On the Right Track | Real Estate Insights on The Region of Waterloo Rapid Transit System

On the Right Track | Real Estate Insights on The Region of Waterloo Rapid Transit System

By Stephanie Bigelow, Senior Research Analyst, Cushman & Wakefield Waterloo Region

When Central Transit Corridor discussions began in the Region of Waterloo, the CN Tower had just opened, the Timbit had just been invented, and the Berlin Wall was still standing. In 1976, only 3 years after the creation of the Region of Waterloo municipality, the first proposal for a Rapid Transit Central Corridor was presented. The forward thinking Regional government relaunched Rapid Transit discussions in 2000. Our community’s 40-year march towards integrated rapid transit is coming to an end, with multiple significant intersections open to vehicles again as of October 2016. Now that we can finally see the light at the end of the tunnel it is time to answer the question about where development along the corridor currently is, and what The Changing Face of Waterloo Region will mean for the Central Transit Corridor.

Development has soared along the LRT Route, primarily in the Downtown Cores of both Waterloo .and Kitchener. Once the announcement was made for the LRT route through Waterloo and Kitchener, 21 separate construction cranes could be counted along the line.[i] One of the key factors driving development around the Ion LRT route is the permanence of the infrastructure. While developers may take bus routes into consideration when in the planning stages of a project, few if any, will launch a project based on the strength of the bus transit due to the transience of bus routes. LRT is the opposite. There is no rerouting of the line once it is in, and this has driven development.

This transit based development phenomenon is not unique to Waterloo Region. One study in Vancouver determined that “office buildings located within 500 meters of rapid transit stations benefit from lower vacancy rates and higher rents than those areas not served directly by rapid transit” [ii] In our brokerage experience, there has not been any redevelopment or relocation that has not at least taken the LRT stations into consideration in the last 5 years since funding was approved. There have also been numerous new developments along the LRT line, both in suburban and urban markets to the tune of over 750,000 SF of new space since the LRT route was announced. It is anticipated that Rapid Transit will continue to be one of the most significant considerations for office tenants when looking for space in the core office markets.

While there has not been a similar pre-development of retail space along the LRT line, the promise of a guaranteed 25,000 riders in the first year and a projected 53,000 daily riders by 2031[iii] will unquestionably affect retailer’s real estate decisions into the future. As of 2014, there are less than a dozen individual roads in the region with that volume of traffic. One of the most important deciding factors for any retailer looking to open a new location is the amount of traffic that passes by a property daily. This number drives real estate decisions for every retailer from a multi-national to a local retail owner. LRT construction has been a tough time for retailers throughout the cores of UpTown Waterloo and Downtown Kitchener, but for those who have been able to survive and for those who are yet to arrive, the foot traffic is coming.

Residential development is unquestionably the area that has seen the most development around the LRT route. Some of this precedes the LRT route announcement, such as the Kaufman Lofts, but much of it does not. The most prominent example of this is the One Victoria building at King and Victoria in Downtown Kitchener. This 19 floor mixed-use condo building will have retail uses on the main floor and condo units above once complete. The developer, Momentum Developments, even commented to The Record in 2012, “Obviously the LRT is one of the catalysts for this particular site,” Maxwell said. “We have been optimistic on Kitchener for a long time and this was the right site and the right time for us as well.”[iv] That particular corner had seen more than $117 million in new development before Momentum’s arrival and will quickly become one of the most vibrant corners in the area. While this is not the only project to put shovels into the ground after the announcement of the LRT, it is certainly the easiest one to point to. Since LRT was announced, there have been the 5 new condo or rental developments in Waterloo, and 4 new developments in Kitchener that have all commenced construction within 500m of the LRT route. This is to say nothing of the numerous other projects that have been proposed along the line.

Looking to the future of LRT and real estate development, there is significantly more densification on the way as it is anticipated that the region will grow to 729,000 people by the year 2031. Due to a lack of development land within the borders of the tri-cities, much of this growth will need to occur through intensification in the cores, and much of the movement of people within the city will need to move out of personal vehicles. It has been estimated that the Rapid Transit system will prevent the construction of over 500 km of new road infrastructure. The future of mobility in the Region will also include and require an increase in alternate modes of transit. In a survey completed by the University of Waterloo in 2015 in UpTown Waterloo, it was suggested that 70% of shoppers had traveled there via alternate transportation methods. This will only increase as LRT becomes more a part of people’s daily lives and cycling and walking become more common modes of transportation.

The most significant proposed development intensification will be the immediate surroundings of King and Victoria Streets surrounding the proposed transit hub. There are also a significant number of proposed projects for both office and residential space along the Central Transit Corridor that are waiting for critical mass to begin construction. As younger generations continue to seek a lifestyle with amenities and work within walking distance of their homes, this will only accelerate. Urbanization is no longer a trend; it is the new normal.

Stephanie Bigelow is the Senior Research Analyst with Cushman & Wakefield Waterloo Region and is an AIC Candidate Member with the Appraisal Institute of Canada.

 

[i] https://www.thestar.com/news/gta/transportation/2015/12/10/while-gta-cra...

[ii] https://www.biv.com/article/2014/11/suburban-office-landlords-find-trans...

[iii] https://www.thestar.com/news/gta/transportation/2015/12/10/while-gta-cra...

[iv] http://waterlooregionconnected.com/showthread.php?tid=11