One of the questions that came up after my recent post about land pricing was: what is it going to take to develop underutilized land on the outskirts of city centers?
So today I thought I would talk about a new development project that was also discussed at the Land & Development conference I recently attended. I think will begin to answer this question.
The project today is known as the Rockport Weston Community Hub & Rental Building. And it’s going to include a community cultural hub, 26 live/work artist spaces, and 300 rental apartments.
It’s located in the Weston neighborhood of Toronto, which is designated as a “Neighborhood Improvement Area.” These are lower-income areas that the city considers to be “at-risk.”
Given this, rents are naturally lower here than in other parts of the city, which means that it’s basically infeasible to develop here. There has been no large scale development in this community since the 1970s!
To put some numbers to this, the developer said they were projecting rents somewhere around “two and a quarter.” So let’s assume for a second that the average apartment rents will be $2.25 per square foot.
At this rate, it means that a 600 square foot one-bedroom apartment will have a face rent of $1,350 per month. This may seem fairly high, but it almost certainly wouldn’t be enough to get a project like this off the ground under normal market conditions. At least, that’s the case here in Toronto with current cost structures.
So what had to happen was a fairly complicated public-private partnership, which you can read all about here. But at a high level, there seems to have been 3 main economic factors that allowed this project to move forward:
1) The developer was able to acquire the land for cents on the dollar. As I said in this post, land is expensive. So this helps a lot.
2) The developer was able to make use of extra parking in an adjacent building. Assuming that underground parking could cost around $50,000 per stall, this is a huge cost savings.
3) Lastly, the project is benefiting from the public invest made in the airport rail link that now quickly connects this site to both Pearson International and downtown Toronto.
The moral of the story is that infeasible sites require some sort of subsidy or top up to make them work. Or, there needs to be an exceptional circumstance. Because if the rents aren’t there, nobody is going to build. It’s as simple as that.
That said, here’s one idea…
This discussion reminds me of a post I wrote a while back called, The hypocrisy of parking minimums. Frankly, I don’t understand why a city like Toronto still has parking minimums. If anything, we should have parking maximums.
Underground parking is a huge cost that has to get carried by purchasers and renters in a new building. For example, let’s assume that 300 apartment suites would require 180 parking stalls (ratio = 0.6). Assuming $50,000 per stall, that’s a $9 million cost.
So the second takeaway is that it’s probably time we took a good hard look at how we think about and plan for parking in our cities. Especially since the entire mobility space is being quickly disrupted.