As I reported in a previous article, Mayor Tory has launched a study process for his SmartTrack scheme via Toronto’s Executive Committee.

One intriguing, if not surprising, admission to come out of this process was for Tory to admit that SmartTrack “was not his idea” and was simply a repackaging and rebranding of the provincial RER (Regional Express Rail) scheme. However, during the campaign, SmartTrack was regularly described as something that experts had studied, a solid proposal, not simply a line on a napkin.

The origins of a “Big U” looping from Markham through downtown and out to the northwest predates Tory’s campaign and can be found in three papers:

If we are to understand the claims made for SmartTrack, we need to understand its origins, and the degree to which campaign rhetoric and fantasy may have diverged from the earlier detailed planning. Also, of course, there is a basic question of whether the studies had the same goals for rapid transit network design as those that should inform the planning process in Toronto and the GTHA beyond.

This article reviews the 2011 paper on the changing location of office space in the GTA.

The New Geography of Office Location

The report’s focus lies in strengthening the core area and in improving transit access to areas now dependent on auto travel. The bulk of its recommendations deal with creating a more attractive market for land development that is focussed on transportation corridors, and by implication the need for transportation to focus on areas of development.

However, the report is completely silent on the unmet travel needs of existing users of the transportation network — be they transit riders, drivers or the goods movement sector. It is all about making things better for new development in specific areas with little thought for the problems we already face overall.

It is also silent on specifics of how the transportation network might change — that will come in later studies — and indeed does not address the complexities and tradeoffs required in our current situation.

This paper begins with a fundamental proposition:

Only about 20% of the region’s office capacity is in Toronto’s downtown core, and the downtown has a much narrower range of types of business. The head offices, publishing firms, and engineering companies have largely moved out to suburban areas, sometimes elsewhere in the City of Toronto, but mostly in the “905” region. For the most part, what remains are businesses in or affiliated with the financial services sector. The GTA as a whole recently passed the milestone of 200,000,000 sq ft of built office space, making it one of only four such regions in North America. Thirty years ago, 63% of the region’s office space was located in the Financial District or directly on subway lines. In 2010, that has changed and the majority of office space (54%) is located beyond the reach of higher-order transit. This may be the most significant change to the geography of the region since the mid-1970s, when some major institutions relocated from Montréal to Toronto. [Page 1]

The Four Sub-Markets

The report identifies four distinct office sub-markets, typified by their transportation access:

The core (22%) containing mainly the financial sector,

The transit-oriented submarket (24%) clustered almost entirely around the “lower U” of the Yonge subway with small outliers such as Scarborough Town Centre,

The Toronto non-transit submarket (21%) made up of the older suburbs such as Don Mills, areas around the 400-series highways, and the new “brick-and-beam” districts of repurposed century-old buildings in the old City of Toronto, and

The suburban market (33%) which is clustered heavily around the highway system with major nodes such as the airport, and the DVP/404/407.

The report argues that the rate of growth in the suburban market is strong because of the tax differential on land outside Toronto, the declining availability of land for commercial development in the core, and the more favourable, faster approval process for new development in the 905. Despite reclamation of buildings for office space in the brick-and-beam districts, the majority of the growth lies beyond even the reach of planned transit improvements.

The Role of Taxes

A large chunk of the report deals not with transportation but with taxes including inequities, real or perceived, of municipal and provincial tax policies. The first two recommendations focus on this problem.

1. The gap between high commercial realty taxes and low residential tax rates in the City of Toronto must be narrowed. The City recognized this in 2005 and has begun the process. This process should be accelerated. 2. Tax and land use policy must recognize that office jobs are the only form of high density employment, representing more than one third of all jobs (estimated at 1 million jobs) in the region. Steps need to be taken to modify public policy to create a competitive environment for office development in all four sub-markets identified in this report.

While one can argue that this is a benefit mainly to property developers, there is the more basic question of where in the region future growth should be encouraged. For all the land use “planning” of past decades, the easily predictable pattern has been that development is attracted by a magical combination of attractive construction costs and access to transportation. Subways are not a pre-requisite to high-density office development, although they certainly address the difficulties in network capacity it brings.

The report notes that two new taxes were made possible by the City of Toronto Act.

Perhaps the most controversial outcomes were the introduction of a municipal land transfer tax and a personal vehicle tax (the latter has been cancelled, as one of the first acts of the new administration at City Hall), which raised concerns at the time that the costs of doing business in Toronto will further erode the City’ s competiveness. Our interviewees, however, did not cite these new taxes among their concerns. [Page 12]

This is not surprising. Vehicle taxes affect people who are forced to drive to work and families where multiple-car fleets are the norm as a matter of necessity. Office space, especially in the core, is served overwhelmingly by transit, and more recently by cycling and walking. As for land transfer tax, this affects the cost of housing resales but as Toronto’s market has proven, the value of “location” trumps the small premium that an LTT brings compared with the relative cost of property in Toronto relative to a location such as Hamilton.

Real estate taxes form a relatively small but important component of total occupancy costs, but represent the largest single differential in markets. Sophisticated tenants take into account the gross costs of occupancy, which include the costs associated with how employees access their place of work and the need to provide amenities and services where these are lacking. [Page 14]

It is difficult to believe that the suburban development would not have occurred if only the tax situation downtown were more favourable — other factors were at work including the ease of access by a growing regional population. Moreover, the region’s road network was not under as great a stress as these areas first developed, and only now have we reached an era where demand greatly exceeds capacity with little hope for relief.

These are not core area trips, but trips between suburbs, and it is vital that the two types of demand not be confused or conflated.

After much handwringing about taxes and their inevitability, the report recognizes that a greater problem is the growth of congestion both for commuting trips and for goods movement. [See Page 15]

Where Does Development Occur

For decades, planning has been de facto led by the location of the road network. Older industrial lands clustered around rail corridors as the primary method of shipping, but even industrial uses are now mainly located where there is easy access to highways, not to rail. The airport, as a major freight node, is another obvious location, but its function as an office node is a combined effect of the highway network and of the airport.

The report notes:

Jobs located in office buildings are highly intensified. Other types of employment are dispersed. For example, First Canadian Place houses approximately 10,000 jobs on less than one acre of land, while a logistics centre in an industrial park may have less than five jobs per acre. [Page 10]

The primary transportation requirement for manufacturing, especially in today’s highly automated environment, is the ability to bring raw materials in and ship finished goods out. Labour is a lesser quantity, still needed, but goods movement determines what is a “good” site. Gone is the era that built the manufacturing node on King Street West where companies like Massey Harris generated very large transit demand for their work forces (who, by the way, lived a comparatively short distance away in the compact, old City of Toronto).

By contrast, offices are full of people and, if anything, the trend in office design is to increase the density of jobs by shrinking the average floor space per worker. The millenium may have come and gone, but the promises for a technology future of telecommuting have not materialized. There is still a demand for office space and a desire for people to work in physical proximity.

Offices depend on the ability of workers to access them in large numbers. When this was easily achieved via the road or transit systems, offices clustered where these provided the greatest commuting capacity, but the capacity is now strained, especially in auto-oriented locations.

The report recommends:

4. The province should work with local municipalities in the GTA to adjust priorities and fine tune the planned roll-out of rapid transit projects to better connect to approximately 108 million square feet of office space that is currently dependent on automobile access.

One vital point is missing from this recommendation — “connect to what”? It is not sufficient simply to have a high capacity transit line at a development node, but this must connect to the places from which people will travel to reach that development. As an extreme example, a subway to Toronto Island would do little to help the core area because most people who work in the core don’t live on the Island. Any transit network serving the auto-centric developments must recognize that the demand patterns evolved from the highway network and people commute from a wide variety of origins, most of which do not have conveniently underused rail corridors as potential connections.

The report goes on to talk about the need to preserve and increase the ability for office development to occur in the core area. This is a challenge because so much land that might have accommodated expansion of the office district has been developed as condos. A related problem is the rise of development in areas well away from the GO and subway networks including the waterfront.

Do the authors really expect governments to halt or redirect the condo juggernaut simply to preserve room for more office towers? Whose interests should drive a change from laissez-faire planning to one of strict land use controls? Does anyone actually believe that such controls are politically acceptable or likely to succeed? Does any land owner exist who would accept a government dictat that his land can be used only for use “x”, not “y” or “z”, and only to a certain density?

A further problem is the evolution of development away from “build it and they will come” speculative projects and the more conservative desire for pre-leasing commitments. Developments tend to be smaller and follow the specific requirements of a potential tenant.

From a public policy perspective, the shift in the risk of development significantly affects not only where the jobs will be located but the ability of public policy to affect the location decisions of private companies. [Page 16]

Attempting to Control Regional Growth

The regional growth plan comes under fire for its concept of growth centres, places like Scarborough Town Centre where, in theory, there will be concentrations of development and jobs. However, actual experience shows that these centres have been monumentally unsuccessful as development nodes, and I would argue that this is a direct result of the artificiality of the “centres” relative to the forces that drive actual development. [See Figure 1 on Page 11.]

In some cases, the centres exist as vestigial reminders of current or former municipal dreams of grandeur without which regional plans would not be politically acceptable. Others mark locations where one major landowner drove local development, but in an area that had no other natural reason to grow. STC is a perfect example — it would not exist without the combination of concentrated landholdings for a mall (Eaton’s) and the desire of Scarborough for a modern civic centre.

It is on a highway, but not at a junction, and rapid transit once planned on a regional scale actually only links inward to the city, not outward to the majority of residential neighbourhoods where its workers live. The RT station is more a connection point between rapid transit and feeder buses, not a primary destination for commuters in its own right. The recent evolution of STC as a location of condos shows its transition from a would-be destination to a source for commuters.

The report goes on to note the mismatch between proposed networks and travel in Metrolinx’ Big Move plan:

The vision is that by 2020, 81% of the population in the GTAH will be living within two kilometers of rapid transit, the problem is that those transit lines do not connect the majority of these individuals to their places of work. [Page 11]

The Big Move is, after all, largely based on locations of existing or likely transportation corridors such as the railway network. As already noted, this was the force behind industrial, goods-oriented, transportation and land use, not commuting. New rapid transit lines, wherever we may build them, inevitably suffer from limitations in the connectivity they can provide between a dispersed workforce and development nodes, to the degree that these exist throughout the region.

The core area is served by a combination of GO Transit commuter rail lines and a subway network that stretches out as a funnel bringing workers into a high-density office district. Because it lies on Lake Ontario, the “core” is actually at an “edge” and only requires capacity from three, not four, sides. This is a mixed blessing because of the historical importance of Yonge Street and development patterns that concentrate demand north of the core. For a suburban node with four “sides”, no single rapid transit line can possibly address access patterns that have grown up around road networks that bring workers from all directions.

The Creative Economy

In an aside [Pages 16-17], the report talks about amenities around office areas that attract the “creative economy”. This is the Richard Florida model of city development. There is, however, a basic problem: suburban development does not “create” the same sort of vibrancy that already exists in the old city for the simple reason that there is no “there” already in place as a context for office development. New centres may have the usual collection of stores, and may even strive to break out of the parking-lot-with-mall configuration that is so hostile to pedestrians. They cannot match the variety that grew naturally over decades in and around downtown. Building a new suburban “cultural centre” will not guarantee audiences or productions.

… many municipal governments in the United States are taking action to provide high-quality pedestrian-oriented public spaces, cultural amenities, transportation and other infrastructure, because they have found that these investments can attract creative and knowledgeable talent in an increasingly mobile world. This trend is highlighted by such investments as the closure of Broadway to automobiles through New York’s downtown, the creation of Millennium Park and other parks improvements in Chicago, and the development of transit and cycling systems in Portland. [Page 17]

Well, yes, but the important point here is that these are changes within existing, vibrant urban areas where pedestrianization improves access for people who are actually in the district as opposed to those travelling through it. Broadway exists. It did not have to be invented as a sop to some suburban politician dreaming they could put their burg on the map with one new theatre and a few restaurants. By contrast, in Toronto, we see ideas for pedestrianization under attack even in established parts of the old city such as central Eglinton Avenue where a scheme to widen sidewalks meets with scorn from politicians including our newly minted Mayor.

Meanwhile, “creative” industries are drawn to particular types of office space.

The one part of [the transit-oriented] submarket that is thriving is the “Brick and Beam” district to the east and west of the financial core. The principal source of demand for office space in this district comes from the so-called “creative industries” – software developers, new media, NGOs and the like. In addition to providing interesting office space in an exciting environment, the “Brick and Beam” area attracts workers who live within walking or cycling distance of their office, or who have reasonably swift access by public transit. Thus there is a clear relationship between the surge in residential growth in

Toronto’s central area and the demand for office space. The role of the “Brick and Beam” area in the Toronto office market should not be underestimated. [Pages 34-35]

A basic problem, however, is that the supply of old buildings is finite and they are often located in areas that are not well served by the transit system, at least not to the degree that space near a subway station can be. An emerging problem for the TTC and City Planning is the rise of the “shoulder” core close enough to downtown to benefit from the character of the “old” city, but far enough away that transit access is dependent on the surface network, mainly the overloaded streetcar system.

Despite the success of the “Brick and Beam” district, the City is not at present moving to reproduce the same approach in other areas in need of revitalization. The same approach could benefit areas of the city in which there are underused industrial buildings, but to date there are no plans to create new “Brick and Beam” districts elsewhere in the City. [Page 35]

This rather odd statement presumes that “brick and beam” districts can be created and ignores the fact that they are more than a collection of old (or old-looking) buildings. They are part of a wider neighbourhood with a near-downtown feel. Some of those neighbourhoods may have industrial roots, but they are now resolutely residential. Others are so large that there is no contiguous neighbourhood (the eastern waterfront is a particularly good example).

The History of Development

A series of four maps shows the evolution of office development in the GTA.

In 1950, almost all of the office space was downtown, and even some of the “satellite” nodes such as King West represented offices for industrial areas, not in the sense we think of new office space today.

By 1980, clustering around the Yonge subway has intensified and spread further north, but almost nothing has appeared along Bloor-Danforth (as is the case today). Meanwhile, new nodes notably in the Don Mills/DVP corridor, not to mention along the 401 ,have appeared that are totally independent of transit access.

By 1999, the shift begun in previous decades is even more apparent with substantial development in the 905 and a few parts of suburban Toronto. What is quite striking about this map is the large amount of white space in the 416. The driving force was lower development costs in the 905 and the shift of population to areas that could easily commute to the new offices by car.

By 2010, even more office space appears in the 905 with strong clusters in Markham (Steeles, Don Mills, 407), the Airport Corporate Centre and other locations along the 401 west of Toronto. Almost all new space in the region lies in the 905 with little or no transit access.

Quite clearly, office development has completely decoupled from the location of major transit services and the choice of location is driven by other factors.

Contrary to the popular belief that construction of the subway preceded growth of the office market, the Yonge Street subway’s success on opening day was due to the fact that it served an existing base of high-density employment from the outset (Toronto’s core) and as well acting as the cultural, religious and educational centre of the region. This point is worthy of note in the context of current plans to build rapid transit lines outside of the more urbanized part of the GTA in advance of higher density development. [Page 19]

If anything, this remark should be a caution against overbuilding on the assumption that subways will create development.

The problem we now face is that development, rather like the Sorcerer’s Apprentice, continued unchecked to a level that the transportation infrastructure cannot sustain. No developer wants to be told that they cannot build because there is no capacity left in the road system, and politicians are unlikely to stand in their way.

The report warns of the “business as usual” situation and the potential downside of inaction:

At the moment, statistics do not demonstrate any change away from the suburban development trend. Thus decision makers, planners and the industry all must ask themselves how conditions on the ground can be created to ensure that the long-term competitiveness of the region is not adversely affected. A report prepared for the Toronto Financial Services Alliance by the Boston Consulting Group (2009) stated that the sector ought to add 40,000 new jobs, but there is no accompanying strategy to create the office space (8M sq ft) needed to accommodate these jobs within the financial core. [Page 30]

This statement is somewhat out of date because planned development in the eastern waterfront will more than supply the required space. Whether this will be taken up by the market depends on the accessibility of these new near-downtown lands by transit.

At some length [Page 32], the report bemoans barriers to development both in the tax regime, land use policies and the approval process. Yes, this is the same report that earlier argued for stronger actions to direct development where it would best fit into a regional plan. Meanwhile, we hear of a beleaguered financial services sector:

Without greater recognition of the value of the financial sector, Toronto risks losing some of the key financial companies in the core of the city. An industry executive quoted in the Boston Consulting Group report Partnership and Action (2009) noted, “If any one of Toronto’s major financial institutions relocated, it would be a devastating blow, but nothing is being done to encourage us to stay.” [Page 33]

Cue the violins.

The greater problem lies in the development during the first decade of the 21st century being almost exclusively in the 905 [see chart on Page 19]. This is portrayed as being the direct result of policies that strangled growth within Toronto proper, notably taxation. The non-transit submarket within Toronto is squeezed between a resurgent central business district where location trumps cost, and the 905 where the planning and taxation regimes are more suited to new development.

A lament for the suburban worker:

The lack of amenities in these clusters may also discourage potential employees, who would prefer a more accessible location with better options for dining, shopping, and recreation. One interviewee linked the rapid decline of an office cluster in this submarket to the fact that “there was not even a

restaurant where anyone could have lunch. It was basically ‘drive to the mall’ every time.” The physical layout of suburban office clusters is also a deterrent to launching ancillary retail or other amenities, because relatively small buildings are separated by large parking lots, effectively eliminating the possibility of walk-in traffic. Although these areas are perhaps the least competitive in the region, and can perhaps be expected to shrink over time, there is nonetheless a need to protect the existing investment in large office clusters in this submarket. Ideally, the expansion of transit services to underserved office clusters would mean that they would eventually be classified as “transit-oriented areas.” Diversifying land uses in office-only areas would also allow for the addition of amenities that would make them more appealing to workers. What would be the consequences of business as usual for the non-transit submarket? If the City’s transit plans do not reconnect these areas with the rest of the City, and the areas are not revitalized to add amenities, the future likely holds only further stagnation and decline in this submarket. [Pages 36-37]

These are fascinating statements on two counts. First we have the premise that simply making areas “transit oriented” will magically transform them with amenities taken for granted elsewhere like cafés. Second, there is the implication that having planned and built poorly, we must compound the error with transit investments. This outlook completely misses the fact that there are “transit deserts” and areas of low amenity beyond the stranded suburban office parks, namely the large, underserved residential districts far from good transit.

Finally we have the development beyond Toronto in the 905 which is totally dependent on travel by car. Even with promised future transit, developers are concerned about the lack of parking imposed through controls on parking-to-employee ratios.

Another interviewee commented, “The example of Vaughan Corporate Centre is instructive. Although there is promise of extending the subway to Vaughan, the municipality is insisting on reduced parking from the outset. This is counterproductive, because prospective tenants will not sign on to new development with reduced parking when transit is still years away. It is important to preserve opportunities to allow a transition to occur when the market is ready.” What this comment reflects is not just a need for parking, but frustration at how long it is taking to create new transit lines in the areas around Toronto. An interviewee commented, “Get people on comfortable, convenient transit and the congestion will go away… It is like [road] tolls. You can’t limit

parking if there isn’t an alternative.” [Page 38]

Lurking below the surface is a difficult problem — how can we possibly build rapid transit linking all of the would-be job centres (never mind those that already exist) with residential communities throughout the region? Is there a self-perpetuating cycle with new buildings designed around cars because transit is not quite there yet, and in the process depressing the need for transit even to the point of political opposition to the potential loss of road space for surface options like BRT and LRT?

There is a desire for more investment in transit service to suburban development, but what are the priorities? How long will it take to catch up with the backlog from decades of auto-oriented growth? Will money be available not just to build new showcase lines, but to operate them and the extensive surface feeder networks they will require?

Unfortunately, the “something for nothing” mentality prevails:

Interviewees suggested that some degree of consistent, continuous improvement in transit service to suburban office clusters, coupled with major changes in approaches to regulating land use were essential ingredients in overcoming problems associated with congestion, and that funding needed to be made in a strategic way to improve access to the workplace by employees. “Senior levels of government need to fund transit. Transit strengthens the city core and cities are the foundations of economies today,” said one major tenant with interests across the region. At the same time, new or increased taxes – that is, disincentives – were not seen as a favourable alternative to leverage funding, but rather a realignment of spending priorities to ensure that tax dollars spent on any given project are being maximized. [Page 39]

In other words, “we have built our buildings and it’s the governments job to bring our employees to them”. The idea that this might have a cost that should be borne through taxes is completely foreign, and is not even examined by the report as an alternative viewpoint. Somehow, we will just shuffle existing revenues (that have been systematically reduced year by year) to “maximize” the benefit. Missing is the question of whether the actual need created by poor planning and auto-oriented development can possibly be addressed within available revenues.

A related problem emerges for developers in the 905 — the absence of amenities.

Most office parks and campuses in the suburbs have been planned as single-use areas (existing industry continues to co-exist with office buildings in many cases). Although the rationale behind restricting development to employment uses made sense during the early years of growth, today few of these areas offer much in the way of amenities or services. As one business owner noted, “905 sites have challenges with providing amenities. The costs of providing amenities have to be borne privately until there is sufficient critical mass to support retail and related amenity development. Tenants and landlords tend to invest in suburban amenities to compensate for a sterile environment.” This means that a company that locates in a suburban location will have added costs for providing the kind of amenities needed to attract the employees they want – such as exercise facilities, cafeterias, and the like. Other interviewees said that they simply avoid the 905 submarket, because the employees they want are young knowledge workers who would find the suburban office campus a deterrent. These workers want easy access to the amenities of downtown or midtown Toronto, including nightlife, upscale shopping, and cultural institutions. [Pages 39-40]

Again we have the problem that there is “no there, there” when an office appears in the middle of a field. Moreover, “nightlife, upscale shopping and cultural institutions” require a substantial population beyond the office buildings downtown simply to exist, and they will not materialize in the middle of that field just because a few office towers spring up. Some of those “savings” of locating in the cheap middle-of-nowhere have offsetting costs. To what extent should the public sector be on the hook to fix this problem gratis for the developer who couldn’t see beyond lower tax rates and cheap property?

A Call for Better Transit, But Where?

The report concludes with a string of recommendations aimed at reinforcing the competitiveness of the office sector generally through its four sub-markets. The maximization of use along existing and planned corridors is stressed, although this runs directly opposite to a desire that somehow the areas now remote from transit be better served.

We cannot build subways everywhere. Lower taxes will not fix the ills of what has already been built. A neighbourhood is more than a Starbucks in a mall. People do not live and work conveniently along existing or potential transit corridors, but in a wide (and widening) range of developments with complex origin-destination patterns.

Market forces are already shifting demand back to the core area, although suburban growth has not stopped. Will the auto-dependent areas of the 905 be the next area of stagnation like the outer parts of the 416 are today? Reasonably, how much can we “fix” with transit alone, and are we willing to pay the price? Who is “we”, and does the definition recognize that transportation investments should be funded not just by the direct users (commuters, shippers, tourists, students) but by the business community that thrives on their existence?