Yesterday afternoon and evening was a series of interesting discussions about city building in Toronto. First, I met with Jeff Ranson of Northcrest Developments for a tour of YZD. This is the 370-acre former Downsview Airport lands that is now the biggest urban redevelopment project in North America.
The tour also involved the two of us e-scootering around the property, which was timely given yesterday's post about not hating on them so much. Jeff is up next on Globizen's Global City Builder series, so stay tuned for that.
After that I was on Ben Myers' Toronto Under Construction podcast. After 80+ episodes, he finally invited me to join (wink wink). It was a great discussion with Rob Spanier of the Spanier Group and Ilana Altman of The Bentway. When the link comes out, I'll be sure to share it on the blog.
But one of the common threads across both discussions, that I'm now thinking about, is about how city builders can better provision for flexibility in new urban projects. Flexibility is an important feature because cities need to be able to grow and adapt over time.
Consider some of the older main streets in Toronto where it's very clear that the shop or restaurant you're in used to be someone's home that has now been converted. This is a very good outcome. It's the city iterating.
But this isn't always possible with newer developments. Condominium corporations, land use restrictions, and a variety of other factors can make this largely impossible. It's for this reason that I'm always drawn to things like live/work suites. They already contemplate a greater degree of flexibility.
Two specific examples that come to mind are the live/work suites fronting onto Fort York Boulevard (in CityPlace), which have over time become more retail oriented, and loft buildings like 90 Sumach Street, which is known for housing a lot of creative professionals.
Cities are at their best when they are able to change and adapt. So I think it behooves us to spend more time thinking about how we can encourage greater flexibility through different design approaches, flexible land use permissions, legal carveouts, and whatever else might be necessary to fully unlock the potential of our cities.
The Frank Gehry-designed Grand LA is a prominent mixed-use development in downtown Los Angeles that sits across from the celebrated Walt Disney Concert Hall (which was also designed by Gehry). Developed by Related, the project occupies an entire city block and contains a 305-room hotel by Hilton, 347 luxury rental apartments, 89 affordable apartments, and over 164,000 sf of retail space.
According to Bloomberg, most of the project is doing quite well. The hotel occupancy rate is at 69%, the hotel restaurant is busy, and the residential is more than 95% leased. The problem is the retail.
Since the project opened in 2022, most of it has gone unleased. Though two new anchors were just announced: an AI museum called Dataland and a permanent home for the University of Michigan's Ross School of Business, which runs an executive MBA program in LA.
But these aren't traditional retail tenants. And it's almost certainly not what was being modeled when the project broke ground in 2019. Back then, everyone was still going into the nearby offices. And those humans would have brought foot traffic. This is one of the tricky things about development — you end up building through different macro environments.
But even in the best of times, it's generally hard to say with exact precision what will be successful. That's development. If there's comparable product, then you can comp against that (less risk). But if there isn't (more risk), you're faced with the question: Does comparable product not exist because there's no market for it, or does it not exist simply because nobody has done it yet?
If you're developing, it's because you believe the latter.
Here's a timely article talking about the difference between 7-Eleven stores in North America versus Japan, and why the Canadian company, Alimentation Couche-Tard, wants to buy the Japanese company for $47 billion:
So far, owner Seven & i Holdings Co. hasn’t been able to replicate that success at its 13,000 US and Canadian stores, better known for their constantly rolling hot dogs and 30-ounce soft drinks than their fresh food or their ability to inspire effusive posts from social media influencers. The Tokyo-based company, which has been closing underperforming North American stores faster than it’s been opening new ones, is now the target of a $47 billion takeover bid by a Canadian rival that says it can do a better job translating that overseas magic to the market.
I have no idea if this will happen, but Couche-Tard has been trying to buy the company since 2005. If successful, this will create the largest convenience store operator in the world. It will also go down as one of the largest foreign takeovers in Japan. (On a related note, Couche-Tard tried to buy French grocery chain Carrefour SA in 2021, but that was blocked by the French Finance Minister.)
What is clear, though, is that there's an obvious user-experience gap between the stores in Japan and the stores in Canada and the US. As we talked about here, convenience stores in Japan serve solid food and act very much as community hubs. I didn't know this until right now, but in Japan, people also use these stores to do things like send parcels and pay utility bills, and top chefs regularly judge the food.
However, this is based on a supply-chain network that is, at least right now, unique to Japan:
In Japan, which is much smaller, the chain relies on a robust supplier network, where inventory and food preparation take place at more than 150 factories churning out breakfast, lunch and dinner. Product lineups and displays change quickly based on consumer tastes, with each store responsible for analyzing the sales of every product and adjusting orders to reduce waste and control inventory. It’s a management method known as tanpin kanri, which was even taken up as a Harvard Business School case study. “Japan’s convenience stores’ food preparation central kitchens and logistics infrastructure would be more challenging to establish and operate efficiently over vast areas in the US,” Boston says.
There appears to be universal consensus that the key to unlocking additional value is more fresh food and overall better offerings. And presumably Couche-Tard is of the opinion that it will be a better operator and that it can figure out whatever supply chain is needed. Time will tell. But I find it interesting that all of this is arguably about creating a kind of "local corner store" that better serves people's needs.
Cities used to have these in spades. But then we zoned them away, scaled everything up, and optimized around rolling hot dog cookers and big gulps. So in many ways, this story is about a return to fundamentals. It's about figuring out a way to serve quality products to local neighborhoods, in a globalized world. That sounds simple enough, but it's clearly not easy.
Cover photo by Lisanto 李奕良 on Unsplash