The Outlook for Office & Institutional Employment to 2041
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PLANNING DOWNTOWN The Outlook for Office & Institutional Employment to 2041 SvN Report Authors and Contributors Hemson Consulting Ltd. Russell Mathew John Hughes Tom Ostler Helen Coombs Yousaf Shah Adam Mattinson ThinkingStrategy: New Paradigms Inc. Judith Amoils SvN Architects+Planners Jason Petrunia Alex Heath Ana Espinosa Maéva Baudoin Data and market insights from CBRE Limited City of Toronto City Planning David Fitzpatrick, Project Manager, Research & Information (Lead) Sherry Goldstein, Senior Planner, Research & Information Ann-Marie Nasr, Manager, Strategic Initiatives Andrew Farncombe, Project Manager, Strategic Initiatives Igor Dragovic, Senior Planner, Strategic Initiatives Sarah Phipps, Senior Planner, Strategic Initiatives Marian Prejel, Senior Planner, Community Planning (Toronto and East York) Economic Development and Culture Peter Viducis, Manager, Research and Information Cover Image: Wylie Poon (Flickr) Creative Commons License iii Contents Executive Summary 1 1 Accommodating Continued Employment Growth in the Core Requires a Rethink of Planning Policies 11 2 Office and Institutional Employment Sectors are Very Large and Growing in the Core 17 3 Future Development will be Driven by the Growing Employment Sectors and How Office Space is Used 33 4 Forecast for Significant Office Growth Indicates the Need for Policies to Assure it can be Accomodated in Downtown 61 5 Conclusions and Recommendations 79 Appendices Appendix A Employment Sectors 89 Appendix B Downtown Submarket Trends 90 This page left intentionally blank. Executive Summary 1 Executive Summary Planning Downtown: The Outlook for Office and Key economic sectors concentrated Downtown Institutional Employment, prepared by Hemson and include: SvN as part of the TOcore initiative, looks at the long-term prospects for employment growth in • The financial services and business services, Toronto’s Downtown. It examines office and which represent 90% of all jobs in the Financial institutional employment, the space requirements to District, with a secondary cluster for both accommodate this type of employment growth, and sectors focused at Bloor and Bay. the resulting land use policy implications. It contains • The health sciences jobs, which are found in and recommendations designed to ensure that future around the hospital complex centered on development Downtown protects and encourages University Avenue, as well as around St. ongoing economic growth. Michael’s Hospital and Toronto Western Hospital. Downtown Toronto is the economic hub of Canada’s • Media, publishing and other creative economy global urban region. Head offices for major national firms, which are clustered west and east of the and international firms are found here, and the Financial District in the King-Spadina and largest stock exchange in Canada is the focal point King-Parliament areas (The Kings), which are for investment. Business activities that take place in also desirable locations for technology Downtown Toronto have ripple effects throughout companies. the economy and across the nation. The Financial District and nearby areas represent the third-largest • Provincial and municipal legislative, concentration of downtown commercial office space administrative and judicial functions, centred on in North America, after New York and Chicago. While Queen’s Park, City Hall and the courts, in recent years a number of large office buildings respectively. have been completed within Downtown, opportunities to expand the supply of office space With approximately 600,000 people working in the are increasingly constrained as residential study area today1 and a density of almost 24,000 development competes for prime sites. jobs per km2, Downtown is the largest, most transit-accessible employment and institutional 1 Footnote: The study area includes the employment areas of South of Eastern, to the east of Downtown, and Liberty Village, to the west. These employment areas could play a role serving elements of the Downtown market. 2 TOcore Planning Downtown: The Outlook for Office and Institutional Employment cluster in the Greater Toronto and Hamilton Area ensure that residential and commercial development (GTHA). Total employment Downtown grew by is balanced in a way that provides for continued almost 162,000 jobs between 1986 and 2016, with economic growth. Moreover, this current review of over 118,000 of these jobs located in large office land use policy is taking place in a new context of buildings. The pace of job growth increased provincial policy leadership as expressed through markedly between 2011 and 2016, when over 16,000 the Growth Plan for the Greater Golden Horseshoe, jobs were added per year. As a result, the supply of 2017 (Growth Plan). Growth Plan policy 2.2.5.2 calls major office space Downtown has grownfor the location of major office and major institutional considerably in the past few years to accommodate development to be directed to urban growth centres the job growth. This growth in economic activity was (UGCs), including Downtown Toronto, as well as facilitated by the decision 20 years ago to open up ensuring that employment is concentrated in the King-Spadina and King-Parliament areas to an locations well-served by transit. Additionally, infusion of investment. These former industrial areas provincial and municipal transit plans are focused on have transformed into dynamic mixed-use bringing more workers into the core of the city in a communities that have proven to be an attractive more efficient manner. location for new and established businesses. The sheer size of the employment base in Downtown While the resurgence in business interests in key provides a benefit to the wider region as the high Downtown locations is a positive trend, it now risks degree of transit accessibility broadens employment being curtailed by a significant increase in residential choices for the regional labour force. Furthermore, development throughout Downtown. Residential the clustering of specific employment sectors such development has taken up some signature sites in as finance, business services, computer services, the vicinity of the Financial District, notably in The healthcare and creative sectors within Downtown Kings, raising concerns that continued residential can lead to agglomeration economies, where a high development will limit growth prospects for density of workers within these sectors in close commercial office uses. Office and institutional proximity facilitates the exchange of new ideas, development outside of the Financial District are which then fosters innovation and economic growth. increasingly competing with residential development This creative synergy results in the development and interests. The economic health of the city could be enhancement of goods and services, providing compromised if residential development interests benefits across the national economy. continue to outbid commercial development in the core of the city. It is critically important, therefore, to Thus it makes sense to encourage job growth in the support the growth in commercial office space over Downtown core, now and for the foreseeable future. the long term. This involves protecting land uses to Union Station anchors the GO rail and bus network accommodate job growth in the financial services as well as the subway system’s Line 1. Moreover, and business services sectors, as well as preserving future transit priorities such as the Relief Line, non-residential development space for the SmartTrack, and GO Regional Express Rail are also healthcare, post-secondary campuses and intended to move more people into the core and will government sectors. significantly enhance accessibility for the regional labour force. These trends have given rise to the challenge of ensuring that there remains capacity to expand the This study examined the long-term prospects for office and institutional employment sectors in employment growth in Downtown, the space Downtown; a challenge that was unforeseen during requirements to accommodate this growth, and past Official Plan reviews. The TOcore initiative presents land-use policy implications and presents an opportunity to document the successes recommendations to ensure the city’s future of past policies and to consider adjustments to prosperity2. Notable findings through the study Executive Summary 3 determined that having a central location with easy There is still a significant market for the traditional access to Union Station and the PATH system office tower, notably in and near the Financial continues to be of importance to firms in financial District, where there are a number of new office services and business services. The study also found buildings recently completed, under construction that there are growing concerns about the ability of and in the development pipeline. From an economic major institutions to continue to expand to service perspective, a key goal of planning policy is to the growing population of the Downtown and rest of protect employment lands. While such protection is the city. essential as it maintains economic activity throughout the city, the activity that takes place in The preparation of employment forecasts for commercial offices is increasingly driving job growth, Downtown Toronto recognize the Growth Plan especially as more traditional industrial activity forecast for the GTHA as a starting point, but also becomes less labour intensive. The office reflect and incorporate recent trends. While total replacement and enhancement