Independent Stores vs. Chain Stores in Downtown Toronto Developments

TL;DR

 Jazz Apartments, Church Street and Shuter Street

Jazz Apartments, Church Street and Shuter Street

There is a commonly held view that new buildings in Toronto are creating a Starbucks and Subway Restaurant-filled commercial monoculture. As planners engage with the public and seek their feedback on new developments, I think it is important to know if public perception aligns with the reality on the ground, as that can influence the success of a given proposal or Plan. As such, I wanted to know if this view about new development monoculture matched the reality on the ground in Downtown Toronto, so we undertook a study to find out. I didn't feel that what I was seeing as I walked around downtown was matching this expressed perception, and so I also wanted to know if I needed to realign my preconceived notions.

To find out, myself and a colleague, Andrew Castaneda, undertook a visual survey of the Downtown Area to compare businesses in new and old mixed use mid-rise and tower buildings. Our results show that independent businesses comprise 64% of commercial units in downtown mixed-use residential/commercial buildings. When compared to older mixed-use residential/commercial buildings in Downtown Toronto, new developments reduce the percentage of independent commercial businesses by around 10% (but as these are linked, an increase in one variable equals the same decrease in the other). So, while the pace of development in Downtown Toronto continues at a historic pace, it retains its ability to support a diverse commercial environment for independent businesses.

What’s this All About?

 The Liberties Building, Gerrard Street and Bay Street

The Liberties Building, Gerrard Street and Bay Street

Planning is a public process, and can be heavily influenced by those who participate in that process. Where there are perceptions about how a city is functioning that are being expressed to influence planning outcomes, it is important to periodically find out of they are based on valid foundations or prevailing trends that might not be accounted for in the plans. Sometimes things are happening in a community that might not be picked up on, and sometimes public perception just isn't correct (or is not reflective of larger trends). This can result in planning decisions and plans that over- or under-compensate to correct for a perception that might not be happening, or only happening to a very limited extent.

The policies of the Toronto Official Plan, both in the past and the current version, encourage new residential developments in the Downtown area to include commercial uses facing the street (“mixed-use” development). The intent of these policies is to ensure that residents in these neighbourhoods have access to the services needed in daily life, streets are animated and lively, car use for daily tasks is minimized, and interesting and complete communities are created. By and large, these policies have been very successful and have achieved what they were designed to: the vast majority of new condominium developments in downtown Toronto are mixed use.

The resulting tenancy of these commercial spaces, however, has been the subject of criticism in recent years. A seemingly-frequent critique is that the new construction is encouraging a monoculture of chains and franchise businesses to the exclusion of small independent businesses. There could be many reasons why this perception exists: a belief is that the management of the commercial spaces in these buildings prefer to lease only to chains and franchise operations on the belief that they are more established/reliable to complete the lease duration; that only chains can afford what are presumed to be higher rents; or just a general bias against corporations in favour of “mom and pop Main Streets,” that don’t need another Subway Restaurant and/or Starbucks. 

The critiques, however, did not seem to match up with what I observed as I would walk around downtown day-to-day. It seemed like there were a lot of independent businesses in new condo developments downtown, and I wanted to know if what I was seeing was anomaly.  Our study sought to determine if these casual observations were reflective of a general pattern. 
 

What Did We Do?

To try and figure out what is going on downtown in mixed use buildings, we undertook a visual survey of mixed-use (residential/commercial) mid-rise and tower developments throughout the Downtown Area, as defined in the City of Toronto Official Plan (the orange area on the map at right, with certain exclusions noted below). In other words, we walked the entire area, counting and making notes about what we saw. This area was chosen because it has an easily defined area with mixed-use encouraging policies; a large number and variety of such developments, new and old; and has seen significant growth in recent years. Businesses were classified as either a chain/franchise or independent, and the age of the buildings as either “old” or “new” based on if its construction was before or after the approval of the current Toronto Official Plan at the Ontario Municipal Board in 2006.

Commercial uses were further divided up into 5 categories for both independent and chain/franchise businesses:

  • Personal Service
  • Medical Office
  • Restaurant
  • Non-Food Retail
  • Food Retail

Only at-grade, street facing commercial businesses were included in the survey. Excluded from the study were:

  • Developments not located in the Downtown Area;
  • Below-grade retail areas (e.g. The Path or Aura);
  • Above-grade commercial areas (e.g. Aura);
  • Interior “mall”-like commercial projects (e.g. Village on the Grange);
  • Specialty areas (e.g. Distillery District or Yorkville’s Mink Mile);
  • Buildings that are not mid-rise or towers;
  • Buildings under-construction/vacant units; and
  • Buildings without a residential component (e.g. commercial-only or office/commercial).
 Riviera Condominium, Queen Quay West

Riviera Condominium, Queen Quay West

A survey of this nature does have some limitations. It only includes units that are occupied at the time of the survey, and so doesn’t include units that are leased but not occupied, or are currently vacant but will be leased in the future. It also doesn’t include buildings that are under construction, or approved by not yet constructed. The survey is also a snapshot in time, and as such does not track which units might have started as, for example, independent but were subsequently leased by a chain/franchise (or vice versa). The survey also does not include instances where a new development replaced existing commercial uses, which might have also resulted in a change in ownership type from independent to chain/franchise. We don’t think we missed any buildings, it is possible that some were missed (though, given the large sample size, we would not expect any such omissions to skew the data significantly if there were omissions). Lastly, "independent" and "chain/franchise" is based on an educated guess, and not a review of incorporation documents, and as such some businesses that appear to be independent could share a common ownership under different store names. 
 

What Did We Find?
 

The survey included 138 buildings in total, 77 classified as “old” (pre-dating the Official Plan) and 61 classified as “new”. These buildings had 478 occupied commercial spaces, of which 296 were in “old” buildings and 182 in “new” buildings. The results of our survey showed that in the Downtown area, 64% of retail businesses are independent and 36% are chain/franchise. Within “old” buildings, 68% of businesses are independent and 32% are chain/franchise. In “new” buildings, chain/franchises increase to 42% of units and independent businesses decrease to 59% (numbers are rounded). 

Galbraith_Retail_Study_Findings.png

When we compared the ownership type to the mode of transit running along the streets on which the units front, we found that the changes are virtually identical to the changes seen in the building age. Independent businesses account for 68% of units fronting on bus routes, 60% on streetcar routes, and 58% on streets with no fronting transit route. 

Aside from the overall numbers, we also found the following:

 Apex @ Cityplace Condominium, 397 Front Street West

Apex @ Cityplace Condominium, 397 Front Street West

  • New developments have fewer commercial units on average vs. old buildings (3.0 units vs. 3.8 units). This could be due to new buildings having smaller footprints, or creating somewhat larger unit sizes, compared to older buildings.
  • Starbucks are present in 10% of old buildings and 12% of new buildings. There is not a significant preference for where they locate.
  • Subway restaurants are in 13% of old buildings and 13% of new buildings. Also no preference for where they tend to locate (other than basically these things are everywhere).
  • There was a big increase in independent non-food retail uses in new buildings (13% of commercial units) vs. chain/franchise buildings (6% of commercial units). There was an overall 7% increase in non-food retail uses (independent and chain/franchise) in new buildings vs. old buildings (12% vs 19%). 
  • Personal Services businesses, independent and chain/franchise, occupy the highest percentage of units in both old and new developments (29% and 26%, respectively).
  • Food retail uses (independent and chain/franchise combined) decrease from 13% of units in old buildings down to 9% of units in new buildings.


Wrap Up
 

This snapshot study indicates that independent businesses continue to comprise the majority of retail units in Downtown Toronto, even in newly constructed buildings. What we found is that while the pace of development in Downtown Toronto continues at a historic pace, it retains its ability to support a diverse commercial environment for independent businesses.

However, there does seem to be some validity that new development does tend to increase the number of chain/franchise stores in commercial units (though not in a majority of cases, or by a significant amount). Whether or not this is a good thing is arguable. Having a mix of business types and ownerships is important for the economic vitality of an area, and to ensure that complete neighbourhoods are created/maintined as they change over time. If it is a goal of the City to ensure that new development continues to include independent commercial uses, it might want to create a monitoring program to track changes in retail uses over time (if it doesn't do so already), and/or see if what is happening in the Downtown area is happening in other pockets of the city that are experiencing big changes through development pressures (Yonge/Eglinton, along the Crosstown, West Queen West, Liberty Village, Canary District, etc...).