Today on the blog, I thought we'd feature a new fourplex being developed here in Toronto at 2343 Gerrard Street East called The Walk-Up. Designed by Studio JCI and presented by Paul Johnston of Unique Urban Homes, this is the first in a series of "missing middle" projects now being developed by Urbinco.
Housed on your typical single-family lot, The Walk-Up is somewhere between 3-4 stories and has four homes: a garden suite, a ground suite, a center suite, and a sky suite. And each is family-oriented both in terms of design and size. They all have over 1,000 square feet of interior space, have two bedrooms, and have access to outdoor space.
In other words, it is exactly the kind of housing solution that Toronto needs a lot more of! Thankfully, this form of housing has been permitted (as-of-right) in Toronto since May 2023. Unfortunately, there are still many municipalities and politicians who don't seem to get it. But that's okay. This is usually how things go. Toronto leads, and then others follow.
For more information on The Walk-Up, click here.
Last week we spoke about how many businesses don't want to own their own real estate, but that some do. We then spoke about Prada's recent acquisition of 720 and 724 Fifth Avenue for $835 million. However, they're not the only ones. According to New York's The Real Deal (thank you John Bell for the article), last year saw the following transactions:
Swiss fashion house Akris bought a property from SL Green for $40.6 million
Japanese coffee retailer Geshary bought a property on Fifth Avenue from the Riese Organization for $38 million
And Dyson bought a building in Soho for $60 million
Now, some, or a lot of this, is strategic. New York is New York, and global brands need to be there. Another part of this is that there was less competition last year. Fewer real estate companies wanted to buy retail and office buildings, and so end users seem to have stepped in at what they presumably saw as favourable prices.
But it's also not totally foreign for retailers to want to own their own real estate. Perhaps the most famous example is McDonald's, which owns its own real estate and then leases it out to franchisees. Though as I alluded to last week, it's important to know what business you're ultimately in. And McDonald's knows it's in the real estate business.
Alex Bozikovic is right to praise Gairloch's upcoming development in the Junction. It's a beautiful project and it's exciting to see so many architecturally significant projects in one neighborhood -- either completed or to be completed. I'm thinking specifically of DUKE Condos (TAS and Quadrangle), our Junction House project (currently under construction), and now Gairloch's.
But Alex (as well as Jeremiah Shamess) is also right to point out some of the tensions and contradictions that are inherent to building at this scale. We want European-type mid-rise buildings all along our avenues, but we also want our housing to be more affordable. Problem is, mid-rise buildings are the most expensive way to build.
The approvals process also tends to privilege urban design considerations over things like livability and construction costs. We talk about the shadow impacts that the project might have on the surrounding community, but not about how well the suites will layout when it's all said and done -- not to mention how expensive they will be to build.
The cynics will tell you that it doesn't matter what it costs to build because developers will always profit maximize (as is the case with every other for-profit business). But that's an oversimplification that ignores a bunch of factors.
One, it's not as simple as just price. You also have to consider sales velocity. Price and sales velocity tend to be inversely correlated. In other words, as prices increase, sales velocity tends to naturally slow. You then begin to trade-off higher prices for increased time (which has a cost) and more market risk.
As I've said many times before on the blog, development happens on the margin. Usually the way this plays out is that you create a development pro forma, you look at all of your project costs, and then you say, "oh shit." You're then stretching to figure out how you're going to make the math work.
Two, there are usually always parts of a city where development isn't feasible (in some unfortunate cases, it might be the entire city). The potential revenues simply don't support the costs. And as costs continue the rise, any areas that have not seen a corresponding increase in prices and/or rents will also become undevelopable.
So there's price, and there's also a question of where great buildings are even possible. As many have already pointed out, it's certainly not everywhere.