A migration is taking place as we speak. No, it’s not animals flying south for the winter or returning to their breeding grounds. The migration in question is a movement of people. It’s not a movement that covers great distances like those experienced by our ancestors moving west but, in many ways, it is just as significant.
Toronto in Canada, like many major cities in the past decades, has been experiencing an expansion of sorts away from downtown towards the suburbs that surround. And where people go, business follows. This trend has left many a major downtown area vacant and neglected.
Recently, however, this “suburbanization” has begun to decline; replaced, instead by a return to the original city center. People are now looking to urban areas – the downtown, or city core, if you will – to provide the necessities of life instead of relying on the suburban sprawl for housing, work, and shopping. The migration back to the “center” of town has begun. But what is driving this reverse migration? What is causing the downtown area to become popular again?
Commercial real estate guru Richard Crenian of Toronto-based Redev Properties Ltd. sums up what could be a complicated set of factors in one word: People. “It really is that simple,” says Mr. Crenian. “The Millennial generation or Gen-Y [in this case, individuals born from the early 1980s to the early 1990s who would now be in their twenties and thirties] continues to drive the recent trends, and the overwhelming consensus is that they enjoy an urban lifestyle and prioritize proximity to amenities.” Where their parents once placed a premium on the lifestyle the suburbs offered, this new generation values, and is drawn to, the lifestyle offered by an urban environment.
It doesn’t stop there. Richard Crenian cites another factor, “Baby Boomers are also driving the return to the downtown area. They are beginning to move to urban areas in an attempt to live in closer proximity to health care services and local shopping.” Like Millenials, Baby Boomers also see the value the proximity of an urban environment offers over the distances characteristic of the suburbs.
This return of portions of the population from suburb to urban center has also fueled another emerging trend: businesses likewise returning to the downtown area. Where people go, business follows.
The return to urbanization – both of people and business – will have a drastic effect on the real estate market in that area. “Demand is there; that’s a given,” says Mr. Crenian. “People want to live (work, and shop) downtown so businesses see the opportunity to satisfy these wants and are rushing to return to the city core. But by its very nature, the urban environment has limited space to offer – the only way to go is up. This high demand coupled with limited space will be the driver behind real estate values in the downtown area. That being said, now is an excellent time to get involved in the urban real estate market because prices have nowhere to go but up. We know that people are coming back. That’s demand one. Because those people are coming back, business will continue to follow. That’s demand two. Real estate developers have an excellent opportunity to take advantage of these two powerful demands now before space becomes the deciding factor.”
All in all, it seems like the “perfect storm” for all groups involved. Large numbers of people now want to live in the downtown area. Businesses want to return to the city core to provide services to this population. And real estate developers want to provide space to both groups. How long this migration will last is anyone’s best guess, but you can be sure that all parties involved are enjoying the trip.