Toronto on the rise?

Toronto is changing fast. No longer is it just Canada’s financial and business hub, but it’s becoming a world centre as well, with many of the spin off benefits and challenges.

This is the argument or observation of Dr. Sherry Cooper, the Chief Economist at BMO Capital Markets and BMO Nesbitt Burns in an essay she penned last week.

In my view, Toronto is becoming a world-class financial and commercial centre on the order of New York and London. While [new ultra-deluxe] condos are going for $1,300-to-$1,800 a square foot, they are cheap by international standards. Donald Trump—at the Toronto ground breaking of Trump Tower Torontos construction at Adelaide and Bay—recently declared that comparable property would sell for $5,000 a square foot in New York and even more in London.

No where is the new wave of foreign money more evident than on Bloor Street—Toronto’s version of the Big Apple’s Fifth Avenue with its mixed-use high-end residential, office and retail space. New designer stores are opening and existing ones are expanding. Canada’s-own Holt Renfrew’s flagship store has expanded and remodeled, becoming even more decidedly upscale; as well, designer boutiques such as Chanel, Gucci, and Escada have expanded. High-priced trendy restaurants are popping up city wide and the remodeling and expansion of the ROM, the Gardiner Museum and the Art Gallery of Ontario are enhancing this urban renewal. We are observing the gentrification of Bloor Street west of Avenue Road and east of Yonge Street as downscale commercial properties are replaced by upscale residences and boutiques. For example, the 16-storey ultra-luxury Museum House condominium development will take the place of the Pizza Hut opposite the ROMs new Crystal and it will be accompanied by other luxury condos on that same strip of Bloor. Even the seamier side of Yonge St. south of Bloor will change with the coming (in 2011) 80-storey hotel/residential/retail tower of 1 Bloor, touted as the tallest residential tower in Canada by its Kazakhstan-based developer. This five-star boutique hotel will join the other five larger five-star hotels opening in Toronto in the next few years, taking us from not a single five-star hotel in all of Canada to six and counting in Toronto alone.

Bottom Line: this is a fascinating and important economic development, bearing with it enormous portent. On the positive side, it will be a boost to the revenue base of the beleaguered city government and certainly increase the economic growth of the city and no doubt encourage the rise of the Canadian dollar. On the negative side, it will reduce the affordability of the city for current residents, potentially displacing low-income residents. It puts additional strain on public services and adds to the de-industrialization of the inner city. Historical preservation has become an issue as we have seen with the saving of the old fire house and the frontage of the first site of Mt. Sinai hospital on Yorkville Avenue. We run the risk of creating concrete caverns that block the sun and increase gridlock on already-busy city streets. It is an opportunity and a challenge, and it is happening faster than most people realize.

Toronto is certainly changing. While I generally agree with Cooper, I think she may be over-stating the case for current change — although not Toronto’s potential. I’m not sure it is achieving the status of New York or London — at least not yet. But it may be securing a role as the number two financial centre in North America after New York. And Toronto has a lot of advantages in terms of growing in this area:

In particular, Toronto offers an attractiveness to potential foreign immigrants and an easier immigration process, in comparison to New York. With over 40% of the population foreign born in the Toronto area (know locally as the GTA), most immigrants can find an ex-pat community from their birth country, should this be important. And Canada has been easing immigration restrictions, particularly for young, educated professionals — talent — which is becoming scarce in some industries and cities.

Toronto as a city is more like New York and London than most North American places. Although automobile-centred sprawl has created some challenges in recent decades, the older districts in the core are more human centred and walkable — and well serviced by efficient public transportation options used by all levels of society (much like New York and London). As oil becomes expensive and more sustainable living desirable, Toronto like New York and London is better positioned.

Certainly, Toronto lacks the same history as a global hub that London and New York share. But has Dubai has shown, this can be overcome with ingenuity, determination, and boldness. Further growth in Toronto may, therefore, require some clever and brash steps from business and political leaders.

And, Cooper is correct in noting the challenges. One she doesn’t mention is that Toronto’s infrastructure is decaying. Roads, overpasses, sewers, etc. require upgrades. Moreover, the city is desperately short of funds and cutting back services to citizens. I’m not sure that new deluxe condos will bring in enough new revenue to really help.

Without good infrastructure, the city will start to decline under its own weight and become less livable, undermining its potential as a financial centre. It’s the federal government’s revenues that will really benefit from Toronto becoming a bolder, global city and financial hub. And its from Ottawa that more support will be needed in order for Toronto to continue on this path.

7 comments

  1. Fin says:

    One point: in the last few years, Toronto’s public transit system has become too popular for its own good. The subway, GO Trains, streetcars and major bus routes are all overcrowded, even outside of rush hour.

    I think transit is the most urgent infrastructure need in Toronto. There are good plans for LRT and subway extensions in the works but the most glaring need is for greater capacity on the existing system.

  2. Wendy Waters says:

    Interesting observation Fin. In your view, is this an easy fix (more cars per train and more frequent trains), or more complicated?

    You also raise an interesting dilemma about increasing transit ridership versus increasing capacity. If you increase demand (say through university passes, for example), and don’t add enough supply you’ll turn potential converts off transit because it’s too crowded and therefore unreliable. If you increase capacity without the demand, well, that’s often fiscally impossible and would be seen as irresponsible until you know what the demand will be.

    Somewhat of a chicken-and-egg problem (which comes first, capacity or demand). And we haven’t even entered the discussion about housing density and transit (and if I understand Toronto’s growth right, there is going to be many more people living in the urban core, in condos, and taking transit).

  3. Fin says:

    Toronto pays for 70% of transit operating costs out of fares – the highest ratio in North America. Beyond significantly increasing the amount of government funding, the biggest improvements would come from removing political interference in transit.

    There are established best practices for developing a useful, cost-effective system, but they usually involve improving service frequency, buying longer vehicles and other gradual, incremental improvements. Unfortunately, that’s not a sexy photo-op for politicians like launching a new subway line. So we end up with hugely expensive subways to nowhere that operate at a huge loss (see: Toronto’s Vaughan extension) instead of relatively inexpensive improvements where they’re needed.

  4. Interesting discussion, indeed. But I don’t think we can blame any major North American city (or its transportation system) for being overcrowded. It is just the price you have to pay for living here.
    Another aspect of the new condo developments was mentioned in another blog, where the blogger claimed that because of “all that construction” the quality of life has suffered.

  5. David M says:

    My opinion is that Toronto has attempted in various ways (with mixed results) to become city with it’s own unique character.

    Certainly that seems to have been achieved in some areas thanks to the aforementioned immigration policies which have created rather vibrant (somewhat) independent communities such as ‘Greek Town’ and so on.

    Area’s such as Yorkville, the Beaches, St. Lawrence Market are also reflective of the city’s successful development (or, perhaps redevelopment) over the past few decades.

    However, in my opinion, Toronto has failed as a whole to clarify what exactly it is trying to accomplish.

    I feel that Toronto is rather a ‘wanna be’ city who is simply taking ideas from other major cities and adopting as it’s own.

    For example, in recent years, the Bloor St. area came upon the name of ‘mid-town’.

    The new hotel being built downtown is called; ‘Soho’.

    The Markham region is apparently now known as ‘Toronto’s Silicon Valley’.

    Yonge and Dundas now looks similar to Times Square.

    We now have the ‘Financial District’.

    And so on….

    A recent addition was completed on the ROM and although, I must give credit to the distinctive appearance…it is, again in my opinion, a slaughtering of what once was a traditional and historic momument that stood famously on a corner for over a century.

    Other major cities in Canada such as; Vancouver, Montreal, Calgary, Halifax don’t see the need to try and become something they are not.

    Instead, they build up character from within and do so in a creative and unique manner.

  6. Wendy Waters says:

    Hmmm…interesting comment David. Since I don’t live in TO, I hadn’t thought about this that much. Some of the monikers like Financial District and Midtown are becoming ubiquitous in major world cities like the terms downtown and uptown.

    Places like Vancouver are really too small to have them — they just have downtown and the rest (although arguably in Vancouver the area around Bentall Centre is the financial core).

    Since this post is older, I’ll try to write a new post soon on a related subject and will bring up your ideas.

  7. Lumiere says:

    Being a Torontonian myself, getting around this city is by far the most complex part of living here. I’ve experienced the density issues increasing over the past 25 years and remember what it was like a few decades ago.

    The fact of the matter is that Toronto’s subway system was designed for its population in the 1970s, when it was just a fraction of what it is now.

    Without creating ways for people to get around easily, the quality of life diminishes with heightened frustration.

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