee, expanded its online presence during the pandemic.
“Our largest competition right now is the online business. The Amazons. It used to be Walmart. But Canadian Tire is different. We still believe in bricks and mortar; the future is our stores,” said Bianchi, noting customer pickup is part of the company’s plan. “We know Canadian Tire customers prefer to be in-store. They use digital assistance but want to touch BBQs and sit on patio sets, and we don’t see that changing.”
Shawn Fujiki, regional director of real estate at Walmart, said the chain still plans to expand in Canada, including its retail presence as the chain continues to expand online sales.
“Physical retail is not dead. Right now, it’s about trying to make sure we can develop a successful formula for physical retail. We believe in our bricks and mortar,” said Fujiki. “The omni offering is an important part of investment. Any successful retailer is going to have the right mix.”
Oliver Harrison, senior vice president of leasing and tenant experience at RioCan, noted his real estate investment trust’s portfolio of retail properties is 98% leased. Demand is so strong that all 13 Bed, Bath & Beyond locations owned by the REIT in Canada have been leased following the U.S. retailer’s bankruptcy.
But Harrison also agreed the retail marketplace is changing, and for Generation Z, those born between 1996 and 2010, the population grew up in the digital-first world.
“Gen Z is online. It’s mobile. Bricks and mortar still plays a significant role, but it starts with digital-first,” said Harrison.
Lifestyle Fitness Company Plans to Introduce a New Brand to the Market
First Capital REIT has secured a new tenant for one of the most prominent retail locations in Toronto following Nordstrom’s exit from Canada earlier this year.
Lifestyle brand Altea Active, which focuses on fitness, wellness and social amenities and services, has agreed to lease 31,000 square feet at 1 Bloor East, once home to a Nordstrom Rack. Altea Active plans to introduce a new brand called Avant and bring what it describes as a unique high-design luxury wellness destination to the posh Yorkville neighbourhood.
The site, located at the southeast corner of Yonge and Bloor streets, where Toronto’s two major subway lines meet, has been vacant following the March 2023 decision by the Seattle-based retail chain to exit Canada. At one point, Nordstrom had 13 locations across Canada before winding down its operations here.
“This evolution is a major milestone as we continue to elevate our member experience and push the boundaries of what a fulsome wellness and social club should be with premium amenities and luxury hospitality infused at every touchpoint,” said Michael Nolan, co-founder and chief operating officer of Altea Active, in a statement.
Altea Active, which operates in Winnipeg, Toronto’s Liberty Village neighbourhood and is about to open facilities in Vancouver and Ottawa, said its new location in Yorkville would be about one-third of the size of the company’s other Toronto location but still feature strength and cardio equipment, private and small-group training options, and high-end amenities.
An Altea location in Toronto. (CoStar)
Avant says it is challenging the perspective of a traditional gym with amenities and premium offerings and taking a hospitality approach.
The Toronto facility, which will open in early 2025 and includes a long-term lease, will be designed by Chapi Chapo Design, with the company hoping to mimic features found in five-star hotels. Details of the lease were not released.
“We are excited to join this project, fusing our global expertise in luxury hospitality design with the unique essence of the Yorkville community to craft something extraordinary, drawing inspiration from the world’s most prestigious hotels and luxury experiences,” said Boris Mathias, partner & co-founder of Chapi Chapo Design, in a statement.
Eric Sherman, head of national operations at First Capital REIT, called Avant a revolutionary concept in luxury fitness.
Old Structures, Remote Work, Home Fitness Create a Challenge
Since the first visitor walked into North America’s maiden YMCA in 1851, millions of people have flocked to the charitable organization to work out or take a swim. But the facilities are now also attracting interest from real estate developers acquiring many of the properties they see as ripe for redevelopment.
The next YMCA facility that could be part of the redevelopment trend is in Montreal, the home of North America’s first and the city’s largest YMCA, at 1435 Drummond St. The owners have announced plans to sell and move to a rented premises in the same area.
Located within the city’s Golden Square Mile area, the Montreal YMCA blames an increase in remote work as part of the reason for its demise.
“We must tackle considerable challenges, particularly the drop in the number of people coming into downtown for work or other reasons, new work habits, and changes in fitness and workout” routines, it said in a note on its website.
The YMCA sits in the heart of downtown among some of Eastern Canada’s most valuable real estate and it has remained closed since Quebec’s pandemic curfew was put in place. It’s on pace to be the second major YMCA in downtown Montreal to close after a gym at the Guy Favreau Complex shut its doors. Its landlord, the Canadian federal government, canceled a deal to provide free rent in 2006, leading to its closing in 2017.
Redevelopment plans of former YMCAs are also rampant in the nation’s capital. The Orleans YMCA at 265 Centrum Blvd. was purchased by Toronto-based developer Bayview Orleans for $6.5 million in January 2022. The developer plans to build three high-rise towers up to 40 floors on the site.
This YMCA on Argyle in downtown Ottawa has gone up for sale. (CoStar)
Another Ottawa YMCA now ripe for redevelopment is at 180 Argyle Ave., located in the heart of the city, a 20-minute walk to Parliament. The YMCA there has announced plans to sell but will remain on the premises for the foreseeable future. “We are open to plans to sell and vacate but that will be years and years later,“ a representative told CoStar News.
Acquiring one of the roughly 140 YMCA fitness facilities in Canada can be done directly with local management.
“The YMCA in Canada is a federated model so each Canadian YMCA Association is an independent charity,” a representative of YMCA Canada told CoStar News in an email. “Any operational decisions that need to be made at a YMCA location are addressed at the local association level.”
Other Ottawa-area YMCAs that have closed in the past decade include one at 2121 Carling Ave. that was open from 1967 to 2021, and another that was in the Merivale Mall at 1642 Merivale Road closed after complaints of noise and vibration in the shopping centre. An attempt to operate a YMCA in the home of the National Hockey League’s Ottawa Senators also failed, as the YMCA at 1000 Palladium Drive closed due to lack of membership.
Older Buildings
The YMCA’s decline is more about buildings than brand, according to one fitness industry observer.
“Many of the YMCAs are located in buildings that were built over 100 years ago,” said John Atwood of the Atwood Consulting Group in an interview. “All over North America, there are YMCAs that frankly most people don’t want to go to because they are old, tired, moldy and whatever else. The dichotomy is that the YMCAs have done an extraordinary job of reinventing themselves.”
Pointing to the success of a newly built YMCA in Gloucester, Massachusetts, he said “new YMCAs all over the country are magnificent. I wouldn’t say the YMCA is a moribund organization. They’re doing a very good job of reinventing themselves with brick and mortar.”
Atwood does not believe that fitness outlets have suffered a dramatic overall decline, as he notes that gym membership is back to about 90% to 95% of pre-pandemic levels. He concedes, however, that about 5% to 10% of former gym members are not likely to return, with many opting to exercise at home on Peloton machines or other methods.
Canada’s YMCAs have suffered a significant recent decline in revenue, hinting that the trend to swap out the buildings for other purposes will continue. YMCA Canada’s revenue has declined by one-third, from CA$24 million in 2019 to CA$16 million in 2022, while expenses declined by over half, from CA$27 million to CA$12.6 million, according to its financial reports.
YMCAs in the U.S. suffered a similar decline between 2019 and 2022, as their total revenue fell from US$193 million to US$144 million during that period, according to their company reports.
Other Canadian cities that have seen their YMCAs targeted by developers include Toronto, home to the charity organization since 1853. The YMCA at 325 Burnhamthorpe Road W, was sold to RGF (Mississauga) Developments Inc. in 2020 as part of a plan to build five towers, ranging in height from 52 to 65 floors, with a total of 4,277 residential units. The Toronto YMCA situation is not entirely bleak, however, as a new YMCA opened at 907 Kingston Road in 2022.
In Calgary, the Eau Claire YMCA at 101 3 St. SW, which opened in 1988 and closed during the pandemic in 2021, was purchased by Telsec Property Corp., which now plans to redevelop the 430,000-square-foot-property.
In Vancouver, which is home to a downtown YMCA on Burrard Street and another on 49th Avenue, Concert Properties and Peterson Group have outlined plans to build on the 49th Avenue site as part of its Langara Gardens project, a major undertaking of 21 buildings, including towers of 16 to 36 floors. The project includes plans to include a newly built YMCA on the premises.
Redevelopment Plans of the Palace Arms Hotel Aimed at Conserving Heritage
The Palace Arms, one of Toronto’s oldest hotels, is being redeveloped into a rental building on the city’s downtown west side.
Greenwin, one of Ontario’s largest privately owned, full-service property management and development firms with 22,000 residential units, and Intentional Capital have formed a joint venture for the site at 950 King St. West that dates to 1890 with Toronto-based asset management firm Windsor Private Capital.
The redevelopment will see a mixed-use residential housing project, conserving and rehabilitating the building’s existing principal facades, heritage brick masonry, window openings, variegated roof lines and masonry chimneys.
Plans include a 14-storey tower with 219 rental units on a 15,000-square-foot lot, featuring a mix of one, two and three-bedroom units.
Under the approved plan with the city, the development will also incorporate a number of affordable studio suites. Kevin Green, president and chief of Greenwin, credited the city for supporting new developments.
Rod Bell, managing director and co-founder of Intentional Capital, a Toronto-based real estate company in the multifamily sector, called the need for housing in the city critical.
“By integrating the architecture of the existing structure with a reimagined contemporary rental experience, we hope to safeguard a treasured piece of Toronto’s historic landscape,” said Bell in a statement.
Details of the partnership were not disclosed. The property changed hands in 2017 for $13.4 million, according to CoStar data.
“This partnership is a natural extension of our companies’ shared vision and commitment to building and supporting some of the GTA’s most vibrant communities,” said Jordan Kupinsky, managing partner of Windsor Private Capital, in a statement.
Windsor Private Capital is a Toronto-based asset management firm focused on real estate lending and equity investments. It advises and manages assets worth over $3 billion on behalf of institutional and private investors, including the LiUNA Pension Fund of Central and Eastern Canada.
