Condo conundrum: How to fit retailers into the mix
Toronto Star
Geoffrey Vendeville
07 January 2016

Retail broker Sam Wertman knows that if he puts up a sign advertising space for rent at the base of a Toronto office tower, calls will pour in.

Sealing the deal is the tough part.

“Retail at the base of condos is the future,” says Wertman, president of Retail Logic Realty.

“The problem is, these buildings are not built specifically to retail.”
The challenges begin at the base of tall buildings, held aloft by enormous columns that redistribute the weight of the structure into the foundation and bedrock below.

Retailers prefer clean sightlines and when they’re building from the ground-up in the suburbs, that’s what they get.

Working around columns can interfere with a store’s layout, merchandising and checkout, making them less efficient and more costly to operate. It can affect the size of the store, forcing retailers to do more in a smaller space.
“You end up having a retailer trying to squeeze very hard into a box not ideally suited for their use,” says Don Gregor, of Aurora Realty Consultants.

When it comes to restaurants, crafting kitchen exhaust systems and garbage removal systems that don’t interfere with residential living can require lots of ingenuity and add to the cost of the enterprise.

Condo corporations may also have strict rules about the operation of patios and other facilities that could create noise and traffic.

Once municipal taxes are added to the mix, downtown retailers face rents that are as much as three times higher than suburban locations.

“For a suburban retailer to come into the downtown core, it’s sticker shock,” says Wertman.

Lack of pedestrians and little parking for ground floor retail. Only one unit occupied.

Pedestrian traffic is another consideration.

“The average condo property is not large enough to sustain the retail just from the occupants of the project,” says Jeff Berkowitz of Aurora Realty Consultants.

“Where there isn’t a natural high volume of vehicles or pedestrians it does become a challenge.”

To be successful, retailers at the base of condos need high daytime pedestrian traffic — office workers in the case of businesses in the downtown core, including those located along the underground PATH system — or travellers, as in the case of Union Station.

The family-owned Longo’s was initially trepidatious about opening a store in the downtown core at Maple Leaf Square on York St. just north of the Gardiner Expressway. But in addition to the condo dwellers above the store, Longo’s benefits from foot traffic around Union Station, from the nearby office buildings and fans on their way to and from events at the nearby Air Canada Centre.

“The challenge in Toronto is the abundance of condos that exist or are in development,” says Aurora Realty’s Berkowitz. “The majority have a component of retail space. At some point in time there is a saturation effect. How many drycleaners can you have within a city block? There has to be a reasonableness to what you expect the retail space is for the market.”

The ideal is to get retailers on board in the early stages of condo development, says Alex Edmison, vice-president of urban retail at CBRE. That way issues including parking and parking ramps, pedestrian access and where to put the loading docks can be tweaked to make it easier for retailers to move in.

“It’s like putting together a 3D jigsaw puzzle,” says Edmison.

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